MP Ranawaka connects VAT concessions to lower govt. salaries

Fact Check

MP Champika Ranawaka cites a Ministry of Finance (MoF) document on tax expenditure, indicating that the loss of tax revenue due to the VAT concession could have been used to increase government employee salaries by Rs. 30,000 per month.

To verify this claim, FactCheck.lk consulted data from the MoF tax expenditure statement and the Central Bank of Sri Lanka’s (CBSL) annual economic review.

MoF document reveals that the revenue forgone due to VAT concessions in 2022/2023 amounted to LKR 554 billion. CBSL data indicates that the number of public sector employees stood at 1,353,860 in 2023.

Based on these figures, the monthly income of a government employee could be increased by LKR 34,122 for a full year, which aligns with the MP’s claim.

The MP’s claim on the potential to have increased the salaries of government employees (without increasing the budget deficit), if revenue had not been foregone through VAT concessions, is supported by government reported numbers.

Therefore, we classify the MP’s claim as TRUE.

Additional note 1: The claim does not translate to the ability of maintaining a salary increase after 2023. This is because many of the VAT concessions were removed on the 2024 budget to meet the budget deficit targets of the current economic recovery plan, under the current salary levels. Therefore, to maintain the salary increases for 2024, without impacting the budget, new sources of revenue would be needed.