Sri Lanka: Technical Assistance Report-Property Taxation at the National and Subnational Level

Sri Lanka: Technical Assistance Report-Property Taxation at the National and Subnational Level
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Volume/Issue: Volume 2024 Issue 074
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Economics- Macroeconomics , Public Finance , Taxation - General , Property taxation , Imputed rental income tax , Simplified assessment approach , Sri Lanka , Fiscal consolidation , , imputed rental income , central government , roll number , rental contract , market rental value , Property tax , Transaction tax , Income and capital gains taxes , Income , Global , Australia and New Zealand

Summary

This report analyzes Sri Lanka’s options for improving the fairness and progressivity of the tax system through the introduction of a nationwide property tax. Given constitutional constraints that limit the taxation of property at the central government level, it recommends taxing the imputed rental value of owner-occupied housing. With a suitable exemption threshold and a progressive tax rate structure, such a tax can support fiscal consolidation by raising revenue from the most affluent members of Sri Lanka’s society while introducing little distortions. Implementation and enforcement of the tax will require substantive investments in data infrastructure, including through the introduction of a digital sales price and rents register. The report also outlines options for improving the fairness and revenue productivity of subnational assessment rates (local property taxes) and suggests additional reforms that can complement the taxation of real property at the national and subnational level.