Sri Lanka in South Asia: 2nd in GDP, 5th in government revenue share

Abstract

Sri Lanka lifted its government revenue to 13.5 per cent of GDP in 2024, the highest level in more than a decade. Yet, it still trails most South Asian neighbours in terms of government revenue.

Academic research indicates a strong correlation between a country's national income and the level of taxes it collects. Richer states collect a larger share of GDP as taxes. France and Denmark, for instance, channel nearly half of their national output into government revenue.

Sri Lanka has not followed this path. Over the years, its revenue ratio declined even as its per capita GDP increased, reaching a record low of 8.3 per cent of GDP in 2021. An IMF-backed fiscal consolidation program has since clawed back more than five percentage points in the revenue level, but the ratio remains low by regional standards.

Among South Asian economies—already the world’s least taxed region—only Bangladesh and Pakistan collect less in terms of revenue to GDP. India, Nepal, Bhutan, and the Maldives all hover at, or above, 20 per cent. The mismatch is striking because Sri Lanka enjoys the region’s second-highest GDP per capita—about USD 4,516 in 2024, second only to the Maldives—yet falls to fifth place in terms of its revenue share.