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| Sunday, 20 November 2005 |
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Business |  |
| News Business Features Editorial
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Budget 2006 - healthy towards economic progress The Ceylon National Chamber of Industries (CNCI) representing the majority of the manufacturing sector consider the proposals in Budget 2006 as consistent with that of last year's budget. Overall, it appears to be healthy towards the economic progress of the country, provided the anticipated revenue generation is attainable to a greater degree if not fully. The budget appears to have taken the interest of the country at large. However, the budget deficit is a cause for concern as this may lead to higher inflationary trends. Power and Energy CNCI, which has been in the forefront focusing on the importance of low cost and dependable quality power, welcomes the incentives offered to develop renewable energy such as dendro and for rural electrification by promoting solar power. We feel that sufficient importance has not been given in the Budget Proposals for the Norochcholai Coal Plant. Highways/Road Network Whilst the CNCI acknowledges with appreciation the proposals made to improve financial assistance for the replacement of old buses by the private bus operators, we express our concern on the low emphasis on construction of highways and improvement of road network. "We urge the Government to focus attention on speedy completion of at least the Southern Highway and the Colombo/Katunayake Highway where the work is currently in progress.We do hope that other highways referred to by the Minister will be implemented early. Taxation CNCI views with concern the increase in corporate tax rate of non listed companies from 32.5% to 35% whereas the previous announced policy was to lower the corporate tax rate. We also express our concern on the additional tax burden such as increase of social responsibility levy (SRL) from 0.25% to 1%. Proposal to reduce the tax rate from 20% to 15% for those whose taxable profit is below Rs 5 million would benefit a large number of smaller enterprises and is welcomed by the Chamber. We also welcome the proposal to set off the Economic Service Charge (ESC) against any income tax payable. However especially with the threshold being lowered to Rs. 40 million we repeat our earlier concerns that the ESC charge continues to have an adverse effect on enterprises with low profitability and those facing temporary setbacks often referred to as sick industries. We do hope some relief will be considered for them at the time of the legislation. The proposal to make the VAT payment to be made monthly instead of quarterly for smaller enterprises would create cash flow difficulties and additional work for the smaller companies. At a time the private sector is making every effort to improve productivity having various types of government levies such as VAT, ESC, SRL, PAL CESS, and Stamp duty are considered a hindrance. Consolidation of these levies into one or two categories would be advisable. Cost of imports The proposed formula to ascertain VAT on the value of imports at an additional 7% of the CIF value against the present formula of 5% of CIF and the increase of the Port and Airport Development Levy from 1.5 % to 2.5 % would increase the cost of imports of the inputs and further strain on the cash flow of the enterprises. Apparel and Textile Sector We welcome the proposal to develop the Textiles Processing Zone and setting up of a college of Textiles and Clothing at Thulhiriya. It is encouraging to note that under opportunities in the EU -GSP + Scheme the textiles industry will be largely benefited. We also note with delight that the budget 2006 has endorsed to encourage backward integration to support the non traditional exports especially the apparel sector. CNCI also hails the proposal to remove customs duty on all printing paper, reduction of duties of raw material for packaging and the idea of a Packaging Development Centre. Proposals to include the packaging material as an intermediate product and to extend the deferment of the VAT for the indirect exports together with facilities to import their raw materials too under deferred VAT are most welcome. These will enhance the competitiveness of the local packaging industry. Rubber sector In this sector we wish to lodge our dissatisfaction on reduction of duty on three-wheeler vehicle tyres as these tyres are locally produced to required standards. Food sector CNCI welcomes the series of incentives offered through budget 2006 widely in this sector. Though the Private Sector may encounter certain difficulties consequent to an increase of public sector employee's minimum salary to Rs. 11,670 CNCI welcomes the proposed increase provided it is accompanied with comparative increases in the productivity and efficiency of the public sector. If not it will not only adversely retard the productivity and progress of the private sector but will also reduce the standard of living of the private sector employees and increase the numbers living below the poverty line in the country. The Chamber welcomes the proposal to limit the subsidy on fuel. We consider this an essential prerequisite for national development. |
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