Streamlining trade and excise taxes with tax exemptions to be allowed only on the grounds of national security, health, environment, and international commitments and simplifying the dual customs duty structure which has prevailed for almost 10 years are among the proposals in next month’s budget, a senior Finance Ministry official said.
Import surcharges have been incorporated into the new duty structure, and remaining duty waivers granted to limit the impact of high international commodity prices in 2009 are being phased out, according to the proposals which are based on the recommendations of the Presidential Tax Commission which officially presented its report to President Mahinda Rajapaksa this week.
The report was however sent earlier to the Finance Ministry for incorporation in the November 2011 budget. The official said action will also be taken to broaden the VAT and income tax bases, simplify the operational modalities of the VAT system and income taxes to eliminate weaknesses, including the complex VAT refund mechanism, and to improve revenue collection.
The necessary legislation for these tax reforms will be incorporated in the budget. These initiatives together with expected private sector investment and growth will sufficiently broaden the tax base and improve the revenue-to-GDP ratio to 15½ % in 2011, with the aim of reaching 16½ % by 2012, the Finance Ministry official said.The fiscal deficit target is set at 6.8 % under a budget that will continue to implement Sri Lanka’s growth-oriented fiscal and structural policies, the official said.
The Government recently tabled the 2011 Appropriation Bill in which nearly 20 % of the total expenditure of Rs. 1.08 trillion is slated for defence with an estimated sum of Rs 215.2 billion. It is an increase of about 6 % from last year.