Tax concessions account for half of the budget deficit

Abstract

All sorts of tax concessions (reported as “tax expenditure”) costs the government almost a trillion rupees a year in potential revenue. In the financial year 2023/24 the tax expenditure statement published by the government reported forgone reporting as LKR 966 billion in revenue. This tax expenditure figure amounts to around 3% of GDP and 21% of projected tax revenues in 2025. The fiscal implication of this is considerable, with the potential to reduce the budget deficit by nearly half—from LKR 2,200 billion to LKR 1,234 billion.