Sri Lanka cabinet to meet on contingency liabilities, new taxes

[sashimaalTop contributor]

ECONOMYNEXT - Sri Lanka's cabinet of ministers may have a special sessions to discuss plans to deal with debt repayments, Minister Gayantha Karunathilake said, with expectations that taxes will be hiked to reduce the budget deficit in a 'mini budget'.

Finance Minister Ravi Karunanayake said this week that hidden liabilities had been discovered and the government had to come up with measures to deal with it.

"There was discussion that a special cabinet meeting could be convened in the coming week to deal with it," Minister Karunathilake said.

Prime Minister Ranil Wickremesinghe said in December that a 'contingency liability bill' may be brought to parliament in March with new taxes to sort out state finances.

"We may have to bring a contingencies liability bill to parliament, sometime next year and the parliament may have to make recommendations," he said on December 02,

"Parliament will have to decide how to raise additional revenues to pay for these expenditures."

Sri Lanka's fragile state finances were further damaged in a January 2015 budget which raised state salaries 40 percent and hike state worker pensions and subsidies.

The central bank then printed large volumes of money (central bank credit) to finance the deficit driving imports to unsustainable levels leading to a collapse of the currency.

A November budget failed to address the revenue and instead cut value added taxes and also lifted a threshold on personal income tax.

Sri Lanka has sought help from the International Monetary Fund, who has also asked the government to reduce the budget deficit which is the root cause of economic instability.

There are expectations that valued added taxes may be raised to 15 percent and general corporate income taxes will be kept around 20 percent.

Sri Lanka has a bloated public sector, which is stuffed with unemployable graduates (who have been taught from taxes collected from the general public) which is too heavy for the public to bear and special interest groups like farmers are also taught by the elected ruling class to demand privileges.

State enterprises such as SriLankan Airlines and LakSathosa also make large losses and are mired in corruption, competing with education and healthcare for funds and generally winning, critics say.

A government can tax people, which is the most transparent way of putting the burden on a large public sector, subsidies and loss-making state enterprises on the people, or take debt and burden yet unborn future generations, or print money and generate inflation and currency depreciation. (Colombo/Mar03/2016)

[Future123Active Member]

Just now we are recovering from Fitch rating disaster and there is going to be a mini budget to raise taxes.

Yahapalanaya ....please let us breath........

[mymoney]

What will be the cost of Living of general public after the tax increased ?

[guruji]

New hidden liabilites should dealt with hidden wealth of mr family

[HAL9000Top contributor]

IMF will come for a bailout similar to 2012, but will give advice for good reasons to reduce unnecessary expenses and to increase revenue. They will definitely advise to raise tax as government revenue is now at dismal situation and tax rates are in lowest levels in the world.

http://www.ft.lk/article/500273/2016-Budget-puts-SL-s-income-tax-best-in-the-world-

[Future123Active Member]

The benefit of low corporate tax and income tax were not implemented yet and I think it's from new financial year starting April 2016. Therefore, we can't say that Sri Lanka has low tax rates as the benefit may be withdrawn when the interim budget is presented.

In fact we had the highest rate of corporate taxes for blue chips in 2014/15 which was 53% (28% CT + 25% SGT).

The business community would lose confidence further if the proposed Corporate tax rate of 15% as per 2016 budget is withdrawn. It shows the inconsistent policy. I don't think government would do the same mistakes again and again and chase out the investors.

It's like you show a chocolate to a kid and when the kid comes closer to eat the chocolate you eat the chocolate without giving to the kid.

The government is earning massively out of petrol and diesel. The prices are at bottom levels in the international markets and the benefits don't go to the consumers. Why can't they use this money?

[poor boyActive Member]

i am also wondering what they are doing with fuel money and liquor taxes .liquor is taxed heavily .now even a GAL bottle has become a luxury.

[pathfinderTop contributor]

The government is earning massively out of petrol and diesel. The prices are at bottom levels in the international markets and the benefits don't go to the consumers. Why can't they use this money?

ඇත්තටම ඇයි බැරි ?

[guruji]

They hav to spend for their luxurious lives

[sashimaalTop contributor]

Main issue is the Rs 10k increase for Govt Servants. From what i know there is approx 1.4 million Government sector employees. Roughly this is close to Rs 14 Billion more money every month (only for the increase). All of this may not have been paid but still amounts to a massive amount. This goes to a massively underproductive bloated workforce (talking in general terms and directly excludes Doctors and Teachers).

Further Samurdhi increases, Pension increases, Mahapola, etc needs a lot of money. These have to come from somewhere.

This year there is Rs 1200 billion that needs to pay for the loans taken in the past. Like it or not that needs to be paid.

Failure to increase interest rates and surprisingly reducing rates after the new Govt came in was a big mistake that the Govt did.

World commodity market prices have come down drastically and has also effected our tea, rubber, etc industries. Our income has been drastically affected. Add to this, the global markets worries...

Fuel money is one of the blessings that the Govt had . If not, may have gone bankrupt . Almost all Economists would say Govt reduced fuel prices too much . The politically motivated people fool the common man by showing how much world prices have come down without showing the other side of the story (which could be linked to economic mismanagement as well as mentioned above).

i am  also wondering what they are doing with fuel money and liquor taxes .liquor is taxed heavily .now even a GAL bottle has become a luxury.

[කිත්සිරි ද සිල්වාTop contributor]

බැරි වැඩ නොකරන් අබරෝ කියලා කතාවක් අහලා නැද්ද ?
(NATO boys never thought that they will get a chance to govern and now they are proving what a failure they are).
Fat R is only good to be a butcher than a FM.

[sashimaalTop contributor]

Yes Kithsiri, he is the biggest issue

බැරි වැඩ නොකරන් අබරෝ කියලා කතාවක් අහලා නැද්ද ?
(NATO boys never thought that they will get a chance to govern and now they are proving what a failure they are).
Fat R is only good to be a butcher than a FM.

[blacknights]

බැරි වැඩ නොකරන් අබරෝ කියලා කතාවක් අහලා නැද්ද ?
(NATO boys never thought that they will get a chance to govern and now they are proving what a failure they are).
Fat R is only good to be a butcher than a FM.

Yes Kith. Wondering why he is still our FM, Did you see his recent saying (I'd call a fairy tale) that LKR to USD could go back to 110? he should not even in the cabinet IMHO. Feel sad as well angry. Because they are playing with ours and our next generations' future.

[කිත්සිරි ද සිල්වාTop contributor]

RW should have balls to tackle the issue but it is a public secret than he sans that.  

බැරි වැඩ නොකරන් අබරෝ කියලා කතාවක් අහලා නැද්ද ?
(NATO boys never thought that they will get a chance to govern and now they are proving what a failure they are).
Fat R is only good to be a butcher than a FM.

Yes Kith. Wondering why he is still our FM, Did you see his recent saying (I'd call a fairy tale) that LKR to USD could go back to 110?    he should not even in the cabinet IMHO. Feel sad as well angry. Because they are playing with ours and our next generations' future.

[Future123Active Member]

For me RK and RW both are same. I told you exactly a year ago when ASPI was around 7500 points and everyone criticized me.

Just think who is happy in the society now.
1) Farmers
2) Engineers
3) Doctors
4) Investors
5) Computer professionals
6) Importers
7) State sector workers
Car dealers
9) Construction workers
10) Trade unions

[HUNTERTop contributor]

I've not much been involved in politics and political discussions.

Haven't even voted in any of recent (and past) elections either (not seen a single candidate with a proper 'vision' so far; so, didn't try to figure out the best of the bad lot).

But, couldn't help but notice that, majority of members were biased towards the previous government change those days.

However, it seems, based on the discussions going on now, I get the feeling, majority of members are thinking the change was like 'ඉඟුරු දී මිරිස් ගත්තා වගේ'.

Especially, I can clearly notice the shift of tone over the period by Kith.

He must be now wondering which one we should have selected.

අලි බබා සහ හොරු හතලිහ
OR
වැඩ බැරි ටාසන් සහ දොන් ජුවන් ධර්මපාල

Am I correct big bro?

[RanaTop contributor]

1.workers need salary increment
2.consumers need to reduce price of the consumer 3.goods ( they need to buy 1kg rice for Rs.60 but farmers want Rs.50 for 1 kg paddy)
4.farmers need free fertilizers and Rs.50 per 1kg paddy.
5.Companies need reduce taxes but don't want to increase salary

how government increase their income when there are peoples who need every thing free.
Should we bring from Mars

Our country needs permanent development policy for 50 years which cannot change by any person

We need clean politicians to develop our country, but our voters elect most corrupted politicians again and again.

බත් පැකට් එකටයි අරක්කු භාගයටයි කතිරේ ගහන මිනිස්සු ඉන්න රටක් ඉදිරියට යා නොහැක.

[කිත්සිරි ද සිල්වාTop contributor]

Well Said Rana.
(This is why some are afraid of Colombian style thinking and dead against Loon project too).

1.workers need salary increment
2.consumers need to reduce  price of the consumer 3.goods ( they need to buy 1kg rice for Rs.60 but farmers want Rs.50 for 1 kg paddy)
4.farmers need free fertilizers and Rs.50 per 1kg paddy.
5.Companies need reduce taxes but don't want to increase salary

how government increase their income when there are peoples who need  every thing free.
Should we bring from Mars

Our country needs permanent development policy for 50 years which cannot change by any person

We need clean politicians to develop our country, but our voters elect most corrupted politicians again and again.

බත්  පැකට්  එකටයි  අරක්කු  භාගයටයි  කතිරේ  ගහන  මිනිස්සු  ඉන්න  රටක්  ඉදිරියට  යා නොහැක.

[Market loverTop contributor]

Well I think Kith doesn't want to see looters coming inn again but at the same time if he doesn't see any improvements with this new NATO boys delivering what they preach then he might not use his vote next time or else he will make sure his vote doesn't go to NATO boys or MR regime  is that correct kith ?

[කිත්සිරි ද සිල්වාTop contributor]

Spot on and this is the dilemma of most rational / sensible thinkers.
(JVPers are good people with lousy economic theories and General is too naive with no experience to entrust to run the country).

Well I think Kith doesn't want to see looters coming inn again but at the same time if he doesn't see any improvements with this new NATO boys delivering what they preach then he might not use his vote next time or else he will make sure his vote doesn't go to NATO boys or MR regime  is that correct kith ?

[blacknights]

RW should have balls to tackle the issue but it is a public secret than he sans that.  

බැරි වැඩ නොකරන් අබරෝ කියලා කතාවක් අහලා නැද්ද ?
(NATO boys never thought that they will get a chance to govern and now they are proving what a failure they are).
Fat R is only good to be a butcher than a FM.

Yes Kith. Wondering why he is still our FM, Did you see his recent saying (I'd call a fairy tale) that LKR to USD could go back to 110?    he should not even in the cabinet IMHO. Feel sad as well angry. Because they are playing with ours and our next generations' future.

[Future123Active Member]

It's RW who wanted to introduce the capital gain taxes and not RK. Both RW and RK are bad for investors ,economy and the country.

Now foreign investors will pull out and CSE will be below 5000 points. It's the worst thing that can happen at this time. Are they having brains in their backsides to introduce capital gain taxes at a time we make massive losses.

These buggers would never allow market to consolidate or to go up. From the day one it's evident.

[roshana7549]

It's RW who wanted to introduce the capital gain taxes and not RK. Both RW and RK are bad for investors ,economy and the country.

Now foreign investors will pull out and CSE will be below 5000 points. It's the worst thing that can happen at this time. Are they having brains in their backsides to introduce capital gain taxes at a time we make massive losses.

These buggers would never allow market to consolidate or to go up. From the day one it's evident.

Still It is not clear whether this Capital gain tax is imposed on share market, given the current situation in the market, it is likely they are going to exempt share market since there will not be any revenue to the government if the market collapse from this point, because the government will loose tax revenue from Transaction levy and capital gain tax if there are no acitivities in the market.

Further it is very evident that main cause of the whole issue is the shortage of Foreign inflows and decline in government revenue in the short and medium term...

Therefore It is likely they will impose this tax on other capital gains excluding share market......

[pathfinderTop contributor]

Spot on and this is the dilemma of most rational / sensible thinkers.
(JVPers are good people with lousy economic theories and General is too naive with no experience to entrust to run the country).

Well I think Kith doesn't want to see looters coming inn again but at the same time if he doesn't see any improvements with this new NATO boys delivering what they preach then he might not use his vote next time or else he will make sure his vote doesn't go to NATO boys or MR regime  is that correct kith ?

I think next time we can vote for an Indian politician after signing ECTA

[sashimaalTop contributor]

https://forum.lankaninvestor.com/t7499p15-vat-15-capital-gains-tax-and-corporate-taxes-back-at-28-tax-platter-for-imf#64250