Government, IMF Differ Over Property Tax in 2027 Budget

28-Jul-2026

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Differences have reportedly emerged between the Sri Lankan Government and the International Monetary Fund (IMF) over the proposed introduction of a secondary property tax in the 2027 Budget.

According to an English-language media report, the IMF has proposed introducing a property tax in the forthcoming Budget targeting additional or second residential properties.

The Government, however, has argued that the alternative revenue measures proposed for the 2027 Budget would be sufficient to meet the required fiscal targets, making such a tax unnecessary. It has also pointed out that compiling an accurate database of property owners would require considerable time.

Nevertheless, there is a strong possibility that the IMF will continue to press for the implementation of the tax even if it is not included in the 2027 Budget.

Under the initial agreement reached with the IMF in 2023, a conventional property tax was scheduled to be introduced by 2025. However, a technical assessment conducted in February 2024 identified two major obstacles.

First, under the 13th Amendment to the Constitution, revenue from property-related taxes is assigned to the Provincial Councils, preventing the Central Government from imposing such a tax directly.

Second, the Department of Valuation does not possess up-to-date and usable data on approximately five million properties across the country.

To overcome these challenges, the IMF proposed in August 2024 an "imputed rental income tax" system, under which the estimated rental value of an owner's primary residence would be treated as taxable income.

Although the measure was scheduled to take effect in April 2025, the new Government that assumed office following the November 2024 election abandoned the proposal, stating that it was impractical to implement.