Budget Proposals 2015 – An overview – Budget 2015
This year’s budget was unique not merely because it was presented on a Friday in the month of October (all three previous budgets were presented on Thursdays in November), but because it contained a few unique “firsts” in a Sri Lankan fiscal budget. Like a loan scheme for default tax payers to settle their tax arrears due to the tax office, (as opposed to a tax amnesty) and an introduction of the concept minimum wage in the private sector ( Rs.10,000)
Restriction of the highest individual income tax rate applicable on employment income to 16 per cent to make it one of the lowest income tax rates applicable on employment income in the Asian region and reduction of the VAT rate to 11 per cent from 12 are the other high water marks in the budget.
It seems a budget for everyone, as everyone has been granted a piece from the pie (consumers, white and blue collar workers, exporters, educationalists, SMEs, senior citizens, charitable institutions, artists, etc) though the portion of the pie may not be the same.
The attempt to seek to simplify the tax administration and the complicated web of taxes is evident by the measures to consolidate multiple levies into a single charge of Excise Duty under Excise (special provisions) Act in lieu of VAT, NBT, PAL, CESS and customs duty on import of motor vehicles and on removal of VAT and NBT on liquor and tobacco.
The move to hike up the threshold for changeability to VAT and NBT to Rs 15 million per annum from Rs.12 million and the imposition to Income Tax concessionary rate of tax of 12 per cent to commence at annual turnover of Rs. 750 million could also be viewed as measures for further simplification of tax administration by elimination of low yielding tax payers from the system whilst conferring a benefit to SMEs.
The Sri Lankan tax administration which occupies the 171st rank in the “Ease of Paying Taxes” out of 189 countries (World bank – Doing business index) no doubt would be assisted in the right direction by the move to go online of the Customs Office and the Department of Inland Revenue with immediate effect, may be the first step in the implementation of RAMIS, a Revenue Administration Information System, which seeks to integrate almost 22 Governmental Departments.
The observation, that high water mark of the budgetary proposals is the compensation related rewards, allowances and other benefits granted to various segments of the society is not far removed from being accurate. The introduction of pension schemes for apparel sector employees, trishaw drivers and migrant workers, allowances for university academics, doctors judiciary service employees, pre-school teachers, teaching assistants, widows of July strikers, elders, differently abled persons, motor cycle allowances and concessionary rates for police officers, for postmen respectively, in addition to compensation revisions of state and private sector employees is a reflection on this point.
The tax revenue collection for funding government expenditure is to be extracted from areas such as casinos (upward revision of the current 5 per cent to 10 per cent of the levy on gross collection and $100 entrance fee,) tobacco and liquor, etc.
Noteworthy is the fact that 61 per cent of revenue proposals is to be funded by an estimated collection of taxes in default by providing loan facilities to the default tax payers.
This budget has not granted any new tax holidays, perhaps in keeping with the school of thought that tax holidays do not add value to the economy.
The budget proposes to increase the unimpressive current Tax/GDP ratio of 11.6 per cent in 2013 to 12.5 per cent, the budgetary estimate.
The composition of Sri Lankan taxes thus far is approximately 81 per cent from indirect taxes and 19 per cent from direct taxes whilst the budgeted tax revenue composition for 2015 fiscal year reflects that 77 per cent would come from indirect taxes and 23 per cent from direct taxes.
Is the cup half full or half empty? The view depends on each person’s expectations! The same holds true for the review of these budgetary proposals as well!