Verité study urges digital overhaul of property valuations as new tax deadline looms

Warns property tax yields under 0.1% of GDP; cannot support 2027 IMF-linked property tax without reform

- 

SRI Lanka's property tax system is delivering negligible revenue and will not support the Government's plan to introduce a new property tax by 2027 unless the valuation method is modernised, according to a new study published by Verité Research.

The paper, Property Taxes in Sri Lanka: Proposal for a More Effective Valuation Method, authored by Verité Research Sri Lanka Economic Policy Group Member Prof. Mick Moore, argues that Sri Lanka should replace manual, siteinspection valuations with digital, mass-appraisal techniques to create a fair, enforceable, and administratively viable tax base.

The Government has agreed in principle to introduce a new property tax by 2027 under the International Monetary Fund's (IMF) Extended Fund Facility (EFF). Prof. Moore says the commitment alone will not yield results without changing how properties are valued.

"The key to unlocking change lies in the valuation system," he writes, adding that digital valuation "provides an accessible, low-cost method for breaking the current systemic logjam." He describes the status quo as a "low-level equilibrium," where little effort is invested and little revenue is collected.

The country's main property tax, known as the rate assessment system, raised less than 0.1% of GDP in 202122. Verité notes this is low even by developing-country standards.

Stamp duties on property transactions and property taxes together contributed about 2% of total Government revenue in that period, with roughly two-thirds coming from stamp duties.

At the local level, the incentives are weak. In 2020, rates and other local taxes provided about 8% of council revenues, while Treasury grants accounted for about 80%. Only around 7% of council staff had revenue-collection responsibilities.

Compliance is thin.