ECONOMYNEXT – Sri Lanka will boost capital spending and tax revenues with non-tax income also raised by exiting non-core businesses, Finance Minister Ravi Karunanayake said.
The budget is aiming to raise taxes in areas which has not been looked at before without placing a greater burden on the broader public he told the Foreign Correspondents Association in Colombo.
The government was also planning to increase non-tax revenues by selling down stakes in non-core areas, he said.
Karunanayake said the budget in 2016 aims to increase revenues over recurrent spending, generating a revenue surplus.
Though many budgets including the revised 2015 budget aimed for a revenue surplus, Sri Lanka has not been able to record a revenue surplus since 1987, due to excessive spending with a bloated public sector.
In 2015, the budget deficit is likely to be in the region of 6.9 percent of gross domestic product, he said. The deficit rose partly due to projects contracted for by the last administration, which the new administration discovered later, he said.
Karunanayake said capital gains taxes on share transactions may be negative but did not elaborate on specific tax proposals.
There have been fears that Sri Lanka may regress into a turnover taxes. During the Rajapaksa administration, the value added tax regime was systematically undermined.
When Sri Lanka originally moved from turnover taxes to VAT, a revenue neutral rate was determined at 17.5 percent, but the actual rates charged are only 10 to 12 percent. In many countries there is a simple 20 percent tax with few exemptions as possible. (Colombo/No12/2015)