Abstract:
Direct tax has become a major tax source in developed and developing
countries. That is one of the instruments of fiscal policy. Thus, this research is
about the impact of direct taxes on the economic growth of Sri Lanka after
1990. According to the researcher, the main objective of this research is to find
out the impact of direct taxes on the economic growth of Sri Lanka after 1990,
and the sub objectives of the research are to identify the correlation between
GDP and income tax, international trade tax, and stamp duty, and to examine
the total direct tax trend in Sri Lanka after 1990. The research is based on time
series data. A multiple regression model was used to analyze the data using E-Views and descriptive analysis was also used. The secondary data was
collected from the Inland Revenue Department of Sri Lanka and the Central
Bank Report of Sri Lanka. According to the time series analysis, it was found
that Income Tax, International Trade Tax, and Stamp Duty Levy significantly
influenced gross domestic product (GDP) in Sri Lanka after 1990. The long run relationships between stamp duty and GDP have been positively and
statistically significant at the 1-unit level. International trade tax and stamp
duty were correlated with GDP before 2004. According to the total direct tax
trend in 2006, there was a sudden increase in the direct tax revenue. The
revenue increased slightly more than in the previous year. Stamp duty and
GDP have been far away. So, the Inland Revenue Department needs to
introduce a new amendment to the stamp duty. Like that, international trade
tax is included in direct tax. It includes import duties, export duties, profit of
export or import monopolies, exchange profit, and exchange taxes. After 2018,
the international trade tax rate began to decrease at a slow level. So, Sri
Lanka's government needs to increase the international trade tax rate in the
future. And after 2006, the Stamp Duty level increased slowly. But the Sri
Lanka government changed the Stamp Duty act in 2006. So, the government
needs to redesign the Act on Stamp Duty.
