Sri Lanka lifted its government revenue to 13.5 per cent of GDP in 2024, the highest level in more than a decade. Yet, it still trails most South Asian neighbours in terms of government revenue.

Academic research indicates a strong correlation between a country's national income and the level of taxes it collects. Richer states collect a larger share of GDP as taxes. France and Denmark, for instance, channel nearly half of their national output into government revenue.

Sri Lanka has not followed this path. Over the years, its revenue ratio declined even as its per capita GDP increased, reaching a record low of 8.3 per cent of GDP in 2021. An IMF-backed fiscal consolidation program has since clawed back more than five percentage points in the revenue level, but the ratio remains low by regional standards.

Among South Asian economies—already the world’s least taxed region—only Bangladesh and Pakistan collect less in terms of revenue to GDP. India, Nepal, Bhutan, and the Maldives all hover at, or above, 20 per cent. The mismatch is striking because Sri Lanka enjoys the region’s second-highest GDP per capita—about USD 4,516 in 2024, second only to the Maldives—yet falls to fifth place in terms of its revenue share.

This shortfall matters. Sri Lanka needs greater investment in health, education and infrastructure. Countries that devote a larger slice of GDP to such expenditure can do so because they first raise a larger share of their GDP in revenue.

While Sri Lanka has made notable progress in increasing its revenue ratio over the past two years (see Sri Lanka’s Revenue: What Changed Between 2021 and 2024? ), this comparison highlights that there is still a long way to go. IMF projections estimate that government revenue will rise to 15.1 per cent% in 2025 and remain at that level in the future. However, even this figure is still lower than that of regional peers.

Sources

IMF World Economic Outlook Database, April 2025 at https://www.imf.org/en/Publications/WEO/weo-database/2025/april

World Bank Group, Data at https://data.worldbank.org/indicator/NY.GDP.PCAP.CD

IMF Working Paper: "Tax Capacity and Growth: Is There a Tipping Point? at https://www.imf.org/external/pubs/ft/wp/2016/wp16234.pdf

Besley, T. J., & Persson, T. (2013, January). Taxation and development. https://ssrn.com/abstract=2210278. (CEPR Discussion Paper No. DP9307)

Kleven, H. J., Kreiner, C. T., & Saez, E. (2016). Why can modern governments tax so much? an agency model of firms as fiscal intermediaries. Economica, 83 (330), 219–246. doi: 10.1111/ecca.12182

Revenue to GDP for 2024 for specific countries

GDP per capita for 2024

Research By: Hafsa Haniffa and Anushan Kapilan

Visualisation By: Muaadh Himaz