"Strengthening the administration of the VAT is a very important reform," IMF mission chief to Sri Lanka John Nelmes said.
"An international comparison of VAT shows that the revenue that is brought in for every percentage point is low by international comparison
"And this indicates that there is a case for improving administration, for reducing exemptions and broadening the base, that will bring in more revenue for every one percentage for VAT."
Complex VAT
Value added tax works best when applied with a single rate - such as 20 percent - with exports zero rated and few or no exemptions.
Unlike import duties such a regime is less interventionist and ensures that powerful special interest groups such as domestic production lobbies do not get any special benefits to exploit consumers and refunds are minimized and limited only to exporters.
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