7 December 2019 12:04 am
The tax relief announced by the government on Wednesday will not apply to alcoholic spirits, tobacco or cigarettes but to essential consumer commodities, Government Spokesman, Minister Bandula Gunawardana said.
The Cabinet last week announced a range of tax relief resulting in VAT reduced to 8% from 15%, removal of withholding tax on interest earned and debit tax while halving income tax on the construction industry and removal of turnover tax and 2% per cent Nation Building Tax on domestic goods and services effective from December 1. The capital gains tax on stocks, a debit tax on financial institutions and debit service tax and taxable threshold on PAYE tax has also been increased to Rs.250,000 a month from Rs.100,000 effective from December 1.
The minister said, the tax relief would help reduce the cost of living and improve per capita income. “The economy is in total disarray. The financial sector and the small medium and major industries have collapsed during the past five years. The value of the rupee against the dollar has depreciated sharply. Businesses went bankrupt and many investors sold their businesses or they wounded up. It was against this background, that the new government led by President Gotabaya Rajapaksa came out with its National Policy Framework called ‘The Vision of Prosperity to Create a New Country,” he said. “The top revenue collectors of the government such as the Inland Revenue Department, The Sri Lanka Customs and the Excise Department, had already issued circulars on the tax reforms. The new taxes will be effective simultaneously with the issuance of the relevant gazette notices. But they have to be approved in Parliament in three months.” The minister said under the policy framework of the new regime, the government expects to achieve a GDP increase of 6.5%, reduce inflation to 5%, the budget deficit to less than 5%, unemployment to around 4% and the per capita income to US$6,500 and the value of the rupee to a steady and manageable level. State-owned business ventures will be fully restructured to make them profit-making establishments.
The minister said the government would also ban the import of pepper, cinnamon, arecanuts and several other commodities for re-export to boost these industries. He said the government would also restrict the import of fruits, vegetables and other crops, foods and other commodities that could be grown or produced in Sri Lanka as it was a shame to import even joss-sticks, kites and canned fish.