A single bold proposal is challenging Sri Lanka’s comfort with delay, privilege and economic orthodoxy, arguing that the country can no longer rebuild itself with half-measures or excuses.
The following article is based on an open letter addressed to the President of Sri Lanka by a concerned citizen and subsequently received by The Sri Lanka Guardian. The text reflects the arguments, data and proposals contained in that letter, expanded here into a comprehensive analytical narrative that examines the country’s fiscal crisis, structural inequalities and the radical solution being proposed.
Sri Lanka stands at a moment of rare and uncomfortable clarity. A devastating cyclone has pushed more than two million people into distress, tearing apart livelihoods, destroying homes and exposing the fragility of economic recovery efforts that were already stretched thin. The immediate requirement for relief, reconstruction and economic stabilisation has forced the state to confront a reality it has long postponed: the country does not have a revenue system capable of responding to crisis at scale.
At the same time, the decision to postpone a proposed property tax has laid bare the political and administrative paralysis surrounding fiscal reform. These two developments are not isolated misfortunes. They are presented in the open letter as interconnected symptoms of a deeper structural failure, one rooted in how Sri Lanka taxes its people, rewards certain forms of wealth and repeatedly avoids confronting entrenched privilege.
The letter argues that Sri Lanka’s tax regime punishes production, discourages enterprise, rewards evasion and consistently fails to mobilise adequate revenue, whether for emergencies or long-term development. In this context, familiar policy responses such as increasing VAT, raising income tax thresholds or tightening compliance are described as not only insufficient but actively harmful. Such measures, the argument goes, intensify inflationary pressure, suppress consumption, weaken growth and push already vulnerable households deeper into poverty.
Against this bleak backdrop, the letter advances a proposal that is intentionally radical in both scope and intent: the introduction of a Single National Asset Tax, commonly referred to as the SNAT. This proposal is not framed as a minor adjustment or technical reform. It is presented as a fundamental reorientation of the fiscal state, designed to replace a fragmented, punitive and inefficient tax system with a single, transparent and growth-oriented mechanism.
The stated objectives of the proposal are twofold. First, it seeks to generate immediate and substantial revenue to fund disaster recovery, reconstruction and economic stabilisation without relying on further debt accumulation or monetary expansion. Second, it aims to permanently dismantle the existing tax structure and replace it with a system that encourages investment, restores purchasing power and unlocks sustained economic growth. The proposal is unapologetically ambitious, asserting that a single, well-designed asset-based levy could both double government revenue and allow for the abolition of most other major taxes.
The argument begins with a detailed examination of Sri Lanka’s current revenue base, which is described as shockingly narrow when viewed against the scale of national wealth. Official figures show that in 2022, all local authority rates and property taxes combined generated only LKR 45.3 billion. Motor vehicle licence fees contributed a further LKR 29.4 billion. Together, these sources amounted to approximately LKR 75 billion, representing just over two per cent of total government revenue.
This, the letter argues, is not a statistical curiosity but evidence of a profound policy failure. The state has largely ignored the country’s primary store of wealth, namely land, buildings and high-value assets. Instead, fiscal policy has concentrated on taxing income and consumption. These are described as the worst possible targets for a developing economy because they are easier to conceal, easier to evade and far more damaging to productivity and demand.
Income taxes discourage skilled labour, formal employment and entrepreneurship. Consumption taxes such as VAT cascade through supply chains, raising prices at every stage and disproportionately burdening the poor. Meanwhile, large accumulations of wealth in property and business assets remain lightly taxed, under-assessed or effectively untouched. The result, according to the letter, is a system that extracts maximum pain for minimum revenue.
The imbalance, the argument continues, is not merely inefficient but fundamentally unjust. It penalises those who earn wages, operate businesses or consume basic goods, while allowing vast concentrations of wealth to grow largely unchallenged. The Single National Asset Tax seeks to reverse this logic by building directly on the existing property and vehicle tax base.
Rather than introducing new valuations, new bureaucracies or complex assessment mechanisms, the proposal relies on administrative simplicity. It applies a single multiplier to what already exists. By applying a one-hundredfold multiplier to the current LKR 75 billion base, the state would generate LKR 7.5 trillion in annual revenue. This figure alone exceeds current total government revenue, which stands at approximately LKR 5 trillion.
The scale of this proposed revenue increase is central to the argument. The letter highlights that cyclone relief and reconstruction are estimated to require around LKR 600 billion, while the broader economic damage is estimated at LKR 2 trillion. Under the proposed system, these needs could be met immediately, without recourse to additional borrowing, emergency taxation or inflationary money creation.
Beyond disaster response, the surplus revenue could be deployed strategically over a ten-year horizon. It could stabilise public finances, retire high-cost debt, rebuild infrastructure, invest in human capital and restore confidence in the state’s capacity to govern effectively. The argument is that Sri Lanka’s problem has never been a lack of wealth, but a failure to mobilise it fairly and efficiently.
A crucial pillar of the proposal is its grounding in the actual distribution of wealth within Sri Lankan society. The letter outlines a stark socio-economic reality that is rarely acknowledged in public debate. The poorest sixty to seventy per cent of the population holds less than five per cent of national wealth. A middle segment, comprising roughly twenty to twenty-five per cent of citizens, controls around twenty-five to thirty per cent. At the top sits a narrow group of approximately seven per cent of the population, holding between sixty-five and seventy per cent of the nation’s wealth, primarily in real estate and business assets.
From this distribution, the conclusion drawn is unavoidable. Any serious attempt to raise revenue in a manner that is both fair and effective must focus on asset wealth rather than income or consumption. The existing tax system does the opposite. It taxes income, which can be hidden, deferred or shifted across borders, and consumption, which falls hardest on those with the least capacity to absorb price increases.
By contrast, assets such as land and buildings are visible, immovable and difficult to conceal. The Single National Asset Tax therefore targets the segment of society most capable of contributing, while leaving the majority of citizens either untouched or positively affected through lower prices, higher real incomes and expanded economic opportunity.
The proposal does not stop at revenue generation. It explicitly links the introduction of the SNAT to the abolition of a wide range of existing taxes that are described as strangling the economy. These include corporate income tax, personal income tax, value added tax, capital gains tax and tax on interest income.
Each of these taxes is portrayed as imposing hidden but severe costs on ordinary citizens. Corporate taxes are passed on to consumers through higher prices. Personal income tax encourages skilled workers to migrate and fuels the brain drain. VAT drives cascading inflation across the economy. Capital gains tax discourages productive asset transfers and investment, while tax on interest income keeps lending rates artificially high and restricts access to capital.
According to the letter, removing these taxes would have an immediate and dramatic impact on the cost of living. Prices would fall sharply as embedded taxes disappear from supply chains, effectively doubling the purchasing power of the most vulnerable households within months. Goods that currently cost one hundred rupees could, in this scenario, fall to fifty rupees. Government expenditure would also decline as procurement costs fall, easing fiscal pressure further.
The SNAT is thus presented not merely as a tax, but as a mechanism that shifts the burden of public finance away from daily economic activity and towards accumulated wealth. The transformative effects are described as extending across both demand and supply, stimulating growth while reducing inequality.
Considerable attention is given to the design of the proposed tax, with an emphasis on fairness, stability and administrative simplicity. The SNAT would apply annually to two asset classes considered impossible to hide: immovable property and luxury vehicles such as cars and SUVs. Crucially, the proposal includes explicit protections for the less privileged.
Properties with a 2024 local council tax bill of LKR 2,500 or less, corresponding roughly to properties valued at around LKR 1 million, would be fully exempt. Motorcycles and three-wheelers, which are essential for livelihoods and transport among lower-income groups, would also be exempt. These safeguards are presented as central to ensuring that the tax targets wealth, not subsistence.
To ensure predictability and prevent abuse, the proposal fixes the base year for assessment at 2024. The local council tax bill for that year would serve as the reference point for the next ten years, with the SNAT calculated simply as that bill multiplied by one hundred. This approach eliminates the need for new valuations, periodic reassessments or discretionary adjustments, reducing opportunities for corruption and administrative delay.
Local authorities would retain the freedom to set their own rates for local services, preserving decentralised governance while separating local finance from national revenue needs. The system, the letter argues, is transparent, predictable and easy for citizens to understand.
An illustrative example is provided to demonstrate how the system would operate in practice. A senior banker living in a Colombo property valued at LKR 80 million, with a rental value of approximately LKR 100,000 per month, paid a local council tax of LKR 3,500 in 2024. Under the SNAT, his annual liability would be LKR 350,000, or around LKR 29,000 per month.
This amount is less than thirty per cent of a single month’s rental value and significantly lower than his current income tax burden. In a tax-free income environment, his capacity to earn, invest and consume would increase, making the contribution both manageable and proportionate. The example is intended to demonstrate that the SNAT is not confiscatory, but calibrated to align contribution with capacity.
The letter goes on to outline the broader economic effects expected within a six-month horizon of implementation. The removal of embedded taxes would sharply reduce production costs and reliance on bank borrowing, making Sri Lankan exports instantly more competitive. Tourism, manufacturing and foreign direct investment would benefit from a lower cost base, positioning the country as an attractive destination in the region.
A surge in revenue and investment would strengthen the currency, reducing the cost of imports such as food and fuel and easing inflationary pressures. The abolition of corporate tax is expected to open investment floodgates, transforming Sri Lanka into a regional hub for capital. The removal of personal income tax would reverse the brain drain by giving professionals strong incentives to build their futures domestically.
Rising real incomes and job creation would lift millions out of poverty within a year, according to the letter’s projections. The elimination of tax on interest income would drive lending rates down to an estimated three to five per cent, making capital accessible to entrepreneurs, small businesses and households on an unprecedented scale.
To reinforce its credibility, the proposal is situated within a global context. Estonia is cited as a successful example of a growth-oriented tax system that taxes corporate profits only when they are distributed, not when they are reinvested. This approach has earned Estonia a reputation as one of the most efficient and competitive tax systems in the world, consistently ranked at the top by international assessments.
The Single National Asset Tax is presented as an extension of this logic, applied not only to corporations but to the entire economy. It prioritises reinvestment, growth and long-term prosperity over short-term extraction.
The traditional path of incremental tax increases, austerity measures and policy hesitation is described as a route to higher inflation, deeper poverty and greater social division. By contrast, the SNAT is offered as a path towards unity, recovery and shared prosperity. It aligns the interests of the wealthy with national reconstruction, provides the state with abundant and stable revenue, and liberates citizens from a complex and punitive tax regime.
The cyclone, in this framing, becomes more than a natural disaster. It is a moment of painful clarity that exposes long-standing vulnerabilities and forces a reckoning with structural realities. The response, the letter argues, should not merely rebuild what was lost, but reimagine the foundations of Sri Lanka’s economy and fiscal state.
The day Sri Lanka ran out of excuses, the letter concludes, could also be the day it chose to rebuild itself on principles of fairness, courage and economic honesty.
SOURCE:- SRI LANKA GUARDIAN
