A commendable Budget

by the Business Desk

While commending the micro economic policies to develop small and medium sector enterprises, SMEs and industries, the backbone of the economy, a section of the business community expressed reservations on the move to liberalize the lubricant market to encourage more players which could affect industry.

Vice President, International Institute of Small and Medium Enterprises, Nawaz Rajabdeen said the move proposed in the budget to develop the small and medium sector enterprises, the backbone of the economy is a step in the right direction and will help boost the SME sector.

Managing Director and CEO, Chevron Lanka PLC, Kishu Gomes said the 2016 Budget offers a comprehensive coverage of all economic activities. Setting up of industrial parks/zones in many regional markets will help mobilize rural innovation and production.

Licences to import gold Duty-free will help develop the jewellery industry. Permission to import tea and coconut will have its own negative effects and benefits. Lifting the ban of leasing land to foreigners will be welcomed by foreign investors. All governments have neglected the SME sector which makes a salient contribution to the economy.

They have provided incentives to large scale companies. The incentives provided to SMEs will help revive and restructure many ailing SME industries and contribute to economic growth, he said.

The new budget which plans to boost revenue by increasing taxes and borrowing from domestic and international sources came under severe criticism from the public.

American Chamber of Commerce President Asanka Ratnayake said, “We welcome the many positive changes introduced to increase trade and investment by the 2016 Budget.

The proposed state-of-the-art industrial parks and the setting up of the ‘second home’ concept by relaxing regulations on foreign equity have been brought in and that which could be borrowed within will encourage foreign investments.

The establishment of a payment security plan and the tax concessions for foreign contractors who would work with local partners and the setting up of a national digital identity platform, will further encourage them by providing business security.

The training of skills for local work force in tourism through private schools (which would receive tax concessions for their services), the mandatory registration of all the hotels in the island and removal of import duties on caravans, surfing and out door adventure equipment will enhance the service provided and increase the foreign clientele.

The construction of a MICE triangle by PPP and the revision of import tax on goods such as garments will help SL enhance its competitiveness in the region.

The proposal of enhancing the cultural, environmental and medial tourism industries and the its management by companies will uphold an international standard while the allocation ofSstate land and the half tax holidays will encourage foreigners to invest in these three prominent sectors.

The establishment of the ‘Colombo International Financial Centre’, the special ‘commercial court’, the call to criminalize ‘returned cheques’, suggestion to monitor repatriation of monies by the Central Bank while encouraging the public to carry bank drafts than monies while also getting all the employers to open up separate bank accounts for their employees and the government and setting up of a private CRI|B for insurance are all aspects we see as a positive step towards increasing trade and investment in Sri Lanka.

A. K. Perera said politicians who lead a luxurious life and waste public funds on tamashas and overseas tours on public money should be taxed first. He said public servants and professions such as doctors and lawyers should be taxed.

A trishaw driver in Pettah, Saman Rajasinhe said all wholesale and big businessmen in Pettah should be taxed. He said it is the low income earner who has to pay for what he purchases and he feels the pinch more than the affluent class.

The new government must learn from politicians in the West who lead a simple life and at retirement as they are left only with the pension. Our politicians amass wealth within a few years in office through corrupt deals and their money is stashed in overseas bank accounts.

Chairman, SSI Shoe Company, Sarath Perera, a medium scale entrepreneur, said, “The fifty percent tax relief granted to finance companies which provide loans to small scale and medium scale entrepreneurs will help develop the economy following the increased inflow of foreign exchange as a result of accelerated exports. This is a good Budget proposal.”

A farm owner of Badulla and businessman of agricultural implements in Nugegoda, Nisantha Mahage said, “The Budget has provided tax relief for the import of agricultural implements. Tax relief will be extended to recultivate abandoned cultivable lands.

“Modern storage facilities would be made available for large scale farmlands. Steps have been taken to permit farmers to obtain loans by producing the receipts issued for paddy sales to the government.Adequate relief has also been provided to paddy farmers and milk farmers. The Budget is, therefore, commendable.”

A small retail shop owner in Galle said, “The Budget is unfair because the people are finding it difficult to make ends meet, only the rich have been given benefits to become more rich while the poor have to suffer. After getting our vote is this how the government treats us?”

A three-wheel mechanic, Udith Danushka of Matara said, “This Budget seems to be useless and it has not considered providing any relief to the masses. The prices of essential items have increased and we are not in a position to live with our income.”

A lecturer at the University of Colombo said, “People expected more from the yahapalana Government’s first Budget. The Budget was no different to previous Budgets. He compared it to a wood-apple consumed by an elephant because there was no relief for the poor.”

Consumers called for price reduction of 10 essential items from the Budget to relieve the burden of the soaring cost of living aggravated by the adverse weather. Prices of vegetables have skyrocketed due to the destruction of crops.The government’s estimated expenditure for 2016 is Rs. 1,941 billion of which Rs.1,314 billion will be recurrent expenditure and Rs. 625 billion capital expenditure. The estimated revenue at the rate structure and foreign grants is Rs. 1,789 billion.

A commendable feature of the 2016 Budget is the four-fold increase in the allocation for education to six percent of the GDP from Rs. 47.6 billion in the previous year to over Rs. 185.9 billion. The allocation for the health sector has been increased to three percent of the GDP from 1.7 percent.

Another outstanding feature of the Budget is the slashing of the expenditure for the President’s office compared to the previous regimes expenditure which was staggeringly high. The allocation for the President’s office is Rs. 2.3 billion, down from Rs. 9.6 billion allocated in the 2015 Budget.

The allocation for defence for 2016 is Rs. 306 billion of which Rs. 257 billion is for recurrent expenditure and Rs. 48 billion for capital expenditure.

Allocations for other major sectors are:

Ministry of Local Government and Provincial Councils - Rs. 237 billion, University Education and Highways - Rs.171billion, Public Administration and Management - Rs. 156 billion, Finance and Planning - Rs. 107 billion and Health, Nutrition and Indigenous Medicine - Rs. 174 billion.

The 2016 Budget has taken a radical shift in the tax policy with change of the direct and indirect tax ratio to 60:40 from the 80:20 ratio. The farmer subsidy of Rs. 350 per 50 kg bag of fertilizer is replaced with a cash voucher to purchase fertilizer from the market.

The Budget proposes to set up a committee to develop the SME sector policy for micro, small and medium entrepreneurs to cover all issues, Regulate the sector, Rs. 500 million rupee initial fund to protect micro, small and medium scale sector, Micro, small and medium entrepreneurs to get 50 percent discount on income tax from April 2016, Selected lenders will finance micro, small and medium entrepreneurs without collateral.

It proposes to make available venture capital for start-ups. Incubators to be set up in mini industrial parks across the country and private sector companies invited to operate in them. A tax reduction of 50 percent for three years to be granted.

Move to convert agriculture to agribusiness with Rs. 1,000 mn allocated for a program to convert underutilized State lands to agricultural lands. Companies that promote greenhouse technology and drip irrigation to be provided 50 percent tax reduction to encourage the production of high yielding seeds.

The maximum retail price of a 400g packet of local milk - reduced from Rs. 325 to Rs. 295, Subsidy of Rs. 30 to producers of 400g milk packets. Rs. 1,000 million to be used for the project.“Fish worth US $ 150 million is exported annually. To encourage the local industry I propose, a life insurance policy of Rs. 1 million for fishermen. We will encourage tin fish production. Accordingly Rs. 300 million concession to be given to Lak Sathosa to sell tin fish at Rs. 125.

Tea - Sri Lanka has less value-added tea in the market. More value added tea based products are encouraged. An active Committee would be set up to look over the tea industry. Measures taken to move towards being a tea blending country.“To protect the ‘Ceylon Tea’ brand I propose to look into labeling strictly. A two-year tax exemption for tea and rubber growers, new economic zone in Vavniya to be setup, Rs. 750 million allocated for the development of Chilaw, Mirissa, Kalmunai, Karainagar, Poornawella harbours and 50 permits to be provided through the Central Bank to import gold.

The 70th and the maiden Budget of the new government was presented in Parliament on November 20 by the Finance Minister Ravi Karunanayake.