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Pointing out the efforts of the Government in this regard, Jayasundera said: “The President himself never thinks he alone has answers to all questions and he too took to the streets, went to the Government ministries, and held consultations with civil society and others. We followed a very rich inclusive policy formulation process. We also turned to top corporate leaders.”
He added that the Government is listening to everybody since it is “set up in a democracy”.
While diverse groups of professionals have been putting forward their opinions about the 2014 Budget since its announcement last Thursday (21), Jayasundera stressed on the need to put forward statements in perspective.
Using the forum as a platform to clarify a few misconceptions on the Budget, Jayasundera touched on the area of taxes as there currently is a perception that locals don’t pay their taxes.
“I disagree,” he said. “People here pay taxes and the level of compliance is high. It is only a residual component that needs to be addressed. A large number of employees pay PAYE. Withholding tax on interest is collected as well. Cigarettes and liquor account for 2% of GDP. Corporates pay taxes,” he said, though noting that the threshold for income tax is Rs. 50,000 a month and upwards and this excludes SMEs which don’t pay taxes and everyone on tax holidays.
It is the current Government, Jayasundera said, that brought public servants into the tax net.
Justifying further the payment of tax in the country, he shared that 2012 collected an approximate of Rs. 1 trillion in taxes. Although this figure is not growing at the same pace of the GDP, he stressed the need for the public to understand the context in which these activities are taking place.
Focusing on taxation, he said what the Government has endeavoured was to expand the base without tinkering too much on the rates. He expressed confidence that once the base is widened and compliance is higher, tax rates could be brought down eventually.
The Treasury Secretary also urged the private sector not to draw parallels to what Malaysia, Singapore or Dubai are doing today vis-à-vis Sri Lanka. He said what these countries are doing today, for example high public investment, Sri Lanka too would get there sooner than later. He noted that Sri Lanka’s problems and challenges are different to some of the exemplary countries.
“It is important to put things in perspective. We first need to put our house in order, do what is doable and carry on forward. We were asked to maintain consistency, clarity and continuity and the President has balanced as much as he could to achieve these three objectives. And that is what this Budget is all about. Perhaps, it’s not enough but at the same time, it’s not bad,” Treasury Secretary added.
He also urged the private sector to graduate from seeking tax concessions as still there were clamours from certain sectors. “Tourism is still not ready for refurbishments without tax holidays,” he quipped. Nevertheless, he admitted that local firms have grown substantially over the years, hence it was highly encouraging.
Responding to the request on having increased emphasis on exports, Jayasundera said this could not be a mere academic exercise. Keeping in line with this, he pointed out that the President had emphasised on all the big markets such as India, China and Brazil in the Budget.
Speaking on the projected growth rates, a never-ending debate, Jayasundera said there is nothing wrong is having a 6% growth when the world is growing at 3%.
“Our vision is that Sri Lanka should grow on a rate higher than the rate of inflation. The Central Bank of Sri Lanka is dedicated to maintaining this – a laudable inflation target. Debt serving is pretty easy now as well. Who knows – we may float a yen-dominated international bond, there is no need to be dollar or euro dominated,” he said.
“The 2014 Budget is noted to be a growth-oriented budget,” Dr. Jayasundera summed up, adding that the country is “on a sustainable inclusive growth model. We are blessed with a leadership that will help us manage the task we have ahead of us.”
