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Cure could be worse than the disease says company director

Published

3 years ago

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Chaminda Wanigaratne

New Tax Structure

By Sanath Nanayakkare

A new tax policy is a timely need for Sri Lanka, but the government should be careful not to throw the baby out with the bath water, because then, the cure would be worse than the disease, Chaminda Wanigaratne – Director Automotive at Ideal Motors (Pvt) Ltd. told The Island Financial Review.

‘Raising high levels of revenue from an anti-industrial tax policy may be the easiest way to pay the salaries of government servants, state-sector pensions, meet huge loan and interest payment liabilities payable by the government, and also to keep the loss making state-owned-enterprises (SOEs) flying their flag above the water. But the government should evaluate the repercussions of this move before it backfires,” he said.

“The government of Gotabaya Rajapaksa gave effect to substantial tax cuts without a mandate from the people, and we all know the repercussions it brought to the country at large. Now the current administration’s policy decisions led by President Ranil Wickremasinghe are going to give effect to historically-high corporate and personal income taxes of which the repercussions are going to be grave on the industrial sector and thereby on the overall economy ,” he says.

He further said::

“If the new tax bill is passed in parliament, it will definitely discourage export-oriented companies and companies that are engaged in the production of import substitutions. In addition to that, it will no doubt discourage the country’s top talent in the fields of manufacturing, technological, finance, marketing, sales, innovation etc. This scenario will create a pervading effect of dismay and disappointment among local manufacturers, business owners, shareholders, C-suite personnel and middle level executives who are collectively the driving force behind the private sector, which is undoubtedly the engine of growth.”

“We are not saying that taxes shouldn’t be levied. In this country, we need to have a minimum of 15% tax to GDP ratio because Sri Lanka doesn’t have alternative earnings. But it should be levied in a strategic and meaningful way. It should be fair by the people and the society. Further, taxes collected should be well spent to improve education, healthcare, infrastructure, power and energy sector etc. But we don’t hear anything from the government whether it is going to use the tax funds for such purposes.”

“It’s clear that the government’s bull’s eye target is raising revenue to meet public expenditure at any cost. They want to have a surplus in the primary account as in 2018-2019 and show the IMF impressive numbers in the balance of payments and budget deficit. In my view, this is just not feasible in the medium to long term in an environment of high inflation, high interest rates and ultra-low growth. Levying corporate taxes of 30%-36% and personal income taxes from 6%-30% would be like robbing Peter to pay Paul. What the government should do is not transferring money from the well-managed corporate sector to the ailing public sector possibly allowing both sectors to collapse. Instead they should make public institutions more efficient and productive by making reforms such as retrenchment and reallocating existing human resources appropriately, and cutting back expenses. Placing the whole burden of loss-making SOEs such as CPC, CEB, SriLankan Airlines, CGR, CTB etc., on the private sector is a shortsighted strategy. Even if the corporates and salaried personnel pay high taxes, it won’t make our lot better. One-third of the potential tax collections will be consumed by public sector salaries, another one-third will be used to pay interest on the loans the government has taken. And the balance one-third will be channeled to fund the reeling SOEs. Not a single tax rupee is likely to be allocated for the wellbeing of the people. So, we will end up paying high taxes like in Scandinavian countries or Europe and live like poor people in North Korea. Instead of becoming another North Korea, we should take a lesson from what India did in 1990s when it encountered a similar crisis. India made the right policies at the right time boldly, and turned it into an industrial country. They established all kinds of technology manufacturing in India and the country today is a leading manufacturing hub for automobiles and automotive components in the world.”

“But unfortunately, here in Sri Lanka we don’t see such policies being conceptualized by the Government or the Central Bank or the Treasury.”

Talking about repercussions of the new tax policy he said, “With high tax rates, dollar-earning ICT sector companies that operate online, may obtain overseas business licenses, and instead of operating from Sri Lanka, they will base their stations in Dubai or Singapore. Changing online operational platforms is a matter of hours for these companies. Then their real business jurisdiction will be one of those countries and will pay taxes to those countries depriving Sri Lanka of any taxes at all. Further, export-oriented manufacturers will find the trading sector more lucrative and they too will convert into trading because the prevailing operational conditions are biased towards trading companies such as supermarket chains and fast-food chains and not import substitution companies. The high personal income taxes will affect our private sector talent pool from middle managers to cluster heads to directors. They have a lifestyle which they have not deliberately embraced but one that circumstances have compelled them to accept. Because of the nature of their jobs, they have enrolled their children in private schools, bought houses in close proximity to Colombo, maintain a car as they need their own transportation. All these mean many financial commitments at the end of each month; therefore, they can hardly take this unexpected tax hit. These skilled young people will have no other option but migrate to other countries where personal income taxes are fair and living conditions are much higher. Thus no-one with professional career prospects would want to stay in Sri Lanka. A confluence of all these will lead to even weaker external sector performance by Sri Lanka in the months ahead making the current situation bleaker.”

“So we should all unite and raise our voices to prevent this tax bill from getting passed in parliament, or otherwise, a second Aragalaya will soon ensue from the widespread frustrations triggered by this unfair tax structure,” he said.


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Inadequate LPG price hike compels the vulnerable to subsidize the wealthy: Advocata Institute

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16 hours ago

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2026/04/25

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While Advocata Institute welcomes the recent Liquefied Petroleum Gas (LPG) price increase by Litro Gas Lanka, it remains inadequate and indirectly forces Sri Lanka’s vulnerable segments to subsidize wealthier LPG consumers.

This inequity arises because the retail price remains below cost-reflective levels despite the price revision. In April 2026, Saudi Aramco’s Asia-Pacific benchmark rose sharply, adding approximately Rs. 1,000–1,200 to the landing cost of a standard 12.5kg cylinder. The retail price, however, was increased by only Rs. 775, leaving a shortfall of approximately Rs. 225–425 per cylinder.

The gap is currently covered through cross-subsidization, where industrial users are charged higher prices than households. In practice, these costs are often passed on to consumers, as Sri Lanka’s protectionist trade regime allows local companies to do so without losing market share. As a result, households ultimately bear the burden through higher prices on everyday goods.

However, the benefits of this subsidy are concentrated among higher-income households. According to the 2024 Census of Population and Housing, LPG is used for cooking by 42.4% of households nationally, while 55.4% still use firewood. The 2019 Household Income and Expenditure Survey (HIES) further shows that nearly 80% of households in the highest expenditure tier use LPG, compared to less than 8% in the lowest-income tier. As such, the subsidy primarily benefits wealthier households, while its costs are indirectly borne by the broader population – including those who do not consume LPG.

Beyond this inequity, the cross-subsidization model creates two economic risks. First, artificially low prices can discourage conservation and the transition to alternatives such as firewood and briquettes. This sustains LPG demand and contributes to ongoing pressure on foreign exchange reserves. Second, pricing below cost creates an artificial price ceiling. Private sector competitors, unable to match the subsidized prices, risk being driven out of the market. This discourages new entrants and limits investment in the sector.

Advocata Institute urges the government to replace this cross-subsidization model with a fully cost-reflective pricing mechanism. Targeted cash transfers should be utilized to ensure that assistance reaches vulnerable households, while avoiding the inefficiencies of subsidies that disproportionately benefit higher-income groups.

Advocata Institute is an independent policy think tank in Sri Lanka that advocates for economic development through free markets

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People’s Bank donates Rs. 300 million to the Rebuilding Sri Lanka Fund

Published

16 hours ago

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2026/04/25

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Financial support for housing project for families affected by Cyclone Ditwah

People’s Bank has come forward to donate Rs. 300 million to the ‘Government’s Rebuilding Sri Lanka Fund’ to support the development of a multi-storey housing project in the Nuwara Eliya District, which is being constructed to resettle families affected by Cyclone Ditwah.

This initiative, undertaken in commemoration of the Bank’s 65th anniversary, forms a key component of its Mahajana Mehewara Corporate Social Responsibility (CSR) programme, reinforcing its commitment to supporting communities and promoting sustainability.

The symbolic cheque for the donation was handed over at the Presidential Secretariat by People’s Bank CEO/GM Clive Fonseka and People’s Bank Chairman Prof. Narada Fernando to the Secretary to the President, Dr. Nandika Sanath Kumanayake. Head of Marketing Nalaka Wijayawardana was also present at the occasion.

Cyclone Ditwah, which struck in November 2025, along with the subsequent landslides in the Nuwara Eliya town area, caused extensive damage to residential properties and displaced numerous families. In response, the Ministry of Housing, Construction and Water Supply initiated a permanent housing programme to provide secure and sustainable living conditions. The contribution by People’s Bank highlights the national importance of this initiative and underscores the Bank’s continued role in supporting post-disaster recovery and community resilience.

The proposed development comprises of a fully integrated multi-storey housing complex designed to ensure both comfort and long-term sustainability. The residential component will consist of three multi-storey blocks, offering a total of 120 housing units, with 40 units allocated per block.

In addition to housing, the project incorporates comprehensive infrastructure and community facilities to support a holistic living environment. Planned infrastructure includes internal road networks, dedicated parking facilities, a wastewater treatment plant, and solar-powered outdoor lighting systems. Community-oriented amenities will feature a health centre, day-care centre, commercial outlets, a community centre, a children’s play area, a condominium management office, and a fully operational banking unit. Each block is expected to be completed within approximately a six-month construction period, enabling the timely resettlement of affected families.

Design and consultancy services for the project will be undertaken by the State Engineering Corporation, ensuring adherence to national standards and best practices in construction and urban planning.

As Sri Lanka’s largest bank in terms of customer base and the branch network, People’s Bank has consistently extended its services beyond banking to support impactful CSR initiatives. Guided by its enduring ethos, “Pride of the Nation”, the Bank continues to play a transformative role in uplifting communities and contributing to sustainable national development.

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Hayleys rights issue oversubscribed, reflecting sustained investor confidence in group strength

Published

16 hours ago

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2026/04/25

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Chairman and Chief Executive Mohan Pandithage

Hayleys PLC, Sri Lanka’s leading diversified conglomerate, has announced that its LKR 9 billion Rights Issue has been oversubscribed by over LKR 2 billion, reflecting strong investor confidence in the Group’s financial strength and growth prospects.

The Rights Issue of 45,000,000 new ordinary voting shares was offered at an issue price of Rs. 200 per share, in the proportion of three new shares for every fifty existing shares held.

The proceeds from the Rights Issue will be strategically deployed through a disciplined allocation of capital intended to fund high-growth, future-focused investments. This strategic move further strengthens Hayleys’ financial flexibility and capital structure, channelling fresh capital into growth-oriented assets while reinforcing long-term stability.

By strategically expanding into the modern trade retail segment and scaling renewable energy projects, Hayleys is diversifying its revenue streams to ensure long-term earnings resilience. The continued strengthening of export-oriented verticals is set to drive vital foreign currency inflows, improving profitability through access to larger international markets. Collectively, these initiatives are engineered to accelerate return on invested capital, ultimately driving sustainable shareholder wealth through long-term value creation.

Hayleys PLC carries a National Long-Term Rating of ‘AAA (lka)’ with a Stable Outlook from Fitch Ratings Lanka Limited, recently reaffirmed, the highest credit rating on the Sri Lankan national scale.

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