Treasury Secretary Warns VAT Hike If Public Salaries Increase

News Today: Impact of VAT Increase on Public Servant Salaries: Treasury’s Warning

Treasury Secretary Mahinda Siriwardana announced today that meeting the salary increase demands of striking public servants would necessitate raising the current Value Added Tax (VAT) from 18% to 20-21%. Addressing the issue, Siriwardana stated that the government is not in a position to accede to these demands, as doing so would place an additional financial burden on the general public.

Meanwhile, President Ranil Wickremesinghe chaired a discussion at the President’s office today to address the trade unions’ demands. However, the PMD stated that the 2025 budget will consider revising public service salaries based on recommendations from an expert committee on salary disparities.

Siriwardana’s statement comes amid ongoing strikes by public servants demanding higher salaries to cope with the rising cost of living. He emphasized that the government’s primary concern is the economic impact on the entire population, particularly in light of the current financial challenges.

Increasing the VAT is seen as a last resort measure, but it highlights the delicate balancing act the government faces in trying to meet public servants’ demands while managing national economic stability. The proposed VAT increase would affect all sectors, potentially leading to higher prices for goods and services, thus impacting consumers and businesses alike.

The discussions led by President Wickremesinghe underscore the government’s commitment to finding a sustainable solution. The expert committee’s recommendations are expected to play a crucial role in formulating a fair and balanced approach to addressing salary disparities within the public service sector.

As the situation evolves, the government’s response and subsequent actions will be closely monitored by both the public and trade unions, who are keen to see how their demands will be addressed without placing an undue financial burden on the general populace.