Blaming the ‘Rajapaksa Regime’ of putting the country into a debt trap of nine trillion rupees Prime Minister Ranil Wickremesinghe making a special statement in Parliament today said the government would increase the Value Added Tax (VAT) to 15 per cent, re-introduce capital gains tax and introduce several other tax reforms to face the challenges ahead.
He said a flat statutory income tax rate of 17.5 per cent would be introduced.
Tax concessions granted on Telecommunication services, private education and health services would be removed. He said VAT would not be imposed on essential commodities and electricity while imposing it only on selected non essential commodities.
It was also announced that the proposal in the 2016 budget to increase nation building taxes to four per cent from the earlier two per cent would be suspended.
"Nothing done by the Rajapaksa Regime in the name of development, had provided any stimulus to uplift the economy. Hambanthota is a very good example. An airport was built but there are no airplanes. We are going back to China to talk about them. A harbour was built but with no ships. We are going back to China to talk about them. They did not have a plan to make use of this airport and harbour. At least no land had been reserved to even build an industrial zone around this port and airport. We went there and marked out the land for the first time.
“They only plunged the country into a debt trap. Because of the arrogant ways of the Rajapaksa Regime the country is in a debt trap of Rs.9.5 trillion. That means Rs.9,500 billion. Sometime it could even be as much as Rs.10,000 billion.
“The challenge before us now is to come out of this debt trap. I would like to emphasise that the foundation for that has been laid by the National Government. The majority opinion is that this challenge could be won by the National Government. The opinion of the International Community is also that. We like to state that many are looking at the way we are proceeding.
“The other challenge faced by us is the present global economic crisis. That is our second challenge. Therefore we have to minimize the impact on our country from the global economic crisis. On the other hand we have to come out of the impact of the debt trap.
“The oil prices in the world are decreasing today. Those who are saying that the fuel prices in the country should reduced because of that do not see the danger behind it. We like if we can completely reduce it. But there is a problem. On one hand the CPC is in debt to the tune of Rs.365 billion. Then we have to introduce a separate tax to pay that debt. On the other hand the economies of countries that depend on oil like Saudi Arabia, Oman, Jordan and Kuwait are facing problems. As a result job opportunities in those countries are reducing. The Sri Lankans doing jobs in those countries might even lose them. The salaries might become less. We should not forget this danger.
“The decrease in oil prices effects Russia as well. Not only will the number of Russian tourists coming to the country reduce, the demand for our tea in Russia has already decreased.
“The Middle Eastern region is in danger because of the ISI terrorists. It has badly affected our tea exports. Also if some incident happens it could affect the world economy and oil distribution.
“The recession in the Chinese economy could also be a disadvantage for us.
“If the European economy weakens it will affect our export earnings. If by some reason Britain leaves the European Union, it could be disadvantageous to us. Therefore we wish that it would not be so.
“The US Federal Reserve could increase interest rates. Once it did it. It has stopped it because it could create problems to the world economy. I think before the US Presidential election they could increase it to show their power. If that is done the interest on the debt we have to pay will also increase.
"For Sri Lanka the year 2016 will be an year which spells utmost diligence given the local and global conditions" the Prime Minister said
He said Sri Lanka should focus on maintaining an economic growth of six per cent and also should show the world that it can overcome any economic storm.
“We can revive this patient and we will revive her even by giving her bitter medicine," he said referring to the country's economy . The prime minister assured that the government would create an atmosphere where the people could lead happy and peaceful lives in the future," the Prime Minister said. (Yohan Perera)