UNDP: Rs 600 bn tax cut a huge mistake

Director of the Sustainable Finance Hub of the UNDP Marcos Neto has called the decision to do away with a range of taxes here a fundamental mistake committed by Sri Lanka.The comment was made at the Parliament complex during an interactive dialogue on ‘Revenue Generation as a Pathway to Sri Lanka’s Economic Recovery’ on Tuesday (09). It was organised on a request by Anura Priyadarshana Yapa, former Chairman of the Committee on Public Finance to the United Nations Development Programme (UNDP).

The Opposition as well as several other parties alleged that the government had lost as much as Rs 600 bn due to the controversial decision to do away with a range of taxes including PAYE, NBT (Nation Building Tax), Withholding tax, Capital Gain tax imposed on the Colombo Stock Exchange, Bank Debit tax and unprecedented reduction of VAT (Value Added Tax). The 15% VAT and the 2% NBT which amounted to 17% imposed on all goods and services were unified and reduced to 8%, effective from the first of December 2019.

The decision was taken at the first Cabinet meeting of the Gotabaya Rajapaksa government on 27 Nov. 2019.Governor of the Central Bank Dr. Nandalal Weerasinghe is on record as having said that the powers that be ignored the IMF warning not to do so and also the immediate need to restructure Sri Lanka’s debt (SF)