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| Sunday, 11 December 2005 |
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Business |  |
| News Business Features Editorial
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Budget focuses on underdeveloped areas Budget 2006 has granted attractive incentives including tax holidays and tax concessions to industries investing in underdeveloped areas. Accordingly companies setting up new industries outside the Colombo and Gampaha districts investing not less than Rs. 30 million in plant, machinery or building and employing not less than 200 are granted a five to ten-year tax holiday depending on the amount invested. These concessions will be granted to industries investing during the two years from April 1, 2006. In addition the government will grant investment relief, VAT and customs duty exemption on the import of new machinery. Interest on any credit facility granted by lending institutions for such industries is also exempt from taxes. The same exemption is available for existing industries in Colombo or Gampaha if they relocate in other districts and relocation expenses are deductible for tax purposes. The objective of these concessions is to minimise regional differences in the economy reflected in several recent survey reports. Addressing the post budget seminar organised by the Inland Revenue Department and the Ministry of Finance, Secretary to the Treasury Dr. P.B. Jayasundera explained the thinking behind the policies in the new budget. Tax concessions granted to export sector agriculture and SMEs are targeting a growth in exports. Sri Lanka is a small country and the domestic market is not sufficient to go for higher growth. Government encourages backward integration of industries to increase the value addition of locally manufactured goods. Unless a conducive environment is created for farmers to cultivate for the export market FTAs are useless, Dr. Jayasundera said. The budget has also given incentives to professionals providing services to international markets. The tax rate for professional service provided to companies has been reduced to 15%. Dr.Jayasundera said that two international sovereign rating agencies have placed Sri Lanka at a reasonably better position. They have measured the risk in the country and said that the country is reasonably good for business. Dr. Jayasundera called upon people not to believe in rumours on the economy but to place trust in these independent assessments. The total government revenue in the 2006 budget is Rs.447,126 million and the total expenditure is Rs.671,517 million. The Budget deficit is Rs.194,391 million or 7.1% of the GDP. However, these figures exclude tsunami related expenditure and the budget deficit with post tsunami expenditure is 9% of the GDP. The targeted government revenue is 17.5% of the GDP. It was 16.4% in
2005. The targeted tax revenue is 15.9% of the GDP. It was 14.7% in 2005. On
the expenditure side, public investment has increased from 5% to 6.3%
compared with 2005.(GW) |
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