News
Jaffna Municipal Council in move to retain VAT revenue
View(s):By S. Rubatheesan
The Jaffna Municipal Council (JMC) is set to move a resolution to retain revenue collected from Value Added Tax (VAT) to meet its revenue target and partially finance its own expenses.
The move comes after the government introduced revenue targets for local councils to encourage them to manage their own expenditure without relying on central government funds.
In terms of the government directive, municipal councils are required to generate 40 per cent of the total expenditure on their own. For other local bodies, the target is set at 20 per cent.
Of the 341 local councils in the country, 24 are municipal councils, 41 are urban councils and 276 are Pradeshiya Sabhas.
The JMC spends Rs 660 million—or sixty per cent of the budget—to pay the salary of its 816 employees, while it requires an additional Rs 300 million to make overtime payments and other allowances.
Even though the council’s budget for 2026 is estimated to be around Rs 1500 million, it is unable to generate the required funds. Therefore, it has decided to seek central government approval to retain funds collected through VAT.
Provincial Council and Local Government Ministry Secretary S. Alokabandara told the Sunday Times that the government’s move was aimed at making local bodies partially cushion their own expenditure and encouraging their revenue generation process.
“At present, local bodies have their own sources of revenues. The government also allocates funds to meet their salary expenditure as a capital grant,” he said, pointing out that the move stemmed from a 2022 budget proposal and not a recommendation from the International Monetary Fund (IMF) as claimed by the JMC.
“According to the 2022 budget proposal, 20 per cent of the fund cut came into effect for municipal councils in 2024, and from this year onwards (2025), it is applicable to all local bodies. The proposal aims to increase the cut gradually till 2029,” the secretary said.
“They should make their own efforts to increase their revenues.”
On the JMC move seeking VAT funds to cover their own expenditure, the Secretary said the government will try to address it at the next month’s budget.
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