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Sunday, 1 February 2015

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A people's Budget

A new era has dawned in Sri Lanka - the era of the common man. This fact was reflected through the interim budget presented to Parliament on Thursday by Finance Minister Ravi Karunanayake. It was a budget that went a long way towards fulfilling the aspirations of ordinary people - not only those who voted for President Maithripala Sirisena, but all Sri Lankans who wish to see equality and progress in their Motherland.

It was in stark contrast to the budgets previously presented by the then President and Finance Minister Mahinda Rajapaksa. Those budgets mostly pandered to the rich at the expense of the poor. Duty and tax exemptions were granted to casino moguls while tax burdens were heaped on the ordinary masses. Corruption was rampant, as evidenced by the large number of complaints made to the police and Bribery authorities in this regard. The public had to make up for the losses suffered due to wastage and corruption, through indirect taxes on essentials and other goods. Even fuel prices were reduced only marginally, whereas prices had plummeted drastically in the world market. The Cost of Living was unbearably high.

On the other hand, President Maithripala Sirisena's Maithri Manifesto promised to bring down the Cost of Living, as one of the immediate priorities for the new Government. Well before the mini budget presentation, it reduced fuel and kerosene prices by a considerable margin. This has had a cascading effect, with bus, three wheeler and school van fares due to come down from today. Goods transport has become cheaper, which should translate to cheaper foodstuff and other goods in the market. Fisherfolk are hopeful that they could pass on the benefit of cheaper fuel to their consumers soon.

As promised, the Government has substantially reduced the prices of 13 items including sugar, wheat flour, green gram, sprats, canned fish, milk powder and corriander by reducing customs duties and taxes on imported items. This is a commendable move that will resonate with a wide section of the society crushed by the COL burden. Kerosene was reduced even further, a far cry from the stance of the previous government which said that kerosene is no longer being used by households. LP Gas, which has replaced kerosene in many urban households, is also more affordable now following a Rs.300 price reduction.

Many people are not earning enough to make ends meet, even with a reduced COL in the offing. In this context, the Rs.10,000 salary hike to be given to Government servants is timely and we hope private sector companies will follow suit. Pensioners too have not been forgotten, with a Rs.1,000 rise announced in the budget. The poorest of the poor including Samurdhi beneficiaries will also benefit from the Budget, as will university students getting the Mahapola bursary, which was increased to Rs.5,000.

Agriculture is the heartbeat of the nation. President Maithripala who is closely knit to the farming community, knows this all too well and the maiden budget has given them due recognition. Hence the enhanced farmgate prices for rice, potatoes and fresh milk. While this may marginally increase their prices in the retail market, consumers are aware of the need to uplift the living standard of the farmer. Fifty percent of the agri loan amounts will be waived off and modern agricultural equipment will be provided at concessionary rates, which should boost the sector.

Critics of the Government have questioned as to how the Government could afford to fund these concessions. One simple answer is that a lot of funds will be made available by eliminating waste and corruption. For example, a staggering Rs.95,930 million was allocated for the office of the President for 2015 and the new Government has pruned it down drastically, to just Rs. 2,560 million. Stopping the Deyata Kirula exhibition alone has saved Rs.25 billion. Sri Lankan and Mihin airline will be merged to reduce losses.

Another Rs. 2.5 billion has been saved by reducing the number of ministries. A prohibition was also imposed on Ministries and state institutions from publishing promotional newspaper advertisements. Since eliminating corruption is a cornerstone of the new Government, it may be possible to grant even more relief in the future. After all, financial discipline and accountability are vital for good governance, an avowed principle of the new Government.

Another answer to the funding question is that the Budget seeks to tax rich companies and individuals, especially those who have not paid one red cent in taxes so far. Casinos, satellite TV providers and non tax-paying private sports channels will have to pay a Rs. 1,000 million one-off payment. Mobile and telecom companies too will have to make a Rs. 250 million one-off payment.

Any company of which the profit exceeds Rs. 2,000 million will have to pay taxes amounting to 25 percent off its profit. A mansion tax was also proposed, where owners of luxury mansions worth over Rs. 100 million will have to pay a separate annual tax. Such direct taxes targeted at the rich are more appropriate than indirect taxes such as VAT which affect everyone.

The Budget has also slashed duties on cars with an engine capacity of one litre or less. This will make smaller cars more affordable for families to buy their first car. The Government should explore the possibility of slashing duties on motorcycles, scooters and three wheelers, considered the poor man's vehicles.

There seems to be some confusion over the new taxes on hybrid vehicles - the authorities should clear the air soon, but we believe these duties should be reduced further to save on fuel and foreign exchange.

The Budget has not forgotten the education and healthcare sectors, whose development is vital for an emerging nation like ours. Budgetary allocations for both these vital sectors will be increased, with education gradually receiving up to six percent of GDP, a persistent demand by educationists and academics.

From a Rs.20,000 allowance for expectant mothers to a fund for kidney patients, the healthcare sector is likely to receive a shot in the arm. The Government aims to develop every school to the level of leading schools in Colombo and Kandy which will end the rat race for year one admissions. Dhamma school and preschool teachers will also benefit from the new budgetary proposals.

The mini Budget was not meant to fulfill the aspirations of everyone at this juncture. As stated, it is only a temporary set of relief measures and the people can expect even better tidings from the next full budget in November this year.

However, it will go down in history as one of the most people-friendly, progressive budgets ever presented in Parliament in recent times. It delivered most, if not all, of the measures that were eagerly awaited by the people.

The masses must take cognizance of the fact that the Government must also concentrate on aspects such as infrastructure, economic and social development, peace and reconciliation while striving to provide relief from the COL. This will no doubt be highlighted on the 67th Independence Day commemoration on February 4.

In retrospect, the people's victory on January 8, 2015 could be termed as a harbinger of freedom after nearly a decade of oppressive and tyrannical rule. With the Budget, the people have just begun tasting the fruits of that freedom.

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