Abstract
IMF Country Report No. 22/341
Copyright Page
IMF Country Report No. 22/341
SRI LANKA
SELECTED ISSUES
November 2022
This Selected Issues paper on Sri Lanka was prepared by a staff team of the International Monetary Fund as background documentation for the periodic consultation with the member country. It is based on the information available at the time it was completed on February 10, 2022.
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Title Page
SRI LANKA
SELECTED ISSUES
February 10, 2022
Approved By
Anne Marie Gulde Wolf
Prepared by Klaus Hellwig, Mike Li, (both APD), Francis Vitek (FAD), and Tubagus Feridhanusetyawan, Manavee Abeyyawickrama (Resident Representative office).
Contents
MOBILIZING REVENUE IN SRI LANKA
A. Introduction
B. Tax Revenue Performance
C. Personal and Corporate Income Taxes
D. Indirect Taxes
FIGURES
1. General Government Tax Revenue
2. Tax Revenue Composition
3. Personal and Corporate Income Tax Productivities
4. Marginal and Effective Personal Income Tax Rate Schedules
5. Corporate Income Tax Rates
6. Indirect Tax Revenue Composition
7. Distribution of Effective Tax Rates across Imported Goods: 2020
8. VAT Rates and Revenues
9. VAT Revenue Efficiency for Imports and Domestic Activity, 2000–2020
10. Statutory and Effective VAT Rates on Imports in 2020
11. Annual Turnover Threshold for VAT Registration
TABLE
1. Number of Registrations: Selected Taxes
GOVERNMENT FINANCING DURING COVID-19 AND ITS IMPLICATIONS ON MONEY AND INFLATION IN SRI LANKA
A. Government Financing Challenges and the Authorities’ Policy Response
B. Consequences of the Policy Response
C. Policy Response’s Impact on Inflation
D. Empirical Analysis on the Relationship between Money and Inflation
References
FIGURE
1. 2014–17 Episode and Its Resemblance to the Current Episode
THE INFORMAL SECTOR AND THE IMPACT OF THE COVID-19 PANDEMIC IN SRI LANKA
A. The Concept of Informality and Stylized Facts in Sri Lanka
B. The Impact of COVID-19 on the Informal Sector
C. The Impact of COVID-19 Relief Measures on the Informal Sector
References
FIGURES
1. Population and Employment Status
2. Informal Employment by Occupation
3. Informal Employment in South Asia, 2000–17
4. Daily Covid-19 Cases and Fatalities
5. Average Revenue of Micro Enterprises
6. Average Revenue of Small & Medium Enterprises
7. Average Revenue of Micro Enterprises by Sector, March–May 2019–20
8. Average Revenue of Small & Medium Enterprises by Sector, March–May 2019–20
9. Average Number of Persons Employed per Establishment, January–May 2020
10. Average Expenditure on Salaries, January–May 2020
11. Government Expenditure on Covid-19 in South Asia
12. Spending on Social Safety Net Programs, 2010–20
TABLES
1. Formal and Informal Employment by Sector – 2019
2. Responses to the Survey by the Department of Census and Statistics (DCS), 2020
3. Allocations for Covid-19 Support Measures by the Government, 2020
4. Distribution of Covid-19 Support by Occupation
ANNEX
I. Determinants of Informality in South Asia: Empirical Analysis