President delivers ‘election magic’ budget but questions abound on costs of implementation – Budget 2015
View(s):President Mahinda Rajapaksa on Friday heaped unprecedented benefits and concessions on large sections of the Sri Lankan public in the 2015 Budget but the key question arose: ‘Where is the money for all these handouts”?
There were mixed reviews of the budget, though in many ways it probably is the first time in recent years that so many concessions and incentives have been provided in a single budget.
Consider this: Sharply reduced taxes for vehicle imports for more than 1 million migrant workers; a total of 100,000 students to enter local universities by 2020 from a current 20-25,000 places; reduction in water rates; benefits for EPF members, improved facilities for judges; motor cycles at concessionary rates to postal workers; pensions for garment and migrant workers and trishaw drivers; local milk powder reduced by Rs 100 per kg; Rs. 3,000 per month for kidney patients; allowance for pre-school teachers; 50,000 new teaching appointments; tax exemptions and low-cost loans for small entrepreneurs, higher interest rates for elders in state banks; higher minimum wages and permanency for casual employees.
Here is a cross section of the views compiled by a team of Business Times journalists:
Minimum wage
Leslie Devendra, General Secretary, Sri Lanka Nidahas Union:
President Mahinda Rajapaksa
“Before the budget we had made a proposal for a National Minimum Wage and the government had accepted it in principle. The National Minimum Wage has been fixed at Rs 10,000. Even though it is not a living wage, the fact that the government has accepted this in principle is very important. All this time there was no National Minimum Wage.
With regard to public servants’ minimum wage, it has been increased to Rs. 15,000 and the cost of living is increased to Rs. 10,000. Thus every worker will get a minimum monthly income of Rs 25.000. We appreciate the gesture by the government. In addition, EPF contribution by the employer has been increased by 2 per cent. This will add to their superannuation benefits. This will apply to both the private sector and semi- government sector.
Legal bar to implementing tax proposals
Gajma Tax Consultant Senior Partner, N. R. Gajendran noted that significant proposals in 2015 budget were the reduction of VAT to 11 per cent from 12 per cent, consolidation of motor vehicle taxes into Excise special provision tax, revision of import duty /CESS, revision of retail Business Turnover Tax threshold to Rs.100 million from Rs. 250 million, Small and Medium scale Enterprise BTT to Rs. 750 million from Rs.500 million as well as the concession granted to large scale manufacturers for exports and manufacturers setting up ventures in overseas.
Raising one issue, Mr. Gajendran said that tax statutes cannot be implemented as there was no Commissioner General for the Inland Revenue Department for more than two months. An acting Commissioner General has no administrative authority in the department, he added.
Farmers must take up the challenge
Anura Weerakoon, Chairman, National Agribusiness Council:
“There is nothing much discussed about agriculture in the budget. The Government has fixed the guaranteed prices for dried chillies, onions and potatoes. Some of these guaranteed prices are already there and it is a matter of implementing them.
In the case of dried chillies there is a guaranteed price of Rs. 350, but there are no dried chillies to be sold as farmers haven’t produced enough.
The government has done their part and now it is the turn of the farmers to produce more.”
Motor vehicle prices to rise
The price of motor vehicles will go up again due to the imposition of a special tax on all vehicles although the VAT has been reduced from 12 per cent to 11 per cent from 2015, the immediate Past President of Ceylon Motor Traders’ Association (CMTA), Thilak Gunasekera said.
The budget proposals providing unprecedented concessions to all most all sectors of the economy seem to be aimed at an impending election, he said adding that the country’s motor trade will be pushed into more difficulty by the new special tax.However he noted that the new tax was not specified in the President’s budget speech and it is premature to come into a conclusion on its outcome.
The 60 per cent tax facility given for migrant workers to import vehicles will help to increase their remittances to the country, he said, adding that it will also boost vehicle imports in the country.
Central Bank Governor Ajit Nivard Cabraal and Treasury Secretary Dr. P. B. Jayasundera arrive for the budget presentation.
The concession granted to postmen to purchase motor cycles was a long felt need as it is essential to modernize Sri Lanka post, and it is beneficial for the industry as well.
He welcomed the reduction of a 20 per cent import tax on electric vehicles and it was very good proposal towards introducing green vehicle concept, but this reduction will offset the special tax on all vehicle imports.
Mr. Gunasekera noted that the struggle for existence in the Sri Lanka motor trade yet continues even though it contributes in no small measure to the country’s GDP. Ad hoc policies and taxation based on theories of treasury officials from time to time were highly detrimental to the progress of the motor industry, he pointed out.
Director of Lekhraj Automobiles (Pvt) Ltd Ashok L. Ganwani emphasized that the special tax on all imported vehicles was not so clear but it seems that all five taxes including Import Duty, NBT, PAL and Excise Duty are going to add up to one single special excise duty taking out the VAT component out. VAT will be imposed separately, he added. This will increase the selling price of a car by Rs. 400,000 to Rs.500,000, he added.
‘Election magic”
Chairman of Marxist party Janatha Vimukthi Peramuna (JVP) affiliated Inter Company Employees’ Union Wasantha Samarasinghe said the working masses cannot be fooled by the 2015 budget which is full of election magic.
He noted that the private sector work force has not been provided anything although it is the largest in numbers — something like 6.5 million and the highest contributor to the national economy. He noted that their trade union has demanded the government to bring legislation to increase the salary of the private sector workers and it was completely unheeded.
Footwear makers shattered
The hopes of some 30,000 workers in the footwear and leather product industry were shattered as the budget has not brought any relief for them although it has given a few big manufacturers’ unprecedented concessions, Sri Lanka Footwear and Leather Products Manufacturers Association President P.G. Nimalsiri said.
He said that Treasury Secretary Dr. P.B. Jayasundera has twice promised to look into their grievances but no action has been taken to find a redress for them.
He disclosed that the association has made a request from the Treasury in two previous budget discussions with manufacturers to re-introduce the duty of 30 per cent on C.I.F or Rs 100 whichever is higher + Rs. 400 Cess on imports of shoes and leather products. But it was not included in 2014 or 2015 budgets.
This budget completely ignored the deserving manufacturers paying attention on major sectors only, he said, adding that their association is waiting to get more information on budget proposals as it was not clear as to who these major manufacturers were as indicated in the budget proposals
Populist budget
It’s a populist budget, said a stockbroker.
Government supporters prepare to light crackers.
He said revenue collection will be challenging as it was announced they are trying to catch the tax evaders which will be difficult. Car import taxes have been simplified but it will increase the vehicle prices, which will affect this sector.
There’s a drastic reduction on electric vehicle taxes which will spur its growth, he said.
No relief for FTZ workers
Ms. Sriya Ahangama, Secretary, Women’s Centre, Free Trade Zones, said that employees at the Katunayake, Koggala and Biyagama zones minimum salary was Rs 9,500 and this budget has increased it by a meagre Rs. 500.
“Our request to the government was for an increase of at least Rs 5,000. Thus, from this budget there is absolutely no relief for FTZ workers. There are more than 100,000 workers in the three FTZs. Their living conditions are pathetic and the Government would have been more considerate towards them as they contribute a large amount of foreign exchange to the country,” she added.
Hoodwinking the masses
Faizer Mackeen, President of the Association of Licensed Foreign Employment Agencies, said the pension scheme for migrant workers is a repeat of a proposal made last year.
“But nothing came up from that. I also cannot understand the proposal for vehicles either to the workers or the agents. If it is for the workers, that would be in thousands. If it is for agents, it is a concession that we have been fighting for the last 25 years,” he said.
Mr. Mackeen said the budget is a “hoodwinking budget just making proposals aiming at the anticipated presidential elections”.
So far the foreign employment industry has got no benefits or incentives from any budget. “Therefore we not very much appreciative of this present budget,” he added.
Budget confers benefits to many sectors
The Institute of Chartered Accountants of Sri Lanka President Arjuna Herath said, “The 2015 Budget has conferred benefits to many segments of society. It includes salary benefits to public servants which are significant. Also the income tax rates have been reduced and value added tax rate reduced by 1 per cent point which will have a wider impact.”
He said in this context the loss of revenue from these concessions will be required to be recouped from other sources. The primary source to increase revenue will be to have a broader base of tax payers, which has not happened yet, possibly since the benefits of growth has still not percolated to a wider section of the society.
Given the active participation of the government in commercial ventures public-private partnerships will be required to be focused to create the platform for increased private sector investment. The government could be a very effective catalyst in this case, added Mr. Herath.
Arts: Same proposal, same refusal
Just like the pensions for migrant workers, which is a repeat of the 2014 budget proposal, the allocation of Rs. 300 million for the renovation of the Lionel Wendt and Lumbini Theatre in Colombo is also an old proposal.
The same proposal was made in the 2014 budget and at the time the Lionel Wendt management politely declined the offer since it’s a private theatre and didn’t want state intervention in its activities.
This year too, the Lionel Wendt management, when asked on Friday, said they were not interested in the offer. “Last year when the Ministry of Finance and Planning asked for a meeting to discuss about the renovation of the Art Centre, we strictly told that we do not want any money or support for renovating since it’s the only theatre with value and pride and doesn’t need support from the government,” one official said.
However the Lumbini Theatre is believed to under renovation with the funds pledged last year.
Casinos
An official at the Bellagio Casino in Colombo said, “The budget is not favourable for casinos in the country in terms of charging $100 as entrance fee. This will definitely affect our customers visiting the casinos. Who would like to pay $100 as entrance fee except the ones who are so sure of taking back money after gambling? Instead of charging an entrance fee they should have charged from the people who win tons of money after gambling.”
Short-term budget
Point Pedro Institute of Development Principle Researcher, Muttukrishna Sarvananthan said the budget is an election oriented budget. Its purpose seems to be just for one or two months to satisfy the university students and the Mahapola scholarships. How far they can implement it remains a question among economists and researchers, he added.
He noted that the 2015 Budget is a wishful budget targeted towards the forthcoming election while duping the rural masses with numerous hopes.
| Budget desk at the Business Times
Interviews and other key information that went into one of the most comprehensive budget reports ever produced by the Business Times were compiled by a team of journalists comprising Bandula Sirimanna, Duruthu Edirimuni Chandrasekera, Quintus Perera, Jagdish Hathiramani and Raj Moorthy. Pix by Indika Handuwala and Anuradha Bandara. |