Sirisena faces May Day test of strength, growing challenge from pro-Rajapaksa ‘JO’
Sunday, April 24, 2016- Despite threats of disciplinary action, dissidents go full steam; President asks why UNP going soft on former leaders
- Polonnaruwa VAT bombshell reverberates at crucial talks with IMF in Washington; major topic at Cabinet meeting
- Tax not withdrawn, experts not sacked, but major changes made in proposals to reduce burden on people
He neither put a halt to new taxes nor sent home the Government’s economic advisors who reportedly recommended them.Yet, President Maithripala Sirisena was able to ensure a few concessions were offered when the Value Added Tax (VAT), the biggest burden for low and middle income groups, becomes effective. There is still an element of uncertainty when a VAT increase to 15% comes into effect though it is currently scheduled for May 2. Other tax measures have already been made effective from April 1.
State Minister for Finance, Lakshman Yapa Abeywardena told the Sunday Times an extraordinary Gazette notification was due on May 2 but would be backdated if there was a delay. The outcome of talks between the Government and the International Monetary Fund (IMF) in Washington DC was being awaited. The Government made a case for an IMF Extended Fund Facility of US$ 3 billion whilst talks in Colombo saw a possible offer of US$ 1.2 billion. Reports from Washington DC indicate that a sum above US$ 1.2 billion but below US$ 3 billion would be the likely outcome. Stating Sri Lanka’s case to the IMF for the enhanced facility was a delegation led by Finance Minister Ravi Karunanayake.
In what seemed a surprising turn of events, President Sirisena declared during a speech at the national New Year celebrations at Pulasthipura in Polonnaruwa, that he would not introduce any tax that would be a burden on the people. He said he had read reports in sections of the newspapers about the revision of VAT. He warned that if there were economic experts who made such proposals, he would send them home. The policy of the Government was to alleviate the burdens of the people and not to heap more, he said. Sirisena’s tough statement hit the headlines and reverberated in the Colombo-based diplomatic community. In Washington, where Finance Minister Karunanayake was negotiating for an extended facility with the IMF, and a promise that his Government would impose certain taxes in order to win an IMF loan, there was a barrage of queries for him. Has the Government gone back on its commitments to ensure financial discipline? How would it make up for the shortfall in revenue if VAT was not increased? These were some of the questions tossed at him. A Washington-based Sri Lankan told Karunanayake about the President’s tough comments and the minister confessed he was unaware of what had gone on in Sri Lanka. There was no official intimation to him from the President’s office or anyone in the Government if indeed VAT was not going to be increased. He was out on a limb, so to say.
