Non-filings of Value Added Tax among Sri Lankan businesses increased during the first quarter of 2026 despite simultaneous gains in overall on-time submission rates.
The finding was published by the Ministry of Finance in Colombo through its Sri Lanka Revenue Administration Diagnostic Technical Assistance report released on Friday.
Data contained in the diagnostic document reveals a persistent 30 percentage point compliance gap between major corporate entities and smaller commercial operators.
Non-large taxpayers recorded a 19.1 per cent non-filing rate in the first quarter of 2026, marking a significant rise from the 12.3 per cent recorded across 2025.
Over the same timeframe, non-filings among large taxpayers rose from 0.3 per cent to 4.0 per cent.
While on-time VAT submissions by non-large businesses improved to 55.9 per cent in the first quarter, they continued to trail behind large taxpayers who achieved an 85.7 per cent on-time filing rate.
Annual income tax figures for 2025 showed severe structural shortfalls across the board, with non-filing rates reaching 52.7 per cent for corporate income tax, 45.6 per cent for personal income tax, and 67.8 per cent for individual income tax.
The report highlighted the expectations of the Medium Term Revenue Strategy, which incorporates International Monetary Fund estimates to project that internal revenue administration reforms could boost the Inland Revenue Department's Operational Strength Index from 0.39 to 0.55.
The enhancement in operational efficiency is estimated to yield an additional 1.9 percentage points of gross domestic product over a five-year period.
Finance Ministry officials emphasized that the revenue strategy remains focused on strengthening internal administration rather than serving as a revenue-maximisation mechanism.