Sri Lanka: Technical Assistance Report-Property Taxation at the National and Subnational Level
Technical Assistance Reports, August 23, 2024
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- Sri Lanka: Technical Assistance Report-Property Taxation at the National and Subnational Level
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Bibliographic details
- Published: August 23, 2024
- Series: Technical Assistance Reports
- DOI: https://doi.org/10.5089/9798400286803.019
Overview
- The 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, the report 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.
Key findings
- Taxing the imputed rental value of owner-occupied housing is recommended as a way to introduce a nationwide property tax despite constitutional constraints on central government property taxation.
- A combination of a suitable exemption threshold and a progressive tax rate structure can:
- raise revenue from the most affluent members of Sri Lanka’s society;
- introduce little distortions.
Implementation and data infrastructure requirements
- Implementation and enforcement of the tax will require substantive investments in data infrastructure.
- The report highlights the need for the introduction of a digital sales price and rents register to support effective implementation and enforcement.
Subnational (local) property taxation options
- The report outlines options for improving the fairness and revenue productivity of subnational assessment rates (local property taxes).
- It suggests additional reforms that can complement the taxation of real property at the national and subnational level.
Policy recommendations (summary)
- Introduce an imputed rental income tax on owner-occupied housing at the national level, designed with:
- a suitable exemption threshold; and
- a progressive tax rate structure.
- Invest in data infrastructure, including a digital sales price and rents register, to enable implementation and enforcement.
- Reform subnational assessment rates to improve fairness and revenue productivity, and pursue complementary reforms across national and subnational property taxation.
International Monetary Fund. "Sri Lanka: Technical Assistance Report-Property Taxation at the National and Subnational Level", August 23, 2024.
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