ECONOMYNEXT – Sri Lanka’s budget for next year will be "revolutionary" while narrowing the deficit through new revenue measures, including the introduction of the much talked about capital gains tax on property, officials said.
Finance Minister Ravi Karunanayake told reporters last week that he intended to unveil what he called a revolutionary budget on Thursday reducing the deficit to 4.7 percent of GDP, down from 5.4 percent in calendar 2016.
"It is going to be a revolutionary budget," Karunanayake said at a dinner he hosted Thursday for reporters and owners of media institutions. "There will be capital gains on property, but not on share transactions."
"There are some people who have made huge capital gains on property and they must contribute part of that to the state," the minister said adding that any gains made within 10 years of purchase will be liable.
He did not give details of the plan, but said stock market transactions will be exempt.
Prime Minister Ranil Wickremesinghe had called for capital gains tax in June after the government failed to implement it in the 2016 budget (presented last year) following opposition from lobby groups.
The restoration of capital gains tax had been an essential component of the government’s negotiations with the International Monetary Fund to secure a 1.5 billion dollar bail out in June.
Finance ministry sources said there will be no tax holidays offered in the 2017 budget, but there could be tax incentives for investments.
The government is likely to make adjustments to the vehicle tax system to make small and medium size vehicles more affordable, but road and emission taxes could be increased.
"The idea is to make vehicle ownership affordable, but usage will cost more," a finance ministry source said adding that fines for traffic offences could also be increased sharply in an effort to improve road discipline.
It is argued that the fines that have been decided decades ago did not have a deterrent effect on errant motorists and sharper increases were needed in the face of more than 2,500 road fatalities annually.
The finance ministry said it received over 2,200 public proposals to be considered in the 2017 budget.
Minister Karunanayake visited the provinces to meet with people and discuss their expectations.
He also commissioned academics to survey 332 divisional secretary divisions in the country to get a feedback from the people on their expectations. (COLOMBO, Nov 5, 2016)