Govt. proposes to impose ‘Medamulana tax’ to repay Rajapaksa era loans

•  New levy to be absorbed by banks
• Applicable only for 3 years

Finance Minister Mangala Samaraweera yesterday proposed to impose a special tax termed ‘ Medamulana tax,’ as the levy is intended at collecting additional revenue to repay foreign debt taken during the Rajapaksa  era.

The government proposed to charge 20 cents per every Rs.1, 000 on the total transaction made through banks with effect from April 1, 2018. 

“The next 3 years will be crucial with debt repayments amounting to almost Rs. 7,000 billion. 

This includes the repayment of international sovereign bonds, which will mature every year amounting to almost Rs.600 billion where bunching is a severe strain on government finances. In 2018 alone, the debt repayment amounts to Rs. 1,970 billion. As was the case last 2 years, you would have noticed that we have not compromised on the investments to be made in 2018 in spite of the impending debt burden. However, we do need support”, Samaraweera said, justifying the new levy.

 However, he said the government doesn›t intend to pass this tax on to the customer and wants the banks to absorb the full burden.

“This will be applicable only for 3 years and shall not be passed on to the customers.”

The government expects to collect an estimated Rs.20 billion from the new levy, which appears to be a bit far-fetched.