News
Five-year income tax exemptions for agriculture, livestock, and fisheries sectors
Budget for next year presented under COVID siege
* Special Tax Appeals Court to resolve tax issues expeditiously
* Rs 500,000 start-up capital loan with 5-year grace period for entrepreneurs
* A sports economy worth USD 1,000 Mn from 2021-2024
* New city universities in each district
* Rs 8 Bn for technology enhancement
* Rs. 250 mn to develop temples in villages
* Extra Rs. 2 per dollar sent by Lankans employed overseas
* Two LNG plants, one coal plant to produce 1,000MW
* Sustainable and renewable energy supply by 2023
* Rs.15 billion for expanding mobile, fixed broadband
* An additional provision of Rs. 20,000 mn for the tri-forces
* Allocation of Rs 750 mn for activities of Rana Viru Seva Authority
* 5.5% economic growth rate for 2021 expected
* 4% budget deficit goal to be achieved by 2025
By Saman Indrajith
Prime Minister Mahinda Rajapaksa in his capacity as the Minister of Finance presented the 75th budget of the country, spelling out measures and proposals to achieve poverty alleviation and economic revival.
The budget proposals aimed to support the two year medium term programme of poverty alleviation and economic revival outlined for 2021-2023 in the “Vistas of Prosperity and Splendour’, the Prime Minister said.
“The expected economic growth rate for 2021 is 5.5 percent. I emphasise that it is our medium term vision to reduce the budget gap through increasing the economic growth up to 6% and increasing the government revenue from its current level of 9.7% to 14.1%. By 2025, the budget deficit is expected to be 4% of the GDP due to growth in tax revenue through the expansion of the economy and the trust placed on the management of public expenditure and public enterprises.”
Prime MinisterRajapaksa commenced delivering the budget speech around 1.44 pm. It continued till 4.54 pm including a half-an-hour tea break between 2.43 to 3.24.
Income tax exemptions have been proposed for agriculture, livestock, and fisheries sectors for five years. In addition, a 50% income tax exemption has been proposed for local companies if get listed in the Stock Market before December 31, 2021.
He proposed to establish a special Tax Appeals Court to facilitate the resolution of tax appeals without delays, Prime Minister Rajapaksa said.
“I propose to simplify the Taxes on Capital Gains, where such taxes will be calculated based on the sale price of a property or the assessed value of a property whichever is higher. I propose to exempt the tax on dividends of foreign companies for three years if such dividends are reinvested on expansion of their businesses or in the money or stock market or in Sri Lanka International sovereign bonds.”
The PM also noted that the government intended to bring necessary changes to the Inland Revenue Department (IRD) in order to increase the self-compliance of taxpayers and to strengthen tax audits as well as to increase tax revenues.
The Premier went to propose enforcing necessary legal provisions that enabled the cancellation of private tax consulting services that aid and abet issuance of forged tax reports.
A loan of Rs 500,000 as start-up capital with a grace period of five years would be introduced for entrepreneurs. A commitment fee of 0.25 per cent proposed to be levied from loan applicants to ensure that the funds are managed and utilized accordingly.
Prime Minister Rajapaksa proposed to allocate additional funds of Rs. 3,000 million to initiate a scholarship programme to provide Rs. 4,000 monthly allowance each to students receiving vocational education based on their active participation.
Technical colleges of which the annual intake is presently at 100,000 would be increased to 200,000 students per year, he said. A five-year-grace period for tax levied from Vocational Training Centres, which were able to double their annual intake of students, was proposed. Rs. 10,000 million would be allocated from the budget next year for new technical colleges to be established in Colombo, Kalutara, Kandy, Anuradhapura and Batticaloa. New city universities would be established in each district to cater to students pursuing popular subjects.
The PM proposed to create a sports economy worth USD 1,000 million during the period 2021-2024. For that purpose Rs 1000 million was proposed to be allocated from the budget. He proposed measures to increase female participation in national sports.
It was proposed to increase production of milk to meet local demand and a Rs. 500,000 loan will be provided for purchasing cows and meeting other dairy farm requirements. The Premier said that $300 million in foreign exchange was annually needed for milk imports and proposed to reduce that by $55 million by encouraging local milk production.
Prime Minister Rajapaksa proposed to allocate Rs. 750 million for the welfare of disabled armed forces personnel.
He proposed to allocate additional funds of Rs. 250 million to develop basic infrastructure of temples in rural areas.
The Budget proposes to allocate Rs. 8 billion for technology enhancement next year. In addition, allocation of Rs.15 billion for expanding mobile, fixed broadband under the “Gamata Saniwedanaya’ scheme was proposed. State land would be given to the Telecommunications Regulatory Commission for the proposal, the PM said.
The Prime Minister said that low-income women migrated for work and their remittances had strengthened the national economy. In a bid to increase annual remittances from migrant workers to over US$ 7 billion, he proposed to pay extra two rupees for every dollar sent by Lankans employed overseas. That was in addition to prevailing exchange rates; he said, assuring to implement a contributory pension scheme for Lankan foreign employees.
It was proposed to expedite the construction of the national expressway network and extend the Marine Drive to Moratuwa. Prime Minister Rajapaksa said a three-year programme to develop road infrastructure in the 25 districts would be introduced. Rs 1,300 million proposed to be allocated to improve the railway network including the extending of Colombo and Kelani Valley track.
Electricity consumers were assured of a sustainable and renewable energy supply by 2023.
The PM said that 70 per cent of the country’s energy supply would be obtained from renewable energy sources by 2023. The Lakvijaya and Kerawalapitiya Power Plants would be strengthened to guarantee interruption-free power supply through years 2021-2022. One coal-fired power plant of 300 MW and two LNG plants would set up. The Kerawalapitiya plant would be transformed into an LNG plant, the PM said, proposing to provide solar panels of 5 kilo watts each to 100,000 houses of low income families under an Asian Development Bank and Indian loan scheme. Loan of 4% interest rate would be provided to low income families for this purpose, he said.
Reforms were proposed for the Foreign Service and under the new reforms bilateral agreements would be reviewed to ensure national security and Sri Lanka’s non-aligned stance, the Prime Minister said, adding that under those reforms a new mechanism would be introduced to assess the efficiency and effectiveness of diplomats and foreign service officers.
“With the aim of ensuring national security, a medium term plan to enhance the professional skills of the heroes of our tri-forces, providing them with modern technological facilities is currently being prepared. In the context of resource constraints and identified priorities in the country, further strengthening of the Sri Lanka Navy has been given priority. We must combat the drug menace and must eliminate it to prevent our country becoming a hub for international illicit drug trade. The government expects to ensure that the investments will facilitate to control smuggling of goods, providing the required protection for the fishery resources and fishery communities and establishing a safe environment for carrying out tasks in the Indian Ocean.”
The PM proposed to allocate Rs. 20,000 million as an additional provision for the tri-forces to fulfill the basic requirements identified in the medium-term and long-term planning frameworks in accordance with their basic requirements.
He also proposed to allocate Rs.750 million for the activities implemented by the RanaViru Seva Authority, including the provision of medical aid, support for development enterprises, conducting of educational and vocational development programmes, housing loans and provision of supporting equipment for the disabled war heroes targeting, the retired and disabled war heroes of the tri forces, police and the civil defense force and the dependents of the families of those heroes have laid down their lives.
The Premier proposed an additional allocation of Rs. 2,500 million, to address special programmes aimed at strengthening public security. “The government has given special attention to strengthening the police so as to assure public security. We must consolidate the environment for all citizens to live freely without any fear. Resources will be allocated to support the control of the drug menace, to regulate vehicles and traffic rules, strengthening Tourist police, special training and provide the necessary facilities to prevent crimes and robberies. It is also proposed to expand the police patrols to ensure public safety by deploying special police vehicles.”
Prime Minister Rajapaksa proposed the implementation of a special loan scheme for public servants to obtain solar powered electricity. “When appointing or transferring public servants, it is proposed to ensure that such postings are made giving preference to the districts of residence. Permission will be granted for non-executive office employees of the public service to engage in other jobs or employment after office hours and those who seek foreign employment will be granted leave for two years. I propose to reduce the maximum interest charged on housing and property loans of public servants granted by banks under housing loans and advances up to a maximum of 7 per cent.”
The PM said: “The estimated Government Revenue for 2021 is Rs. 1,961 billion. The total Government expenditure is Rs. 3,525 billion and as such the difference between the revenue and the expenditure is Rs. 1,564 billion. It is planned to maintain the budget gap at 9 percent of the GDP since the private investments which amounted to 32.3 percent of the GDP in 2014 has decreased up to 27.6 percent in 2019 and since it is required to provide a robust start by the government to revive the economic growth which had stagnated recently.”
The second reading debate of the budget is scheduled to commence today (18) and continue till Nov 21. The vote on the second reading will take place at 5 pm on Nov 21. Parliament sittings will be held from the 18th to the 20th from 9.30 am to 5.30 pm. The debate of the Committee Stage will commence on Nov 23 and is scheduled to conclude on Dec 10. The final vote on the budget is scheduled to be taken at 5.00 pm on Dec 10.
News
Unions resist tripartite EPF management plan
… warn of dire consequences
A group of trade unions and civil society groups has requested President Anura Kumara Dissanayake to abandon his government’s controversial plan for the proposed tripartite management of the EPF.
The group has told the President: “We strongly object to the government’s plan to transfer the EPF to a tripartite board—jointly promoted by the Employers’ Federation of Ceylon (EFC), International Monetary Fund (IMF) and the International Labour Organisation (ILO)—and to increase the investments of those funds within private equity and debt markets.
“While the EFC and the government jointly project this plan as a ‘modern governance framework’, it poses a serious threat to the EPF’s financial stability, fiduciary conduct, and returns to workers’ life savings, with severe consequences for broader macroeconomic stability. Rather than replacing the corruption existing in the public sector, this tripartite framework paves the way for a corporate takeover of the EPF. Through this, the fund is exposed to unlawful business practices such as insider trading using internal information of EPF investments, conflicts of interest and corporate bailouts of unstable private companies.
“Sri Lanka’s corporate sector has a tremendously negative track record, which you alluded to during your victorious election campaign in 2024. This was recently unravelled by the multi-billion-dollar illicit capital flight through trade misinvoicing, which your administration is now actively working to curb in the imports sector.
“The recent banking sector fraud exceeds Rs. 13 billion; widespread corporate tax evasion destabilised the fiscal position (Sri Lanka Auditor General’s Department Annual Reports) and consequently inflated the tax burden on the general public. The EFC has found it convenient to remain silent about these crimes, possibly assuming that their silence would preserve their social standing. Considering this inherent corruption within Sri Lanka’s corporate sector and its disregard to the living standards of the general public, there is no realistic basis to integrate corporate interests to actively manage the EPF. The corporate sector of Sri Lanka has not developed sufficiently on technical and ethical grounds to safely entrust the largest retirement savings pool in the country. The EPF is a captive fund that has no mechanism for the owners to divest if the management is corrupt. This further increases the possibility of corporate fraud when the management of the fund is jointly held with the corporate sector.
“Furthermore, during the recent public discussion with trade unions, Deputy Minister of Finance Dr. Anila Jayantha pointed out that the domestic debt restructuring (DDR) would inflict a loss of Rs. 600 billion to the EPF. Our independent calculations—formally submitted as an affidavit to the Supreme Court approved by the Federation of University Teachers’ Associations in 2024—reveal that nominal loss alone is Rs. 634.4 billion. When factoring in foreclosed reinvestment returns, the true loss skyrockets to Rs. 1,711 billion, wiping out 48% of the fund’s projected gross income for the 2023 – 2028 period. Under the pretext of safeguarding the banking system, this colossal robbery preserved high yields on government bonds held by commercial banks and high-net-worth individuals, subsequently reaping them astronomical profits. Now, the exact same plunder is rearing its head again disguised as a tripartite committee.”
“The main arguments supporting our resistance and viable alternatives for optimising EPF management directly under the Central Bank of Sri Lanka (CBSL), are outlined below.
“Objections to the government’s tripartite proposal:
1. The “International best practice and conflict of interest fallacies”
The government holds that tripartite management of pension funds is the “international best practice” and that there is a “conflict of interest” in CBSL managing the EPF. They are key pillars justifying government’s tripartite proposal.
These two positions are shockingly misleading given that four of the five largest pension funds in the world, in Norway, Japan, the U.S., and Singapore, are managed directly by state bodies or central banks. Therefore, ‘international best practice’ in pension fund management is the exact opposite of what the government and the IMF are proposing. We hence reject these baseless positions.
2. Corporate captivity and bailouts
It is clear that the EFC is desperately pushing for this proposal at a time of global uncertainty, to cushion the effects of the crisis and maximise gains. Under corporate influence within the proposed tripartite board, the private conglomerates can use the multi-trillion-rupee EPF to continue their unstable commercial operations without having to risk their own capital or savings to do so. This will severely erode the financial stability of the EPF and its returns.
3. Risk of front running
“Because the EPF is a colossal fund, its investment decisions can alter asset prices. This creates immense monetary value for the information generated by its investment decisions. Corporate representatives on the proposed tripartite board will be perfectly positioned to use this information to trade ahead of the EPF (front-running), buying assets cheaply and dumping them onto the EPF at inflated prices for guaranteed corporate gain, resulting in a reduction of returns to the EPF.
4. Unavoidable loopholes
“Presence of a separate group of investment analysts, trade union representatives and government officials within the proposed tripartite structure cannot prevent pre-market corporate access to EPF’s investment decisions. Investment proposals made by the analysts has to be first approved by the proposed tripartite committee, making it impossible to prevent corporate access to insider information on EPF investments.”
News
Two arrest warrants issued for Gnanasara thera
The Colombo High Court and Court of Appeal yesterday issued arrest warrants for the Bodu Bala Sena general secretary Galagoda Aththe Gnanasara in a case involving an alleged statement insulting Islam.
The arrest warrants were issued on Tuesday and Wednesday. The Court of Appeal issued an open warrant two weeks after the court rescinded the presidential pardon granted to the thera when he was serving a six-year term for contempt of court.
The Appeals Court also imposed a travel ban on the monk and ordered that the Controller General of Immigration and Emigration be informed of the restriction.
The case was taken up before Colombo High Court Judge Buddhika C. Ragala. Gnanasara Thera was not present when the case was called.
A medical report was submitted stating that Thera was unwell, while his sureties also failed to appear before court. His counsel, Asoka Weerasuriya, told court that his client wished to bring the case to an early conclusion and that representations had been made to the Attorney General in that regard.
However, after considering the submissions, the High Court judge said he was not satisfied with the medical report submitted on behalf of the accused. The court also noted the failure of the sureties to appear.
The judge subsequently ordered that Gnanasara Thera be arrested and produced before court.The Attorney General filed the case under provisions of the Penal Code, alleging that remarks made by Gnanasara Thera concerning the Holy Quran amounted to an insult to Islam.
News
CA dismisses GR’s writ petition against arrest
A two-member bench comprising Court of Appeal President Justice Rohantha Abeysuriya and Justice Sarath Dissanayake yesterday (1) dismissed a writ petition filed by former President Gotabaya Rajapaksa seeking judicial intervention to prevent his arrest under the Prevention of Terrorism Act (PTA) in connection with the ongoing investigations into 2019 Easter Sunday terror attacks.
The writ petition was rejected in limine.
In the petition, the former President cited Inspector General of Police Priyantha Weerasooriya, Criminal Investigation Department (CID) Director Shani Abeysekera, the Officer-in-Charge of the CID’s Special Investigations Unit and the Attorney General as respondents. The ex-President sought the court intervention after the arrest of former head of the State Intelligence Service (SIS) retired Maj. Gen. Suresh Sallay over the Easter Sunday attacks.
Since then , former Director of Directorate of Military Intelligence (DMI) has been named as a suspect.
Earlier, the Fort Magistrate’s Court imposed a travel ban on him in relation to investigations stemming from allegations made by Asad Moulana in the Channel 4 documentary on the Easter attacks.
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