COLOMBO, June 6 (Xinhua) -- Sri Lanka's cabinet of ministers has approved a proposal to draft a bill to cancel the existing simplified value added tax (SVAT) methodology from next year, and to remove a large number of value added tax (VAT) exemptions, a spokesman said here on Tuesday.
The proposal was made by President Ranil Wickremesinghe.
In a press conference, cabinet spokesperson Bandula Gunawardena said Sri Lanka must introduce two major revisions to the VAT as per an agreement with the International Monetary Fund (IMF).
The IMF in March approved a 48-month extended arrangement under the Extended Fund Facility of about 3 billion U.S. dollars to support Sri Lanka's economic policies and reforms.
Sri Lanka has a number of goods and services that are exempt from VAT and the IMF has demanded most of these exemptions be removed, Gunawardena said.
He also said that the SVAT system must also be cancelled, as per the IMF agreement.
By carrying out these two reforms the government can increase the tax revenue by 1.2 percent of the country's gross domestic product (GDP), the spokesperson said.
The president has proposed to revoke most of the VAT exemptions while maintaining those for education, health, and agricultural sectors as well as measures taken to ease the burden on the poor and to protect vital state interests, said Gunawardena. ■