CCC commends fiscal consolidation in Budget

The Ceylon Chamber of Commerce (CCC) welcomes the commitment to continued fiscal consolidation in Budget 2015, particularly the projected lowering of the deficit to 4.6%, which is supportive of macroeconomic stability.

While there is a proposed 15% increase in government expenditure, given the decrease in demand in the market recently, a degree of fiscal stimulus can be accommodated without substantial over-heating of the economy.

However, the Chamber encourages the authorities to act quickly and decisively if there are signs of significant deviation from the government's targets for inflation and the current account of the balance of payments.

Given the proposed changes in VAT, NBT and PAYE taxes and the fact that nearly two-thirds of the proposed new revenue for 2015 has been estimated to come from the refinance facility for collection of tax arrears, meeting the proposed revenue targets may remain a challenge.

It is encouraging to note the gradual shift in the nature of tax incentives away from blanket, long-term tax holidays towards alternatives such as accelerated depreciation, tax holidays with defined time horizons, and tax concessions that are directly linked to the amount and type of new investments undertaken.

The Chamber welcomes the new initiatives to better link revenue and other state agencies and stronger integration of ICT in revenue collection. It also supports the proposal to have a one-stop-shop service center at the Customs, which will contribute to improved trade facilitation.

The measures will improve Sri Lanka's ease of doing business index, which is often more important than granting tax concessions. The Chamber acknowledges the positive measures which have already been undertaken to promote exports, including entering into Free Trade Agreements (FTAs).

However, realising the full potential not be possible without a concerted effort at improving Sri Lanka's export competitiveness. We cannot overstate the importance of encouraging export-oriented foreign direct investment (FDI) to Sri Lanka.

The reduction of electricity tariffs is welcome given that high energy prices are a key factor affecting competitiveness of Sri Lankan enterprises. The Chamber recommends the implementation of a transparent and market-reflective energy pricing mechanism, rather than ad-hoc adjustments.

We also recommend addressing the quality of electricity supply, particularly issues of power brown-outs and fluctuations and efficiently meeting the emerging needs of industries. The Chamber is encouraged by the increased attention to education contained in Budget 2015, and its emphasis on strengthening Sri Lanka's potential as a knowledge economy.

The Chamber welcomes the proposals, to invest a further Rs. 15 billion in school laboratories, to introduce a scheme of school-based teacher recruitment, to expand skill development and vocational training and to set up new faculties and degree programs in science, technology, management and multi-disciplinary studies across several universities in the country.

The Chamber observes that while many of the proposals on education are focussed on enhancing access and affordability, a stronger focus on improving the quality and relevance of education at all levels is a critical pre-requisite to increase productivity and competitiveness to achieve 'Vision 2020'.