The government revises the tax policies announced in the 2016 budget proposals to get the country out of the labyrinth of the loan crisis that the previous regime had put it into, Prime Minister Ranil Wickremesinghe said in Parliament yesterday.
He added that the government proposed to maintain the Nation Building Tax at two percent although it proposed to increase this from two percent to four percent in the 2016 budget. The Prime Minister added that it was proposed to maintain this at two percent as the increase affected all sectors of society.
He added that the proposal to exempt electricity, lubricants and telecommunications would be further continued.
“I propose to withhold proposals with regard to Corporate Taxes and non-corporate taxes for one year and to continue the rates proposed in the budget 2015 for those two taxes,” the Premier said.
“The Value Added Tax (VAT) will be maintained at 15 percent to maintain GDP at 5.4 percent and the economic growth rate at six percent in 2016.”
Making a special statement, the Prime Minister said that as he promised the House on January 28 to make a special statement with regard to the current economic situation in the country in the face of global economic trends and future prospects, he thought it was time for him to make that statement.
“We have observed that several persons are attempting to create unrest among the public by shouting that country’s economy is in jeopardy,” Premier Wickremesinghe said.
“Some go overseas and hold seminars to tell Sri Lankans living there that the economy of Sri Lanka has collapsed. That is why I thought of making a statement to the House and state the truth”. He added that it was him who predicted in 2014 first that there would be a national election in 2015. He added that he made the prediction very much ahead of Sumanadasa Abeygunawardena who made predictions on the basis of formations of star clusters and planetary movements. The Prime Minister added that he made predictions after analyzing the economic situation in the country.
“After analyzing the way the Rajapaksa was mismanaging the country’s economy, I realised that there was no future for that government after 2015,” the Premier said. “With the election of Maithripala Sirisena to the Presidency we could turn back the direction the country was being dragged. We changed the economic policies that concentrated all resources around a single family. We provided relief to the people under the 100-day government.”
Premier Wickremesinghe said however it was not easy to salvage the economy from where it was as the previous government had taken massive amounts of loans. He added that the previous government had not followed formal procedures in taking loans.
He said they had obtained loans at their will without worrying how to pay them back.
“We did not have proper or complete records of the amounts of loans taken at the time we prepared the budget 2016. Some information we received only after the budget,” Prime Minister Wickremesinghe said.
“According to the latest documents, the country’s total outstanding loans at the end of year 2015 were Rs. 8,475 billion, which amounts to 74.9 percent of the GDP. Due to the previous government’s economic mismanagement, the country is in a debt trap of Rs 9.5 trillion.”
He added that the challenge before the government is to get out of that trap while facing the current global economic crisis.
“World market oil price is reducing. Those who demand to reduce the local oil prices do not see the danger behind it,” the Premier said. “On the other hand, the Ceylon Petroleum Corporation has outstanding loans of Rs. 365 billion.”
He added that the government has discussed this situation with world economic experts at the World Economic Forum at Davos last January.
Government representatives discussed the crisis situation with IMF Managing Director Christine Lagarde, economists George Soros, Joseph Stiglitz and Ricardo Hausman and listened to their advice, he said.
He added that their opinion was that it was very difficult to predict the world economic situation and advised the country to put more weight on increasing national income with utmost care in spending.
“We will not take loans to settle the loans like the Rajapaksa regime did. We will not be able to solve economic problems in such a manner,” the Premier said. “To get out of this crisis, we should increase the national income. We have to streamline the tax revenue of the government.”
He said that for that purpose, the government would revise tax policies that it announced in the 2016 budget proposals.
“I propose to withhold proposals with regard to Corporate Taxes and non-corporate taxes for one year and to continue the rates proposed in the budget 2015 for those two taxes,” the Premier said.
“Since 1987 Capital Gain Taxes were not levied in Sri Lanka. However there has been a growth in private capitals in the country during the last decade. As a result the prices of lands and shares in the stock market increased because there was no levying of the Capital Gain Taxes. We propose that capital gain tax should be imposed again.”
He added that the Nation Building Tax is levied on the basis of turnover. He also added that it has been proposed in 2016 budget to increase the NBT from two percent to four percent. “That increase affected all sectors of society. In order to prevent that impact, we propose to maintain the NBT at two percent. The proposal to exempt electricity, lubricants and telecommunications would be further continued. In budget 2016 it has been proposed to implement two rates of Value Added Taxes as eight percent and 12.5 percent instead of the 11 percent of single rate,” the Premier said.
“It seems that it is prudent that we maintain a single rate of 15 percent. We would remove the tax relief granted to telecommunication services, private education and private medical care,” he added.
“We would not let the low income groups to suffer the increase of VAT. We would not impose the VAT for essential commodities. All these moves are aimed at maintaining the GDP at 5.4 percent and the economic growth rate at six percent in 2016.”
( R.Sampanthan)-09/03/2016
CHENNAI, 
