Sri Lanka’s biz community happy with 2016 budget concessions
Sri Lanka’s 2016 budget presented on Friday drew mixed reviews while two issues stood out – whether the bureaucracy is capable of quickly implementing the decisions, particularly taxes, and not addressing the foreign exchange crisis.
However the business community was by and large happy with the outcome as Finance Minister Ravi Karunanayake’s proposals addressed many of their concerns in whipping up foreign investment, tackling the shortage of skilled labour, reducing taxes to boost investments and the decision not to shift to Turnover Tax from the current Value Added Tax.
There was also some confusion. Some economists said the budget didn’t reflect the Prime Minister’s policy reforms on November 5. “The PM in his statement early this month said that there will be 40 per cent in direct taxes and 60 per cent in indirect taxes, but the budget has projected a significant deviation of 85 per cent in direct taxes and 15 per cent in indirect taxes,” an economist said.
On Saturday, the budget was analysed by a panel comprising Sujeeva Samaraweera, Senior Deputy President – National Chamber of Commerce and Managing Director, Atlas Logistics Lanka (Pvt) Ltd Colombo; Wasantha Samarasinghe, JVP spokesman on trade union issues and Shiran Fernando, Lead Economist and Senior Product Head at Frontier Research, via skype organized by the Business Times (BT). This is a continuing series organized by the BT where analysts are brought together on a skype platform to discuss important, national, economic and social issues.Mr. Samaraweera said the budget laid the long term policy framework of the Government and welcomed the 5-day work week proposal saying would save extra costs as nothing productive happens during a 6-day work week.
The focus on small and medium enterprises rather than big companies was also an encouraging sign, he said, speaking as an entrepreneur himself. But he pointed out that the government spent a lot of time on the 100-day programme and elections and that now it’s the time to start working.
Shiran Fernando, Lead Economist at Frontier Research, said the budget had missed the opportunity to address the Balance of Payment crisis. “There are no short term measures to ease the pressure on the Balance of Payments. What they do in terms of reserves is they go out to the market with a sovereign bond to shore up reserves. But in the end they use what they raise to sort of defend the Sri Lankan rupee, intervening in the market and lose out,” he said. Mr. Samarasinghe, said the maiden budget of the new government has burdened the people by imposing indirect taxes.
The government has trebled the Goods and Services Tax (GST) to Rs. 378 billion in 2016 from Rs. 126 billion in 2015 and the people will feel the pinch when their pockets get empty, he told the skype discussion.