Will Lowering the VAT Threshold Increase Inflation? Analyzing the Impact on Prices and SMEs

• The government plans to reduce the VAT threshold from Rs. 60 million to Rs. 36 million to widen the tax net and reduce tax avoidance.
• Lowering the threshold will bring more SMEs into the VAT system and make tax avoidance harder.
• Previous reductions in the VAT threshold did not lead to higher inflation rates or significant price increases.
• Data shows that past VAT threshold changes did not accelerate month-to-month inflation.
• The move is expected to increase tax compliance without causing a notable rise in inflation.

Source: themorning.lk

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.

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