Boosting tax revenue is crucial for sustainable development. Enhanced tax revenue hinges on compliance, and understanding the factors driving compliance is key. Fiscal contract theory posits that people pay taxes because they appreciate the benefits received in return. As paying taxes involves sacrificing personal income for public good, it presents a collective action dilemma. Therefore, both the citizen-state relationship and the inter-citizen relationship significantly impact tax compliance. Enhancing voluntary compliance and public trust in the fiscal system hinges on a perceived fair and equitable design. Tax administration must deliver service-oriented taxpayer assistance, ensuring citizens have the necessary information and support to fulfil obligations and claim entitlements, crucial for systems fostering voluntary compliance.

This study – the first national taxpayer perception study in Sri Lanka - aimed to assess business and household perceptions of fiscal policies and tax administration in Sri Lanka in light of the economic crisis and the subsequent tax policy effort that is part of broader economic reforms. It provides a comprehensive analysis based on a general survey and Key Informant Interviews (KIIs), capturing insights from respondents across all nine provinces. The survey involved 567 participants, while the KIIs included 75 key informants, covering all 9 provinces in Sri Lanka and the survey was carried out in all three languages. The study’s findings align with initial expectations, confirming the Ministry of Finance and Inland Revenue Department’s views on business and public perceptions of tax policy and administration.

Sri Lanka’s first national taxpayer perception study is anchored under the United Nations Development Programme (UNDP)’s overall support to the Government of Sri Lanka, as a component of the Tax for SDGs (T4SDGs) programme, a global initiative implemented by UNDP in 25 countries. The Tax for SDGs global Initiative is supported by the Government of Finland and the Government of Norway. This programme is implemented in Sri Lanka under the leadership of the Ministry of Finance and the Inland Revenue Department.