‘Ordinary’ budget aimed at rapid growth

President Mahinda Rajapaks, who celebrates both his birthday and one year on the hot seat is confident that the 2007 budget will ‘increase the income of the poor at a far more rapid pace than in the past and place its thrust on building a strong economy’ but according to many, it is an ambitious budget while for some it’s just an ordinary one.

“There is nothing extraordinary in the budget – it is just like any other. The visa tax was a bit over the top and very discouraging to tourists,” a top official at a hotel sector company told The Sunday Times FT. Tourists are to be charged a US$ 10 on their air ticket to Sri Lanka.

A CEO of a tourism firm said that the industry has been totally ignored. “It has got into a worse shape because of the visa tax,” he added.

A stock market analyst said that unlike in the last budget, the corporates have not been taxed directly, but a lot of ‘tinkering’ has been done with the VAT, ports levy and the economic service charge. “These will affect corporate taxes,” he said.
Athula Jayasekera, Assistant General Manager Business Development L B Finance said that it is a balanced budget. “The lower withholding tax was revised from Rs.108, 000 to Rs.300, 000 and this is a benefit to our customers – especially the pensioners,” he added.

S C Securities in a report said that the gap between an interest income of Rs.300,000 and Rs.600,000 will be taxed at a lower five percent. “In contrast any income above Rs.600,000 will be taxed at current 10 percent. This will ease the ability of banks to increase their deposits from one account holder,” it said.

Ashok Pathirage, owner of Softlogic and Chairman of Asiri Hospitals, said that it was a good move to reduce the tax on medical equipment from 15 to five percent. “The VAT on high tech medical equipment was lowered to five percent and will positively impact on companies in the health industries, which are in the expansionary move,” he said. S C Securities report said that the spending allocation on public healthcare will increase the private channelling and boom the hospital sector.

Dakshitha Thalgodapitya, CEO Chamber of Construction and Industry hailing the tax concessions on the construction sector said that adjustments in the withholding tax on the construction industry from five to one percent will benefit the companies in the construction industries. “It is the first time that a budget has been made on a medium term development framework and the emphasis is on stepping up the infrastructure projects, which is a progressive step,” he added.

Premier blue chip John Keells Holdings Chairman Susantha Ratnayake giving his initial observation said that the Budget had a mixed bag of very progressive proposals as well as some contentious ones. “But in any budget implementation is critical,” he added.

Favourable proposals for plantation
The plantation sector is expected to benefit from lower ESC of 0.25 % from a previously higher 0.5%. Machinery imported by plantation companies (Tea, Rubber and Coconut) will be exempted from VAT. All the plantation stocks and diversified Hayleys are expected to benefit.