Financial Times

Juggling the budget via retroactive tax legislation
A page from the Budget Speech 2005 was found outside the Hilton Hotel, having either fallen out from the folder of a visitor or a resident or having accidentally blown out with the wind from the Treasury building and is reproduced below.

"In pursuit of the policy of the UPFA government of Rata Perata Honorable Speaker, I have pleasure to announce that this budget has achieved all the objectives our election manifesto with the realization of the following objectives;

*we have not subjugated our sovereignty to any other nation or multi lateral lending agencies or bowed our head before multi national companies and foreign investors by following the practices and traditions of other nations and adopting taxation principles of other countries (wait for applause),

*we have increased the tax to GDP ratio by 3% over last year,

*we have reduced the budget deficit to 6.0% of GDP the target in line with Fiscal Responsibility Act,

*we have achieved all of the above without burdening the poor

( Wait for applause)
The UNF government followed the dictates of the IMF and the World Bank whilst paying homage to rich business and foreign investors. We have already made the first departure from tradition by legislating some of the 2004 tax proposals with retrospective application from 2002. This measure has made the big banks, both local and foreign owned (some foreign banks having market capitalizations even bigger than the GDP of Sri Lanka), pay dearly towards our 2004 budget deficit.

Despite retrospective legislation being deemed unacceptable from Canada (this would be ultra vires and contrary to the provisions of the Financial Management and Accountability Act 1997 and the Constitution), United Kingdom and even recently in Indonesia (retrospective prosecution underway in trials of those accused in Bali bombing proclaimed as unconstitutional), the UPFA government has decided to introduce several new revenue measures with retrospective effect from the year 2000.

Those impacted by the new proposals will only be the corporate sector of Sri Lanka. I am sure they will accept these additional commitments as a due discharge of their Corporate Social Responsibility (CSR).

The millennium development CSR tax will support the subsidies that the UPFA government is extending to alleviate poverty. (Wait for applause)
I propose that the following tax proposals applying to all corporate entities be introduced with retrospective effect from the year 2000.

*All company cars used for traveling will be charged Rs 100,000 per car per year and all company provided houses will be liable to a tax of Rs 250,000 per year

*Where company employees have engaged in any foreign travel in excess of four trips per annum the company will be liable to a tax of Rs 100,000 per employee

*Where any employee is paid a salary and benefits in excess of Rs 3 million per annum the company will be subject to a 10% surcharge, in excess of Rs 5 million subject to a 20% surcharge and in excess of Rs 10 million a surcharge at 30%

*All houses, household property, land and buildings owned by companies with foreign shareholding will be taxed at 0.5% of the market value

*Advertising and promotional expenses and all local and foreign travel expenses, entertainment and annual year end gifts and hampers will be disallowed for tax purposes *Dividends distributed in excess of 50% of profits after tax will be subject to an additional dividend tax of 10%

*All imports of food, drinks, vegetables, fruits, meat products ( excluding infant milk) will be subject to a special VAT of 5%

*All sales of vehicles, Household Goods, Cigarettes and Liquor and luxury goods will be subject to a special VAT of 10%

*As the depreciating rupee has benefited exporters the concessionary tax rates applicable have been increased by 5%
Honorable Leader of the Opposition, we have done what your government could not achieve in fiscal management. We have achieved the fiscal management targets without burdening the poor whilst at the same time encouraging local entrepreneurship and benefiting the farmers and SME's (wait for the applause).

I am sure that that the media will agree that we have now unplugged the nation from the IMF and World Bank. I assure this house that the UPFA government has not and will not bow down before big business and their chambers and I am personally proud that I have surpassed both Saradiel and Robinhood put together (wait for applause)."

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