Budget targets high growth - Report
The fiscal strategy outlined in the budget aims at phasing out the
budget deficit, containing operational expenditure within income and
maintaining public investment within 6 - 7% of the GDP, states a report
by Ford Rhodes Thornton and Company Ltd.
To reduce the budget deficit the budget proposes a broad based low
tax regime, improve quality of Government spending and productive
utilization of state assets. The proposed tax reforms are based on
interim proposals of the Presidential Commission on Taxation. It
proposes abolition of multiple taxes and a move to a simple, broad
based, low tax regime; reduction of tax rates on personal and corporate
income, reduction of taxes on banks & financial institutions; address
and manage the dichotomy between BOI & non BOI regimes and phasing out
ad hoc and unproductive tax concessions offered by the BOI & Inland
Revenue Act.
The main focus on public sector reforms proposed by the budget are;
modernization of strategic public sector enterprises, all state
enterprises to be self-sufficient, implementation of administrative
changes for simplification and improve efficiency and remuneration and
pension structure of the public sector.
The budget proposals said that a new incentive structure will be
presented by the next budget for the textile and garment industries to
be competitive and penetrate new markets.
The key growth sectors identified by the budget are; agriculture, IT
and BPO, ports and aviation, oil exploration and related services, gem
and jewellery, furniture, ceramics, tourism, livestock, construction,
value added exports of tea, rubber and cinnamon, professional services
and sanitary ware.
According to the trade policy outlined by the budget raw materials
and intermediate inputs should be available at duty free prices. It also
promotes import substitution and proposes high duty on importation of
goods that could be produced in Sri Lanka such as milk powder, wheat,
grain and sugar while enforcing new tax on exports on raw form.
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