Connect with us

News

Without upped tax revenue, country can revert to era of queues

Published

on

The Government is ready to implement prudent economic management after successful debt restructuring, emphasized President Ranil Wickremesinghe, when he delivered a special statement on tax policy today (19).

President Wickremesinghe further noted that it was not possible to strengthen the economy without increasing the revenue of the country, which will compel him to reluctantly make tough decisions in order to rebuild the nation.

The full statement by President Ranil Wickremesinghe is as follows;

An important step in Sri Lanka’s debt restructuring program took place last week. A team under the Minister of State for Finance participated in the Annual (October 07) meeting of the International Monetary Fund (IMF). In that instance, a meeting was convened by the IMF, with the lending and international private institutions to Sri Lanka.

Over 75 persons participated both in person and  through zoom technology. The main objective of this meeting was for the three main countries that have granted loans to Sri Lanka, namely Japan, China and India, to come together on a common platform to discuss the future steps in the formulation of concessions.

During this meeting, the IMF and Sri Lanka pointed out the need for a common platform. India and China have informed that they will examine the issues further and respond accordingly.  These two countries have also informed the possible need for bilateral discussions in this regard.

Many other countries also participated in this meeting, including the attendance of an Assistant Secretary of the United States Treasury. All this was possible due to the implementation of the decisions taken in consultation with the IMF.

There is an aspect about the income of the Government of Sri Lanka which need to be noted. In 2015, during a visit to Sri Lanka the IMF representatives  underlined the need or a surplus in the primary budget. Therefore, it was provided for in 2017-2018. However, it was reduced in 2019 due to the Easter Sunday bombings. However, there were no serious repercussions. The IMF was  optimistic that Sri Lanka would be able to increase its revenue, since there was a surplus in the primary budget.

At that juncture, Sri Lanka’s income was between 14.5% – 15% of the Gross Domestic Product (GDP). However, it was agreed that Sri Lanka could gradually increase this to 17%-18%.
However, in November 2019, the country’s taxes were drastically reduced, with the Government revenue decreasing to 8.5%. In this context, the IMF set aside the agreements and declared that it was unable to provide the agreed assistance. 

That year the Government lost approximately Rs. 600-700 billion as revenue.  Simultaneously, the country  had to face the Covid-19 pandemic. These issues are the main factors that led to the collapse of Sri Lanka’s economy.

The IMF advised the need for  a surplus in Sri Lanka’s  primary budget. It was agreed to, since the country needs the support of the IMF.

It was also decided to increase the country’s income from 8.5% to 14.5% of the GDP. However, it is a difficult task to accomplish immediately, it is envisaged to achieve this  by 2026.

Initially, a decision had to be taken on the manner in which the income is to be increased. Money was printed due to the decrease in income. During the past two years, Rs. 2300 billion has been printed, resulting in inflation rising to 70% – 75% and even more in respect of food inflation.

These increases need to be controlled, while securing income. Therefore, during the discussions with the IMF a new tax system has been proposed. The IMF informed that even the export industries would be required to pay taxes.

The IMF pointed out that in countries with an export economy, the related industries were liable for tax. The IMF also upheld that Sri Lanka’s primary export economy is based on the plantation industry. During British rule, taxes were charged from every plantation sector, including tea, coconut and rubber. Therefore, if the country has to move towards that goal, taxes will have to be paid. The export sector has now questioned this aspect and the related concerns are to be submitted to the IMF.

The second issue regarding the personal tax structure.  The majority of tax revenue is through indirect taxation. The majority of the country’s citizens, even those below the poverty line, had no choice but to pay indirect taxes.  The direct tax revenue is 20% and 80% has been derived from indirect taxes.

The IMF that particularly had reservations in this regard were of the view that the amount of tax obtained through direct taxes should exceed 20%. The IMF noted that otherwise this would not be successful and ordinary citizens would need to pay taxes.

Therefore, according to this framework, and also to achieve the goals of 2026, the Treasury and the IMF discussed the possibility of limiting the taxation from those who have an income of Rs. 200,000, which however, did not materialize.  Eventually, this has resulted in the decision to levy income tax on people earning over 100,000. Today, this has become a vital concern amongst the citizens.

Against this backdrop, without this tax system, the desired goal will not be achieved. The agreed goal is to achieve 14.5% – 15% of Gross Domestic Product (GDP) revenue by 2026.

 If Sri Lanka withdraws from this program, IMF assistance will not be received. Without IMF certification, the support of these international financial institutions such as the World Bank,  Asian Development Bank, and the countries that have supported financially will not be forthcoming. If that happens, the country will be  back to the era of queues.

Tougher times ahead will have to be faced. Therefore, these loans need to be obtained and embark on a debt-restructuring program. These decisions are not being taken wilfully, but are being done  reluctantly. However, these decisions will be reconsidered periodically.

In the same manner of conducting the debt restructuring program successfully, if a bountiful Maha season is achieved as expected, it will help in reducing economic pressure. Measures  to increase the country’s foreign reserves has also been discussed and once all these steps have been implemented the country can move forward.

The country at this juncture is facing a difficult period. Expectedly tough decisions have to be taken during these difficult times. I undertook this challenge when no one else was willing to come forward. Therefore, it is my responsibility to explain the background of the related issues and the Government is also ready to discuss this further if required.

News

Chinese Minister of Commerce meets President AKD

Published

on

By

The Minister of Commerce of the People’s Republic of China, Mr. Wang Wentao, who is currently on an official visit to Sri Lanka, met with President Anura Kumara Disanayake this afternoon (29) at the Presidential Secretariat for discussions. 

Minister Wang noted that, considering the current political and economic stability in Sri Lanka, along with the clear policy direction being pursued by President Disanayake’s administration, there has been a notable rise in interest from Chinese investors looking to invest in the country.

He further stated that this visit undertaken with the participation of over 100 Chinese investors demonstrates a solid dedication to enhancing economic collaboration between the two nations.

The discussion also focused on the importance of working together to achieve mutually beneficial trade and economic goals during this challenging period. In light of global economic instability, the Chinese Minister of Commerce reiterated China’s commitment to providing the necessary support to Sri Lanka.

One of the key objectives of Minister Wang Wentao’s visit is to follow up on the agreements reached during President Anura Kumara Disanayake’s recent visit to China. The two sides also discussed the timely completion of on-going development projects in Sri Lanka with Chinese government support, as well as the prompt implementation of proposed new initiatives.

The Chinese delegation included Mr. Qi Zhenhong – Ambassador of China to Sri Lanka, Mr. Wang Liping – Director General of the Department of Asian Affairs and Ms. Shu Jueting – Director General of the Department of Foreign Affairs.

Representing Sri Lanka, Minister of Trade, Commerce, Food Security and Cooperative Development Wasantha Samarasinghe Secretary to the President Dr. Nandika Sanath Kumanayake and Senior Additional Secretary to the President Roshan Gamage, along with other officials, were also present at the occasion.

(President’s Media Division)

Continue Reading

News

Polish FM meets President AKD

Published

on

By

Minister of Foreign Affairs of the Republic of Poland, in the context of Poland’s Presidency of the Council of the European Union Radosław Sikorski, currently on an official visit to Sri Lanka, met with President Anura Kumara Disanayake this afternoon (29) at the Presidential Secretariat for discussions.

The discussions focused extensively on strengthening cooperation between Sri Lanka and the European Union. President Disanayake emphasized the importance of continued EU support in overcoming future global economic challenges facing Sri Lanka.

President Disanayake stated that, in the face of challenges arising from the newly introduced tariff regime by the United States and the fiscal constraints imposed by the International Monetary Fund, Sri Lanka hopes to engage in broader cooperation with the European Union to address emerging economic pressures.

The President expressed his appreciation for the positive response demonstrated by the European Union regarding the continued maintenance of the GSP+ concession granted to Sri Lanka.

Meanwhile Polish Foreign Minister Radosław Sikorski stated that his visit reflects the special attention both the European Union and Poland place on Sri Lanka.

The discussion also focused on further strengthening the historic ties between Sri Lanka and Poland, with both sides expressing interest in enhancing bilateral collaboration.

Polish Foreign Minister Radosław Sikorski recalled the 50 years of economic and trade and 30 years of development cooperation between Sri Lanka and Poland. He expressed his government’s intention to work closely with the new administration in Sri Lanka to further advance these relations.

The delegation including Ambassador of the European Union to Sri Lanka Carmen Moreno, Secretary to the President Dr. Nandika Sanath Kumanayake, Senior Additional Secretary to the President Roshan Gamage were among the other officials. 

(President’s Media Division)

Continue Reading

News

Galle Marvels owner gets sentenced

Published

on

By

Prem Thakkar, the Indian owner of the Galle Marvels franchise in the Lanka T10 League, has been sentenced to two years in prison, suspended for 10 years, after pleading guilty to a match-fixing charge under Sri Lanka’s Prevention of Offences Related to Sports Act.

Thakkar was also fined Rs. 6 million and ordered to pay Rs. 1 million in compensation. In addition, the Kandy High Court has granted a request by the ICC Anti-Corruption Unit to download and examine data from Thakkar’s mobile phone as part of ongoing investigations.

The Attorney General filed the indictment earlier this year, accusing Thakkar of attempting to corrupt West Indies cricketer Andre Fletcher by offering him incentives to influence the outcome of a game involving Galle Marvels during the Lanka T10 League in December 2024.

(newswire.lk)

(Except for the headline, this story, originally published by newswire.lk has not been edited by SLM staff)

Continue Reading

Trending

Copyright © 2024 Sri Lanka Mirror. All Rights Reserved