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Prez insists on IMF approved new tax regime, warns of dire consequences unless fully implemented

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President Ranil Wickremesinghe, in a televised statement yesterday (18), warned that Sri Lanka wouldn’t be able to obtain assistance of the IMF, or any other lending agencies, or countries, if tough new tax regime was not implemented.

The President said: “If we withdraw from this programme, we will not receive assistance from the IMF. If we don’t get the IMF certification, we will not get the support of those international institutions, such as the World Bank, and Asian Development Bank, and the countries that provide support. If that happens, we will have to go back to the era of queues.

“We may have to face even tougher times ahead. We have to obtain these loans and go for the debt-restructuring programme. We are not doing these wilfully. We have to take certain decisions, even reluctantly.

“However, we will reconsider these decisions periodically.”

The following is the full text of the President’s statement: “An important step in Sri Lanka’s debt restructuring program took place last week. A team under our Minister of State for Finance participated in the annual (October 07) meeting of the International Monetary Fund. Accordingly, a meeting was held under the leadership of the International Monetary Fund, with the countries that had given loans to Sri Lanka and some private institutions that had also given loans.

Over 75 persons participated directly or through zoom technology. The primary purpose of this was to come to a common platform with the 03 main countries that have granted loans to Sri Lanka, namely Japan, China and India, and discuss the next steps to be taken to provide these concessions.

During this meeting, the International Monetary Fund and Sri Lanka pointed out the need for a common platform. India and China have informed us that they will investigate further and provide answers. These two countries have also informed us that bilateral discussions may be required.

Many other countries also participated in this meeting. It is notable that, an Assistant Secretary of the United States Treasury came here. All this was possible because we are implementing the decisions taken in consultation with the International Monetary Fund.

There is one thing about the income of the Government of Sri Lanka. In 2015, when the representatives of the International Monetary Fund came to Sri Lanka, we were told of the need for a surplus in the primary budget. Therefore, we provided that surplus in 2017-2018. But it was reduced as a result of the 2019 Easter Sunday bombings. However, there were no serious issues. They were optimistic that we would be able to increase our revenue, to have a surplus in the primary budget.

At the time, our income was between 14.5% and 15% of the Gross Domestic Product (GDP). However, we agreed that we can gradually increase this to 17%-18%.

However, in November 2019, the country’s taxes were drastically reduced. Then the government revenue decreased to 8.5%. There, the International Monetary Fund declared that it is unable to provide aid because of these agreements.

That year we lost around Rs. 600-700 billion. Simultaneously, we had to face the Covid pandemic. These issues are the main factors that led to the collapse of Sri Lanka’s economy.

The International Monetary Fund notified us that we need to show a surplus in our primary budget. We agreed to it because we needed their support.

The other factor is that it was decided to increase the country’s income from 8.5% to 14.5% of the GDP. It’s impossible to do it all at once. We have planned to increase the country’s income to 14.5% of the GDP by 2026.

Initially, we had to think about how we were going to increase our income. We have printed money because our income decreased. During the past two years, Rs. 2300 billion has been printed. As a result, inflation has risen to 70% – 75%. Food inflation has increased even more.

These need to be controlled, but we also need to secure our income. Therefore, a new tax system was proposed during these discussions. The International Monetary Fund had notified that even the export industries are required to pay taxes.

It was indicated especially in countries with an export economy, taxes are being paid. The IMF also pointed out that our primary export economy was the plantation industry. During British rule, taxes were charged from every plantation sector, including tea, coconut and rubber. Therefore, we decided that if we are to move towards that goal, we will have to pay taxes. The export sector has now questioned this move and if these facts are to be submitted to the International Monetary Fund, we have discussed carrying out an analysis.

The second matter is individual taxes. We have obtained the majority of taxes through indirect taxing. Even the majority of the country’s people below the poverty line had no choice but to pay taxes indirectly. Our direct tax revenue is 20%. 80% which was derived from indirect taxes. The International Monetary Fund had specific questions about it and they were of the view that the amount of tax obtained from direct taxes should exceed 20%. Otherwise, they noted that this would not be successful, as ordinary citizens would be forced to pay taxes.

Therefore, according to this mechanism, and to achieve the goals of 2026, the treasury and the International Monetary Fund discussed the possibility of limiting the taxation from those who have an income of 02 lakhs, but that was not possible. Eventually, income tax was levied on people earning over 100,000. Today, this has become a huge problem in the country.

I would like to point out that based on this backdrop, we may not be able to achieve the desired goals without this tax system. The desired goal is to achieve 14.5% – 15% gross domestic product (GDP) revenue by 2026.

If we withdraw from this program, we will not receive assistance from the IMF. If we don’t get the IMF certification, we will not get the support of those international institutions such as the World Bank, and Asian Development Bank, and the countries that provide support. If that happens, we will have to go back to the era of queues.

We may have to face even tougher times ahead. We have to obtain these loans and go for the debt-restructuring program. We are not doing these wilfully. We have to take certain decisions even reluctantly. However, we will reconsider these decisions periodically.

While successfully conducting our debt restructuring program, we expect to move forward through the economic success achieved through a bountiful Maha season. This will help reduce our economic pressure. We have also discussed measures to increase our foreign reserves. Once we have implemented these measures, we can move forward.

We are in a difficult period. We will have to make tough decisions during these difficult times. I took on this difficult task when no one else was willing to come forward. Hence, I feel I must enlighten everyone regarding this background. The government is ready to discuss this further.



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Supreme Court Judge, President of the Appeal Court, Appeal Court Justice took oath before President

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(pic PMD)

Justice K. P. Fernando, President of the Court of Appeal took oath as a Supreme Court Judge before President Ranil Wickremesinghe this morning (06) at the President’s House in Fort.

Court of Appeal Justice Mr. Nissanka Bandula Karunaratne took oath as the President of the Court of Appeal while High Court Judge M.A.R. Marikkar was also sworn in as a Judge of the Court of Appeal before President Ranil Wickremesinghe.

Minister of Justice Wijayadasa Rajapaksha, Secretary to the President Mr. Saman Ekanayake, Commanders of the Tri Forces and other officials attended this event.

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Strong earthquake hits south-eastern Turkey near Syria border

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BBC reported that a powerful earthquake has hit Gaziantep in south-eastern Turkey, near the border with Syria.

The US Geological Survey said the 7.8 magnitude tremor struck at 04:17 local time (01:17 GMT) at a depth of 17.9km (11 miles) near the city of Gaziantep.

The quake was felt in the capital Ankara and other Turkish cities, and also across the region.

Reports are coming in that several buildings have collapsed, and a number of people may be trapped.

A BBC Turkish correspondent in Diyarbakir reports that a shopping mall in the city collapsed.

Rushdi Abualouf, a BBC producer in the Gaza Strip, said there was about 45 seconds of shaking in the house he was staying in.

Turkish seismologists estimated the strength of the quake to be 7.4 magnitude.

They said that a second tremor hit the region just minutes later.

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13 A: Political parties miss Ranil’s Feb. 04 deadline for submitting their proposals

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Udaya compares constitutional threat with Indonesian crisis in late ’90s

By Shamindra Ferdinando

The government hasn’t received proposals from political parties regarding President Ranil Wickremesinghe’s decision to implement the 13th Amendment to the Constitution fully.

President Wickremesinghe, on January 26, requested party leaders to furnish their suggestions, if any, by Feb. 04 as he intended to brief Parliament on Feb. 08 as regards the implementation of land and police powers.

Political parties, represented in Parliament, had not responded to President Wickremesinghe’s request so far, authoritative sources told The Island. Responding to another query, sources said that the President’s Office hadn’t received proposals in support of President Wickremesinghe’s declaration or against it.

Several political parties, including the main Opposition Samagi Jana Balavegaya (SJB) and the Janatha Vimukthi Peramuna (JVP) spurned the President’s invitation.

Having declared his intention to fully implement the 13th Amendment to the Constitution, enacted in Nov. 1987, during Thai Pongal celebrations, in Jaffna, on January 15th, 2023, President Wickremesinghe warned party leaders on January 26 he would go ahead with plans unless the parliament repealed it. Both declarations were made in the presence of Prime Minister Dinesh Gunawardena.

Sources noted that though several political parties declared opposition and some issued statements supportive of the President’s move, they haven’t submitted proposals in writing.

President Wickremesinghe prorogued Parliament, on January 27, the day after setting Feb. 04 as the deadline for political parties to submit proposals. The new session of Parliament begins on Feb. 08.Sri Lanka Podujana Peramuna (SLPP) General Secretary, Sagara Kariyawasam, MP, told The Island that the decision to fully implement the controversial amendment shouldn’t be taken hastily.

“We are certainly not opposed to the devolution of power. However, we cannot under any circumstances support an agenda that may cause chaos,” National List MP said.

The Attorney-at-Law said so when The Island asked him whether the ruling party submitted its proposals to President Wickremesinghe.The lawmaker said that there was no requirement to do so as he on behalf of the SLPP explained to the January 26 meeting chaired by President Wickremesinghe why 13th Amendment shouldn’t be fully implemented without examining the ground situation.

“Seven past Presidents didn’t do that. Why didn’t they do so? We’ll have to study why they refrained from granting police and land powers in spite of them being part of that Amendment. If the reasons that compelled them not to do so no longer exist, we can consider the proposals,” lawmaker Kariyawasam said.

Declaring SLPP’s commitment to maximum possible devolution, MP Kariyawasam warned of dire consequences if decisions were made on the basis of language and religion.The SLPP that secured 145 seats at the last general election remains the largest party in parliament though over two dozen MPs quit the government group.

MP Kariyawasam emphasized that they couldn’t act recklessly on the issue at hand.Those who quit the SLPP parliamentary group, too, have strongly opposed the full implementation of the 13th Amendment. Pivithuru Hela Urumaya (PHU) leader Udaya Gammanpila, MP, compared the developing crisis here with Western project that divided Indonesia in the late 90s.Attorney-at-Law Gammanpila explained how Western countries exploited the economic crisis in Indonesia to compel Jakarta to grant independence to East Timor.

Addressing a public rally at Dehiwela on Feb. 02  in support of Nidahas Janatha Sandhanaya contesting March 09 Local Government polls, former Power and Energy Minister said that the challenge faced by Sri Lanka owing to the continuing balance of payments and debt crises was very much similar to the circumstances leading to East Timor independence.

The 13th Amendment would split Sri Lanka on ethnic lines, the Colombo District MP warned.The MP recalled how external powers created an environment that compelled Indonesian President Suharto to resign in May 1998 to pave the way for Megawati Setiawati Sukarnoputri to win the next presidential election. The MP said that Sukarnoputri granted independence to East Timor.

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