13% revenue to GDP ratio is manageable: Treasury Secy.
Monday, 25 November 2013 00:33
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Treasury Secretary Dr. P.B. Jayasundera on Friday expressed comfort over the revenue figure of 13% of GDP though several analysts have termed it very low.
“A revenue to GDP ratio of 13% is manageable,” the Treasury Secretary said adding that several large expenditures of the past weren’t there thanks to the end of the war and re-settlement of Internally Displaced Persons.
“The end of the war ensured the heavy defence expenditure is no more. I remember business leaders once said ‘end the war and don’t worry about the rest’. We also don’t have expenditure on IDPs,” Dr. Jayasundera added.
“When people talk of revenue to GDP ratio of 20% in the past, one must be mindful that current expenditure to GDP was also 24%. Given the challenges, today we are comfortable with a 13% revenue to GDP ratio and a 14% current expenditure to GDP ratio,” he added.
The 2014 Budget proposes revenue to GDP to be 14.5% and current expenditure to GDP ratio of 13.4% from 13.6% and 14.1% in 2013.
He also said that revenue effort is being enhanced and will be made buoyant in the medium term.
The revenue deficit which was 3.7% in 2009 is expected to be reduced to 0.7% in 2013.
As per the Fiscal Management Report released last week, the Government revenue of around 13% of GDP is expected to be improved in the medium term when present tax reforms generate a revenue elastic tax system and tax administration is improved.
The medium term revenue effort is expected to reach 15-16% of GDP as the base settles down following the recent monetary and fiscal policy adjustments towards stability in the external sector. Further increase in the revenue is also important to provide adequate liquidity to Treasury operations to facilitate better execution of the Budget.
The Government will also make a strong effort to address the challenge of taxing the services sector, which has become an important issue with the structural shift in the economy towards more service oriented one. Other challenges such as the facilitation of the emerging sectors in the new economy, promotion of exports and improvement of domestic production will also be addressed appropriately.
