Sunday Sep 22, 2024
Sunday Sep 22, 2024
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The Cabinet of Ministers at its meeting on Monday has approved a proposal by Prime Minister and Finance Minister Ranil Wickremesinghe to amend five Acts of Parliament to boost Government revenue.
The five Acts include Inland Revenue Act, VAT Act, Telecommunication Levy Act, Betting and Gaming Levy Act and Fiscal Management Act.
The move is in line with the new interim Government pronouncements that State revenue has to be considerably increased to meet essential expenditures amidst the economic crisis.
“Today, we are faced with a huge budget deficit and a huge drop in Government revenue over the years. It was decided to amend the laws needed to adjust taxes to the status quo before 2019,” Cabinet Co-Spokesman and Minister Bandula Gunawardena said at the post-Cabinet meeting media briefing yesterday.
He said the revenue loss of the Government per day is around Rs. 6 billion due to the relaxed tax policy introduced in 2019 to reduce the rates of VAT personal income tax and corporate income tax and shrink the tax base on VAT income tax.
The Cabinet Co-Spokesman also claimed that successive Governments since 2003 have failed to adhere to the Fiscal Management (Responsibility) Act. 3 of 2003, which underscores three key objectives — to ensure the budget deficit shall not exceed 5% of the GDP post-2006, maintain debt to GDP below 60% from 2013 onwards and to maintain guarantee for loans only at 4.5%.
Contrary to what was proposed in 2003, Gunawardena pointed out that the budget deficit is now at around 12%, debt to GDP at 119% and guarantee for loans at 15%.
“Arbitrary and stubborn decisions has led to amend the 2003 Act three times as of now and is one of the key reasons for the current economic crisis. The bad fiscal management of successive Governments is the reason for the fiscal crisis today,” he said.
He also cited that following the COVID pandemic, countrywide lockdowns, difficulties faced to collect revenue, a drop in Government income and tax cuts impacted adversely on the State income which led to the economic crisis.
“Public sector salary and pension, as well as the interest paid on Government debt, are the two major expenses that successive administrations have been grappling with over decades. In 2020, 86% of the total Government tax collection was allocated to pay public sector salaries and pension,” he explained on the vicious cycle, adding that it was, therefore, necessary to increase Government revenue to stabilise the economy.
Gunawardene said Sri Lanka has historically failed to even meet the recurrent expenditure of successive Governments and as a result of it the people are experiencing the consequences.
