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Verité Research unveils 10 budget proposals for revenue and growth

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Pre-budget forum focuses on the pathway to revive Sri Lanka’s economy

Ahead of the presentation of the budget for 2024 to Parliament today (13 November), Verité Research has unveiled 10 Budget proposals designed to enhance revenue and revitalise growth in Sri Lanka.The proposals were announced at a forum titled ‘Budgeting for Revenue and Growth’ hosted by the think tank on Thursday (9), which facilitated a conversation on the pathway to revive Sri Lanka’s economy.

The forum featured presentations by Professor Mick Moore from the Institute of Development Studies – UK, Professor Shanta Devarajan from Georgetown University, Professor Udara Peiris from Oberlin College and Verité Research’s Executive Director Dr. Nishan de Mel, Research Director Subhashini Abeysinghe, Lead Economist Raj Prabu Rajakulendran, Lead Economist Mathisha Arangala and Lead Data Analyst Ashvin Perera.

In his opening remarks, Nishan de Mel underscored the importance of reducing interest costs while increasing revenue for sustainable economic recovery. He noted that the interest cost for 2024 projected in the upcoming Budget was LKR 234 billion higher than what was envisaged in the current IMF agreed economic recovery plan.  He showed that Sri Lanka will continue to have the highest ratio in the world of interest cost to government revenue: currently above 70%, and remaining above 60% based on the projected 2024 budget.

The forum presented five proposals aimed at increasing revenue:

1.Increase the withholding tax rates from the existing 5% to 10%. – the proposal is expected to yield an additional LKR 90 billion.

2.Adopt the published rational formula for indexing cigarette taxes – the proposal is expected to add over LKR 35 billion.

3.Reverse sugar tax reduction and remove executive discretion on tax changes – the level of discretion allowed through the Special Commodity Levy Act, to the minister, led to what is commonly referred to as the ‘sugar scam’, immediately rectifying it (as had just taken place) can add over 25 billion.

4.Recover excess costs of Ceylon Petroleum Corporation through an increased tax on the whole industry rather than an increased price, above the internationally indexed formula, by the entity – the proposal will generate about LKR 25 billion in extra taxes collected from competing producers.

5.Implement the described method to estimate and collect property taxes – the proposal will initially increase tax collection by at least LKR 17 billion.

The next segment of the forum presented five proposals aimed at revitalising the economy:

1.Introduce state-funded maternity leave benefits (MLBs) – The private sector currently bears the full cost of maternity benefits, making it costlier to employ women. Research shows that state funded maternity leave reduces discrimination in recruitment, and boosts female labour force participation.

2.Protecting the poor with cash transfers and reforming state subsidies – better targeted transfers protects the vulnerable, and makes the allocation of subsidies more efficient, and effective.

3.Implementing trade facilitation targets — Sri Lanka has requested external assistance for 69% of the trade measures while least developed countries have, on average, asked for assistance for just 40% of the measures. Proposals were described to increase pro-active implementation.

4.Accede to the Madrid Protocol on trademark registration – this gives a much needed boost for exporters to go global with high-margin, value-added products, as it would Increase the speed and ease of international trademarks registration.

5.Actions to protect the Banking sector – Addressing banking sector risks requires joint actions from the central bank, the government and the International Monetary Fund (IMF) to implement proposals that include raising the deposit guarantee limit, establishing a Financial Stability Fund for liquidity injection during bank failures, and creating an asset management company for non-performing loans.

The segment on enhancing revenue was followed by a panel discussion featuring Nishan de Mel, Subhashini Abeysinghe, Professor Mick Moore and Professor Shanta Devarajan. The session was moderated by Inoshini Perera, Strategic Advisor to the Executive Director at Verité Research. The discussion highlighted the need to improve Sri Lanka’s risk perception to reduce its cost of borrowing, emphasising the need for better governance, including the restriction of discretionary powers in the executive arm of government. The panel also discussed the need to shift the composition of public expenditure on growth-promoting activities.

The segment on revitalising the economy was followed by a panel discussion that featured Nishan de Mel, Subhashini Abeysinghe, Professor Shanta Devarajan, Professor Udara Peiris and Country Managing Partner at Ernst and Young Sri Lanka Duminda Hulangamuwa. The session was moderated by Hemas Consumer Brands – Managing Director Sabrina Esufally. The panel emphasized the need for Sri Lanka to diversify its export sectors, reduce barriers to international trade, and seize economic opportunities in tourism, IT, ports and shipping infrastructure. The discussion also touched on the importance of addressing inefficiencies in tax collection and institutional processes.

Concluding the session, Nishan de Mel stressed the need for collective engagement and urgent attention to implement these proposals, among others, so that Sri Lanka might stave off a second debt episode of debt restructuring, and make the current recovery path effective and sustainable.



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Secretary to the President meets with heads of the Health sector

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A special discussion between Secretary to the President Dr. Nandika Sanath Kumanayake and the heads of the health sector was held on Tuesday (18) at the Presidential Secretariat.

During the meeting, it was discussed that a committee would be formed to explore possible steps that could be taken through the President’s Fund to reduce the number of patients on long waiting lists for surgeries in government hospitals.

The committee is expected to submit a report on the matter within one month. Based on the findings, appropriate actions will be taken, as indicated by the Secretary to the President.

The discussion highlighted the significant number of patients, including those requiring cardiac, ophthalmic, and paediatric surgeries, who are currently awaiting procedures on long waiting lists at government hospitals.

Attention was also given to the potential support that could be provided by the President’s Fund and other relevant sectors to address the challenges faced by these patients.

Additionally, discussions were held regarding the possibility of conducting surgeries after regular working hours at government hospitals. The challenges faced by doctors and staff were also thoroughly discussed during the meeting.

The discussion was attended by several key officials, including Deputy Minister of Health and Mass Media Dr. Hansaka Wijemuni, Secretary to the Ministry of Health and Media Dr. Anil Jasinghe, Additional Secretary (Public Health Services) Dr. Lakshmi Somathunga, Director General of Health Services Dr. Asela Gunawardena, Senior Additional Secretary to the President Roshan Gamage, along with directors and specialist doctors from major hospitals across the country.

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Govt. plan to boost revenue with taxes on vehicle imports unrealistic, warns Harsha

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Dr. de Silva

By Saman Indrajith

SJB Colombo District MP Dr. Harsha de Silva told Parliament yesterday that vehicle imports would be affected by unusually high prices. Commencing the Second Reading debate from the Opposition side, Dr. de Silva said that President Anura Kumara Dissanayake had, in his Budget speech, projected a substantial portion of tax revenue from vehicle imports. “What is the feasibility of such expectations, given the current price surge,” the MP queried.

“Who can afford to import vehicles at these rates? I do not believe there are enough affluent individuals in Sri Lanka to sustain vehicle imports at these exorbitant prices.”

Providing examples of the dramatic price increase, Dr. de Silva pointed out that a Toyota Raize now cost Rs. 12.2 mn, a Toyota Yaris Rs. 18.5 mn, and a Toyota Prius a staggering Rs. 28.9 mn.

“Someone mentioned that a Toyota Vitz could be available at Rs. 1.4 mn.”

Dr. de Silva said that the government aimed to increase tax revenue by 1.6% of GDP with a significant portion expected from vehicle imports. However, he warned that achieving that target was unrealistic under current circumstances. The government must reassess its reliance on this sector for increasing tax revenue,” he said.

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SLN receives shallow water multi-beam echo sounder from Australia

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From left : Defence Advisor to the Australian High Commission in Colombo, Colonel Amanda Johnston, Australian HC in Colombo Paul Stephens, Commander of the Navy, Vice Admiral Kanchana Banagoda and Chief Hydrographer of SLNHS and Commander Southern Naval Area, Rear Admiral Kosala Warnakulasooriya

Giving a significant boost to Sri Lanka’s hydrographic capabilities, the government of Australia handed over a state-of-the-art Shallow Water Multi-Beam Echo Sounder to the Sri Lanka Navy Hydrographic Service (SLNHS) during a ceremony held at SLNS Rangalla today (18 Feb 25). The formal ceremony was held under the auspices of the High Commissioner of Australia to Sri Lanka, Paul Stephens and the Commander of the Navy, Vice Admiral Kanchana Banagoda, marking new chapter in the discipline of hydrography.

The Australian government provided the Sri Lanka Navy with this Multi Beam Echo Sounder to enhance its hydrographic capabilities. This advanced equipment will enable the Sri Lanka Navy Hydrographic Service (SLNHS) to conduct precise hydrographic surveys, essential for creating nautical and electronic charts for international use. The device will also facilitate the production of high-precision nautical charts, ensuring safer maritime navigation.

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