Sri Lanka’s property tax system is failing to deliver meaningful revenue, threatening the Government’s plan to introduce a new tax by 2027 unless the valuation framework is modernised, a new Verité Research study warns.
The paper, Property Taxes in Sri Lanka: Proposal for a More Effective Valuation Method, authored by economist Prof. Mick Moore, highlights the limitations of the manual, site-inspection-based valuation system, which is administratively cumbersome, inequitable, and prone to evasion.
With the existing system, rate assessments contributed less than 0.1% of GDP in 2021–22, while stamp duties and property taxes together made up just 2% of government revenue. Local councils remain heavily dependent on Treasury grants, with rates accounting for only 8% of revenue, and compliance is abysmally low. In Colombo, just 20,000 of 110,000 commercial properties pay property tax regularly.
Prof. Moore identifies five systemic weaknesses: unregistered new buildings, undervaluation by untrained assessors, failure to factor in building extensions or local infrastructure upgrades, infrequent general revaluations, and susceptibility to bias or bribery. Between 2022 and 2023, only 3.5% of properties received updated valuations, leaving many assets effectively untaxed for decades.
To break the logjam, the study recommends Points-Based Valuation (PBV), also known as Computer-Assisted Mass Appraisal (CAMA). PBV uses aerial imagery, GIS mapping, and standardised market data to produce transparent, mass valuations without entering properties.
The system can automatically update assessments for new construction, extensions, or market shifts, while enabling automated billing and collection. Cities of 100,000 properties can be mapped in one to four weeks, with data collection completed in about three months. Internationally, similar systems are widely deployed; nearly half of all real-estate appraisals now use model-assisted techniques.
Prof. Moore warns that digitisation alone is insufficient. Transparent models, routine revaluations, and coordination between central and local authorities are essential. Pilot programs in selected councils can demonstrate feasibility, generate demand, and build capacity.
The study underscores that reform is both feasible and urgent. A modern, enforceable valuation system would not only increase revenue but also improve equity, reduce evasion, and provide the fiscal foundation for a fair 2027 property tax rollout. Without such reforms, Sri Lanka risks continuing a decades-long cycle of low compliance, minimal local revenue, and fiscal inefficiency.
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