Ceylon Chamber expresses concern over some budget taxes

Sri Lanka’s Ceylon Chamber of Commerce on Sunday while acknowledging that the interim budget presented on Thursday ase based on the election manifesto of President Maithripala Sirisena, noted that some of the new taxes are both ‘distortionary’ and entity-based. It said these taxes “… may send confusing signals to investors leading to a reallocation of resources. These are not desirable features of a competitive economy (which thrives on consistency) and a modern tax system (which ensures consistency),” it said in a statement to the media. The chamber said it hopes that these are short term transitionary measures aimed at maintaining a reasonable fiscal position until a firm economic policy framework is introduced. “In terms of revenue generation in the future, we call for a framework that is fair and non-discriminatory and focuses on a streamlined tax structure and an efficient tax administration.” The chamber in detailed statement said the relief measures will ease peoples’ economic hardships. It also noted that endeavours have been made to finance the new expenditure proposals through new revenue measures - albeit targeting a relatively small segment of the public - thereby containing the budget deficit to what was initially envisaged. “Overall, given the benign inflationary environment at present and the modest levels of household consumption, we believe there is space to accommodate the relief measures and since they have been financed with new revenue sources, macroeconomic stability is unlikely to be undermined,” the statement said. The chamber urged the Government to formulate – and announce at its earliest - an economic policy framework to drive sustainable and inclusive growth. “We believe that a strategy centered on exports, investment and education would be most appropriate for the country at this juncture. Such a policy framework, if aligned to market forces and institutionalized governance and supported by foreign policy, would ensure a competitive and productive economy and thereby, a reasonable minimum standard of living for all Sri Lankans,” it said.