Abstract
The government revenue–income ratio of Sri Lanka has fallen sharply over the years, especially from 1990. The trend can be observed in many revenue components too. As the declining revenue–income ratio casts serious concerns over the resiliency of the country's tax system, this article sheds light on the issue by estimating the buoyancy parameters of tax functions. Results show that the long–term responsiveness to income is absolutely low in corporate income taxes. Further, the buoyancy of general goods and service tax is biased downwards due to non–structural factors. Nonetheless, personal income, excise and import taxes grow in relation to their tax bases. The non–tax revenue component also reports an almost one–for–one relation–ship with the base variable proxy. Depending on the estimated results, we claim that the low buoyancy of corporate income tax and the susceptibility of general goods and service tax to unexpected non–structural shocks are the main causes of the declining revenue–gross domestic product (GDP) ratio.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.