IRD’s 2025 Surge Signals Stronger Tax Compliance and Administration

Sri Lanka’s Inland Revenue Department (IRD) is recording one of its strongest years in recent history, with new data showing sharp improvements in taxpayer registration, revenue mobilisation, and overall administrative performance compared to 2024. Under the current leadership, the Department has reported a significant expansion of the tax net, strengthening the country’s fiscal position amid continued economic recovery efforts.

At a media briefing organised by the Government Information Department, Senior Deputy Commissioner P. Nandana Kumara revealed that 200,000 new individual taxpayers have been added so far this year, taking the total number of registered individuals to 1.2 million. This marks one of the largest annual increases in recent years and reflects a sustained push to improve compliance and reduce tax leakages.

The Department’s 2025 performance is also supported by the formalisation of business activity. Kumara noted that the IRD has registered 18,000 new companies, a notable rise that signals growing business confidence and expanding economic activity. Alongside this, excise duty registrations have increased to 30,000, contributing to a broader diversification of revenue sources.

The new registrations have translated directly into stronger revenue outcomes. The IRD has already collected over Rs. 2 trillion as of 17 November 2025, surpassing the full-year collection for 2024 by more than Rs. 60 billion. In 2024, the IRD achieved a record Rs. 2,620 billion, building upon a recovery trend that began in 2022 after the sharp revenue contraction caused by tax cuts and the pandemic.

Sri Lanka’s tax revenue had plunged from Rs. 1,025 billion in 2019 to Rs. 523 billion in 2020, before slowly recovering to Rs. 632 billion in 2021, Rs. 1,058 billion in 2022, and Rs. 1,842 billion in 2023. The current administration has pushed these gains further, with 2025 shaping up to outperform all previous years.

According to Kumara, VAT revenue has increased by 21% compared to last year, reflecting stronger enforcement and the widening of the tax base. Income tax collection is also up 14%, supported by the rise in new registrants and tighter compliance monitoring.

These improvements come alongside a policy change that raises the personal income tax threshold from Rs. 1.2 million to Rs. 1.8 million for the 2025 assessment year. Officials argue that this adjustment provides relief to low- and middle-income earners while ensuring higher-income groups contribute more effectively.

The IRD attributes the improved performance to increased digitalisation, stricter enforcement, and targeted efforts to bring previously unregistered individuals and businesses into the tax system. Officials say the 2025 outcomes demonstrate the effectiveness of ongoing institutional reforms, positioning the Department to meetand likely exceed this year’s revenue goals.