Budget 2021 to generate Rs.2.3 trillion revenue
Budget 2021 will be presented in Parliament on Tuesday with the focus on achieving economic development for the people and creating a ‘caring and healthy society’ amidst COVID-19 challenges, government officials said.
The proposals have been devised to strengthen the government’s development programme of prosperity supported by a robust safety net, and state intervention to address market failures and ensure social justice and increase investment in social infrastructure. These objectives will be addressed in the budget proposals by facilitating livelihood development among other matters, a senior Treasury official said.
The proposed budget shows recurrent expenditure for financial year 2021 at Rs.2.69 trillion and capital expenditure at Rs. 2.22 trillion. Revenue is projected to trend around Rs. 2.29 trillion. Direct taxation is expected to witness a significant increase among other budget 2021 revenue proposals, he said.
The budget deficit is pegged at 9 per while Sri Lanka’s debt stock is envisaged to be brought down to below 70 per cent of GDP, he said adding that the budget deficit also includes carried forward dues of the previous regime.
Several existing tax holidays, partial tax holidays, and other concessions are to be removed while introducing a simplified three tier corporate tax structure, taxation of capital gains while expanding the coverage of withholding taxes.
Corporate tax rate will be revised and the Finance Ministry is likely to re-introduce the wealth tax, official sources said.
The government had set a target in its medium-term economic plan to increase income tax contribution to total tax revenue to at least 40 per cent from 20 per cent in the budget revenue proposals.
The excise tax on cigarettes and hard liquor manufactured locally will be further increased (excise duty on special arrack remains without change) and excise duties imposed on malt liquor will also be revised. Furthermore the government is to hike taxes on fuel imports, luxury items and cosmetic imports.
Priority will be given to projects which provide immediate relief to the public such as empowerment of low income families, upliftment of the rural economy and fulfill the housing needs of the public.
It will also focus on educational reforms and achieving transformational progress in the skills development sector, development of infrastructure facilities, promotion of small and medium scale domestic producers and expansion of their products, upgrading rural road network.
Tax revenue and other proposals will be aimed at providing immediate benefits to the people and priority will be given to projects which provide immediate public relief.
The government will take several measures including broadening the tax base, simplifying the tax rates, reducing the number of taxes, facilitating voluntary compliance, avoiding politically-motivated tax amnesties and tax concessions to enhance tax revenue.