A New Era of Fiscal Resilience: Comparing IRD Sri Lanka’s 2024 and 2025 Performance

A New Era of Fiscal Resilience: Comparing IRD Sri Lanka’s 2024 and 2025 Performance

The Inland Revenue Department (IRD) of Sri Lanka achieved a significant milestone in 2025, demonstrating robust growth and the successful execution of transformative administrative reforms. Operating within a stabilizing macroeconomic landscape, the department exceeded its established annual targets, reinforcing its position as a cornerstone of national economic stability.

Record-Breaking Revenue and Strategic Reforms: The 2025 Year in Review

In a landmark year for domestic resource mobilization, the IRD not only met its fiscal mandates but surpassed them, signaling a strengthening economy and more efficient tax administration. The 2025 Annual Performance Report reveals a department in transition, focusing on digital optimization and a broader taxpayer base.

1. Revenue Performance: Surpassing the Three Trillion Mark

The most striking outcome of 2025 is the IRD’s ability to exceed its revenue estimates. While the department collected Rs. 2,620.07 billion in 2024, it shattered records in 2025 by collecting Rs. 3,221.55 billion, achieving 104.14% of its target. This represents a robust 22.96% year-on-year growth.

• VAT Dominance: Value Added Tax (VAT) remained the primary engine of growth, contributing Rs. 1,746.87 billion (54.22% of total revenue) in 2025, a 33.38% increase over the Rs. 1,309.68 billion collected in 2024.
• Income Tax Growth: Total Income Tax rose to Rs. 1,131.33 billion in 2025, up from Rs. 1,024.10 billion the previous year. Notably, Corporate Income Tax saw a 15% increase, reaching Rs. 669.64 billion.
• SSCL Contributions: The Social Security Contribution Levy (SSCL) generated Rs. 294.52 billion, reflecting 17.40% growth compared to 2024.

2. Broadening the Tax Base: Expansion by Tax Type

A major strategic focus in 2025 was expanding the tax base through initiatives like National Tax Week (Badu Shakthi), which resulted in over 12 million individuals securing their Taxpayer Identification Numbers (TINs). The total number of registered tax types grew from 1,239,541 in 2024 to 1,470,011 by the end of 2025.

The breakdown of registrations by specific tax types highlights this growth:

Source: IRD Performance Reports 2024 & 2025.

3. Operational Efficiency: Record-Low Cost of Collection

The IRD has become significantly more efficient, with revenue growth outpacing departmental expenditure. The cost of collection reached an all-time low of Rs. 0.28 (28 cents) per Rs. 100 collected in 2025. This is a steady improvement from 31 cents in 2024 and 41 cents in 2023.

4. Key Structural Reforms and Digital Shift

Several new specialized units and policy changes were implemented to ensure institutional integrity and efficiency:

• Mandatory E-Filing: Starting July 1, 2025, all VAT-registered persons must furnish returns electronically, with manual submissions allowed only under exceptional circumstances.
• Specialized Units: The establishment of the Internal Affairs Unit (IAU) provides an independent oversight mechanism, while the High Wealth Individuals (HWI) Unit focused on top earners to ensure equitable tax distribution.
• SVAT Abolition: The Simplified VAT (SVAT) scheme was abolished on October 1, 2025, replaced by a Risk-Based Refund Scheme.
• Personal Relief: Personal relief for resident individuals was increased to Rs. 1,800,000 effective for the 2025/2026 year of assessment.

Comparison Summary Table

Conclusion

The 2025 performance report paints a picture of a resilient and modernized Inland Revenue Department. While challenges such as human resource constraints persist, the surge in registrations and the successful implementation of digital-first policies provide a solid foundation for Sri Lanka’s long-term fiscal stability. For taxpayers and professionals, the shift toward a paperless administration and a more transparent, risk-based refund system remains a primary focus for the future.

Performance Report -2025