Sri Lanka delays tax and debt collections, state to intervene in financial markets

COOPERATION – President Gotabaya Rajapaksa wants Sri Lankans to come together

ECONOMYNEXT- Sri Lankan President Gotabaya Rajapaksa in a statement said host of new relief measures to combat the COVID-19 coronavirus pandemic have been implemented, including delays to tax collection, a new debt moratorium and interventions in money markets.

On Monday evening, President Rajapaksa directed the central bank, ministry secretaries, provincial councils and financial institutions to carry out the relief measures with immediate effect, amid the number of positively tested coronavirus patients rising to 97.

The deadline for collection of income tax, value added tax, driving license fees, water bills and assessment tax of less than 15,000 rupees has been extended till April 30, an official statement said.

Collection of credit card bills under 50,000 rupees have also be delayed till end-April. Sri Lanka is currently under island wide curfew.

Meanwhile, state-owned Bank of Ceylon, People’s Bank and National Savings Bank, the Sri Lanka Insurance Corporation, and the superannuating Employees’ Provident Fund and the Employees’ Trust Fund, will intervene in the government securities market.

The state institutions and public funds will be used to invest in Treasury Bonds and Bills and stabilise the money market rate at 7 percent.

In addition, a six month debt moratorium has been be granted to the tourism, apparel and SME (small and medium-sized enterprise) businesses, with the moratorium costs borne by the central bank.

The tourism industry is at a standstill amid the government stopping all arrivals to contain the spread of the virus, while the apparel sector, Sri Lanka’s largest exporter, is hit by disruptions to global value chains.

The new suspension in loan collections comes amid the President halting the collection of working capital loans and asking banks to provide new working capital loans at 4 percent.

Further, a 12-month SME sector moratorium which was planned at end-2019 to help stimulate the economy was about to launch at end-March.

Meanwhile, President Rajapaksa on Monday also suspended the collection of lease payments for three wheelers for six months.

Recovery of loans from salaries of government and private sector employees has been suspended till May 30.

The president directed banks and finance companies to suspend collection of personal loans below one million rupees for three months.

The full list of new relief measures follows:

1. A grace period for the payment of income tax and VAT, driving licence renewal fee, water bills and assessment tax less than Rs. 15,000, monthly credit card bills less than Rs. 50,000, be extended until April 30th.

2. Suspend the leasing loan repayment of three wheeler owners for a period of six months.

3. Suspend the recovery of loans from the salaries of government employees, private sector employees until May 30th.

4. Suspension of loan repayments for personal loans less than one million borrowed from banks and finance companies for three months.

5. The Rs. 20,000 allowance for the graduates chosen to follow the training programme will be credited to their bank accounts.

6.The Agrahara insurance benefits for health workers engaged in Corona prevention activities, Police, Civil Security personnel and other government employees to be doubled.

7. A six month debt moratorium will be granted to the tourism, apparel and SME for which the Central Bank will bear the cost of the moratorium.

8. When the Bank of Ceylon, People’s Bank, National Savings Bank, Sri Lanka Insurance Corporation, Employees Provident Fund and Employees Trust Fund jointly invest in Treasury Bonds and Bills, thereby stabilizing the money market at 7% interest rate.

9. A maximum of 15% interest rate has been stipulated for credit card domestic transactions up to Rs. 50,000 and a 50% reduction in minimum monthly charges.

10. All bank branches to remain open during non-curfew hours providing maximum service to customers.

11. Sri Lanka Ports, Customs and other regulatory bodies must continually issue essential food, fertilizer, pharmaceuticals and fuel to the relevant individuals continuously.

12. Samurdhi beneficiaries and Samurdhi card holders to be offered an interest free advance of Rs. 10,000 through all Samurdhi Banks.

13. Exempting Lanka Sathosa and Cooperative stores from VAT and other taxes.

14. Samurdhi Authority should issue title certificates to Samurdhi and low income families immediately for issuing nutritious food items to low income persons. They should be provided with rice, dhal and salt on a weekly basis with their food cards.

15. In the face of the current Covid-19 threat, the Bank of Ceylon has opened a special account at the Presidential Fund to provide relief to health and social care. 100 million [rupees] has been allocated from the Presidential Fund for this purpose. Tax and foreign exchange control restrictions have been lifted for all local and foreign donors who contribute. Sri Lankan Government donated $ 05 million to the SAARC Corona Fund.The President has instructed his Secretary to immediately implement these directives. (Colombo/Mar24/2020)

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