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Another mini budget to raise government revenue
Sri Lanka’s Treasury is preparing a mini budget 2016 as the 2016 Budget revenue and capital expenditure estimates have gone haywire due to the introduction of amendments to the ongoing budget, officials said yesterday.
In December last year, Prime Minister Ranil Wickremesinghe told Parliament that a “contingency liability bill” or a mini budget would be presented in Parliament in March with new taxes to meet the need for growing state finances.
A senior Treasury official said the mini budget would revise the present tax structure and introduce new taxes or a tax hike to raise additional revenues to implement amendments made to the 2016 Budget.
The amendments made in the 2016 Budget revenue would incur a deduction of at least Rs. 70 to Rs. 80 billion in the estimated revenue, he said, adding that re-introduction of tax-slashed vehicle permits and the reduction of vehicle emission test levy to Rs. 1,500 from Rs. 5,000 would alone bring down the estimated revenue by at least Rs. 66 billion — another reason to present new estimates through a mini budget.
Lakshman Yapa Abeywardana, Minister of State for Finance, also confirmed to the Sunday Times that the Treasury was preparing a mini budget while a cabinet decision would have to be taken to present it in parliament.
He said the Treasury was also working out modalities of the tax framework that would be presented to the IMF for a bailout programme. The need of a mini budget has arisen as the country’s tax-to-GDP ratio is one of the lowest in the world, and tax efficiency is low compared with other countries in the South Asian region. The official said that overall expenditures were expected to grow by 30 percent, with recurrent and capital spending increasing by 17 and 70 percent, respectively.
He noted that erroneous estimates, data and records were endangering the country’s economy with relation to 114 expenditure proposals mostly for handouts where financial allocations were to be made from Treasury votes for the medium term 2015-2017 provisions.
Meanwhile, Finance Minister Ravi Karunanayake told a media conference in Colombo last Monday — the day Fitch ratings announced a downgrade of the country’s rating — that the Government had unearthed liabilities worth Rs. 1.15 trillion that had been hidden by the former Rajapaksa regime, making the debt burden that needs to be repaid worse than anticipated.
The official said the Government would spell out measures to raise additional revenues to pay for those additional expenditures including borrowings of the previous regime.
The Government expects to reduce the budget deficit to 5.9 percent of the GDP in 2016 from a revised 6 per cent in 2015. Last year’s targeted deficit was 6.9 percent.