ECONOMYENEXT – Sri Lanka hiked value added tax to 18 percent to help pay state worker salaries and give the first increment this year, President Ranil Wickremesinghe said, as sections of state workers started strikes ahead of elections.
During the last economic crisis, some suggested sending 500,000 state workers home on no pay leave until money could be found to pay their salaries.
“I said at the time I cannot send anyone on leave,” President Wickremesinghe was quoted as saying at a ceremony in the Uva region.
“I raised VAT to 18 percent and faced the criticism of the public to pay the salaries.”
The first increment had already been granted in 2024.
“Development officers, clerks are saying to raise the salaries. We cannot do that. To do that we will have to raise VAT again. The people cannot bear it.”
Another salary increment will be announced in the budget for 2025, and a committee is looking into the matter, President said.
Without cutting public service salaries, the current administration has frozen new hires.
A 10,000 rupee salary hike had been given.
Sri Lanka’s economy has started to recover and tax revenues are starting to increase.
In 2021, 85 percent of the tax revenues went to pay state salaries and pensions and other current expenses were met with borrowings.
Salaries and pensions were reduced to 48 percent of taxes last year, but the current account of the budget is still in deficit. (Colombo/July07/2024)