Number of tax files more than doubled, to 1.4 million : Budget: top priority for bread-and-butter issues | Sunday Observer

Number of tax files more than doubled, to 1.4 million : Budget: top priority for bread-and-butter issues

Faced with criticism over the 2016 Budget, Finance Minister Ravi Karunanayake is set to present a ‘People’s Budget’ next week, with emphasis on education, health, roads and houses. “We are concerned about boosting economic growth and improving the livelihoods of the ordinary people,” he said in an interview with the Sunday Observer.

Karunanayake also emphasized that his 2017 budget is ‘for the people’ who elected the coalition government nearly two years ago. The government is targeting a deficit of 4.7 percent of gross domestic product for 2017; and aimed at meeting a 5.4 percent budget target for 2016.

“We are presenting a ‘People’s Budget’ which cannot be prepared in isolation; business chambers and the common people are an integral part of the November 10 budget,” he stressed.

Karunanayake said, he had already visited several provinces to get first-hand information directly from the people on their expectations and the needs to improve their livelihood. He had visited places such as Mavil Aru in Trincomalee, Polonnaruwa and Galle and several other districts. He also had discussions with trade union representatives and others who represent various sectors of the economy such as tourism, poultry industry, vehicle importers, trade and industry in Colombo and the provinces.

Inputs

For the first time, the Finance Ministry also launched a program called, “Citizens’ Engagement” which involved 12 teams of professionals from 12 universities in the country to obtain inputs from the people on their needs, as well as, make them aware on budgetary constraints and the development and reform programs introduced in the budget.

“This government was elected by the people, for the people, through the people. Elections bring in promises. But, in most cases, in post-election time, these concepts disappear. We want to keep our promise and engage people even in the ‘budget making’ process - so that we will bring out a budget that meets people’s real aspirations,” the Minister said.

With this concept in mind, Karunanayake, himself, and the ‘expert teams’ met people’s groups in many different areas of the country covering both urban and rural areas over the last few months.

These academic teams with the assistance of the Ministry of Finance conducted systematic surveys on the economic needs of the people covering 332 Divisional Secretariat (DS) divisions in the country under the aegis of the respective Divisional Secretaries.

“We kept talking to people, listened to their issues and collected their ideas and proposals during these meetings,” the Minister said.

So far, they have received 2,300 proposals.

“We have taken a majority of the views into consideration when the budget proposals were made, and have incorporated them.” Asked about the mechanism of how the ‘people’s ideas’ were analyzed for budget proposals, the Minister said, they looked at the ‘cost benefit analysis to know whether the proposals are advantageous to the country.

“We then adopted it, if it was good and cost effective.” These also include the proposals from other sectors of the economy, trade unions, the corporate sector, business and trade chambers, and individual companies.

He added that the proposals given by business chambers have also been taken into consideration.

“The business community can expect a constructive and pro-growth budget this year. While we are taking measures to increase jobs on the one hand, the retention of business on their side is also taken in.

“People could expect a very pro-growth budget, targeted at poverty reduction, job creation and self-employment opportunities. It will also be business-friendly and investor-friendly.

“We have identified several thrust industries. In addition to traditional sectors, such as, tea, rubber, coconut and the apparel sectors, we will provide facilities for the services sector (BPOs/KPOs), logistics sector and, commercial agriculture sector. A couple of new areas that we looked at, include boat and furniture manufacturing sectors.”

The government has decided to discontinue the system of incremental budget allocation from this year and instead all ministries have been allocated funds on Zero based budget proposals put forward by the ministries in accordance with the government’s national economic priority plans.

Accordingly, all ministries had to submit their annual action plans before finalizing the allocations and they would be required to strictly adhere to and monitor the implementation of the plan.

The Minister said, as Sri Lanka aspires to become a higher middle-income country, it would need to adjust its development model with the intention of achieving an increased per capita income and lowering the fiscal deficit to 3.5 % of the GDP by 2020.

VAT controversy

Talking about the VAT controversy that led to various court cases and several major protests around the country, following the 2016 budget, the Minister said, most issues came up due to political ‘nuisance-sake’.

“People who got involved in these protests are not even bothered to pay taxes. However, we have taken measures to address all the matters related to taxes.”

Asked why the government failed to keep to its promise of increasing direct taxes instead of indirect taxes, through the last budget, Karunanayake said his government was able to increase the number of direct tax files to 1.4 million from 599,000 earlier.

Investment drive

“We have taken measures to increase the number of direct tax payers. New measures will be taken to further strengthen the tax collection system soon.”

Meanwhile, an economic analyst said, some of the major challenges the government is facing include improving the tax collection system, restructuring State Owned Enterprise (SOEs), including finding a partner company for SriLankan Airlines and boosting foreign investments for the government’s priority development plans, such as, the Western Province ‘Megapolis’ project and the Colombo International Financial Centre that have already been announced.

The new government’s policies have drawn strong support from the international community and the country’s development partners.

According to a Finance Ministry statement, they have pledged funding and technical assistance for several wide-ranging and interconnected support schemes for a sustainable medium term economic development program.

Some features of the new economic landscape for Sri Lanka at the end of the medium-term program would be:

 

A fiscal deficit of 3.5 percent of GDP by 2020—sustained or lowered over the longer term to ensure that the debt-to-GDP ratio continues to fall.

An increase in the tax-to-GDP ratio from 10.1 percent in 2014 to about 17 percent by 2020.

A reduction in public debt to about 60 percent of GDP by 2020.

An increase in foreign exchange reserves of the Central Bank to about 10 months of import cover by the end of the medium-term.

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