MR calls for Parliamentarians to oppose VAT Bill

Former President Mahinda Rajapaksa yesterday called on Parliamentarians to oppose the VAT Bill to be tabled in Parliament next week as it would increase the cost of living and slammed the Government for “irresponsible” increases of public salaries to win elections. 

Rajapaksa, who had himself pledged an increase in public sector salaries in the run up to the election, releasing a statement insisted that VAT increases on health and medium enterprises would hit middle class consumers hard. He also expressed confidence President Maithripala Sirisena would oppose the VAT increase as it would raise expenses of key services. 

“What makes this increase in VAT most objectionable is that it is being imposed on the public to finance the salary increase and various other concessions that the ‘Yahapalana’ Government gave against all economic reasoning in order to win the August 2015 parliamentary election. No previous government has taken such liberties with public finances for political purposes. I call upon all members of Parliament to oppose the Value Added Tax (Amendment) Bill when it comes before parliament on 11 August.” 

“I believe the President will also make an intervention in this matter as he has stated publicly that he will not allow unreasonable taxes to be imposed on the people. The VAT on health and the VAT on the small and medium retail and wholesale trade should not under any circumstances be allowed to be passed into law.” 

Rajapaksa during his 10 years in power borrowed billions of dollars at commercial interest rates to fund low-yielding infrastructure projects, which increased Sri Lanka’s debt exponentially. During his years in power he also oversaw a significant decrease in public revenue and narrowing of the tax net. 

However, Rajapaksa insisted that the new VAT Bill seeks to increase the VAT rate from 11% to 15%, to bring the small and medium retail and wholesale trade and the private health care services within the ambit of VAT and to mandatorily require all establishments with a turnover exceeding Rs. 33,000 a day to register for VAT. 

“A tax on health care is in effect a tax on ill health. The more serious the illness, the more revenue the government will make from that patient. Everyone knows that those who make use of private health services are not only the rich,” Rajapaksa said despite having overseen a systematic shrinking of healthcare and education budget allocations during his time in power.   

“Traders and small businessmen countrywide, opposed the 15% VAT imposed on the wholesale and retail trade because it will cause an increase in the prices of goods when it is passed onto the consumer and lead to reduced sales. Previously the VAT on the retail and wholesale trade was limited to large establishments with a turnover of more than Rs. 1 million a day. But when the threshold is brought down to Rs. 33,000 a day, that brings even small establishments within the ambit of VAT. When retail sales drop as a result of increased prices, that leads to a chain reaction whereby the manufacturers who supply the goods don’t get enough orders to be able to break even,” he added.