For over seven decades, under many forms of democracies practiced in Sri Lanka, its economies failed to deliver shared prosperity to its citizens. With many accepted ways by which economic performances are measured all hinting that the country was facing a problem. One of the contributory factor for all the ills in the country, with polarizing of ethnic and religious communities taking them through a civil-war of three decades that left the little island nation divided politically, was confirmed by the recently concluded Presidential Election. Earlier each crises that country faced reinforced the fact that rulers need to think fresh to improve economic performance to deliver shared prosperity ; boost the social progress of the multi-ethnic and multi-religious people living in the island nation.
The new president is well aware of this sad state of the economy and knowing well the caretaker government does not have the much needed majority in parliament; intends to prepare the nation to face parliamentary election early next year. With confidence of winning that election the care taker government has decided on a holistic plan to ease the economic pressure from the total population by inviting them to participate in the resulting development process by getting on with their job more efficiently thereby boost recovery of country’s economy.
Taking into account the pledges made during the Presidential Election, a new relief program was approved by the President, at the very first cabinet meeting. Where it was announced of the removal of a number of taxes, including the Pay As You Earn Tax (PAYE), Further, the government has decided to bring down the income tax rate from 24 per cent to 18 per cent, for any form of monthly earning of Rs.250,000, Rs.500,000 and Rs.750,000 and above would be imposed an income tax of 6 per cent, 12 per cent and 18 per cent respectively. In addition, the information technology sector would be released from all types of taxes to further encourage individuals engaged in the IT sector, especially young people. The 15% Value Added Tax (VAT) and 2% Nation Building Tax (NBT) which amounts to 17% together, which was imposed on all goods and services will be unified and reduced to 8%, effective from the first of December this year. The NBT imposed on household goods and service products has been completely removed and also the reduction of the VAT. Meanwhile, the tax-free threshold for turnover for VAT has been raised from the existing Rs.1 million to Rs.25 million. VAT on condominium properties has been abolished. Also noted that it has been decided to reduce the income tax on the construction industry from 28% to 14%. The debit tax imposed on banks and other financial institutions as well as the Capital Gains Tax imposed on the Colombo Stock Exchange has been removed. It has also been decided to reduce the Telecommunications levy to 25%. All taxes imposed on the remittances made by expat workers will be removed, while places of religious worship will be exempt from all taxes.
The New Government expect citizens to by these changes gain actual benefit by next January. All sectors in the country to be uplifted through these tax concessions leading to an increase in productions. Thereby the government will be able to tax more people, but at a lesser rate ultimately leading to better revenue. The government expect to increase government revenue through future budgets to reduce expenditure to bridge the gap between income and expenditure. At present tea, rubber and pepper are imported into the country and the government is to look into initially minimize importation and then completely ban its imports. Government would also take steps to exempt earnings through plantation industries from taxes.