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Sunday December 10th, 2023

Sri Lanka quarterly income tax payments rebounds to exceed 2019 level: Treasury Secy

ECONOMYNEXT – Sri Lanka’s quarterly income tax filed for the 2020 last final quarter had exceeded the 2019 number, despite lower rates showing that economic activity was starting to pick-up and some tax payers had also opened new files, Treasury Secretary S R Attygalle said.

Corporate and personal income taxes collected in February 2020, relating to incomes earned in the fourth quarter of 2019 had been 61 billion rupees.

But income taxes paid in February 2021, relating to the earnings of the December 2020 quarter had risen to 65 billion rupees, he said.

The 2019 final quarter was a ‘normal’ period before Coronavirus hit the economy whereas the 2020 December quarter was during the Covid-19 second wave he said.


In 2019 corporate was 28 percent, which had been reduced to 24 percent in some cases, and in manufacturing to 18 percent from 28 percent.

“Profits and turnover had both grown in 2020 last quarter,” Attygalle told reporters. “Now rates are lower, there was the Covid second wave, so it shows that there is some growth in the economy.”

He said the number of tax files had also increased. He believed at least 3,000 new files had been opened.

“I think when the rates are brought down, people are also encouraged to pay tax,” Attygalle said. “Compliance is improving, that is also what we want.

“If you increase rates people try to avoid paying. In this case there is an increase. I hope that will continue.”

Sri Lanka cut taxes in 2019 hoping for a ‘fiscal stimulus’ following an output and consumption coming from a currency crisis in 2018 from a so-called ‘flexible’ inflation targeting and a ‘flexible’ exchange rate involving unusually discretionary monetary policy.

The currency crisis had been triggered in the wake of an attempted monetary stimulus to target an output gap, despite the central bank law requiring it to maintain “price and economic stability”.


Sri Lanka’s last International Monetary Fund program went on an unusual direction in a socialist or statist track involving so-called ‘revenue based fiscal consolidation’ or bringing the deficit down by taking the tax take (revenue to GDP) to some arbitrary number, and putting the entire burden on the private sector instead of also cutting state spending.

Under the Robinhood ‘revenue based fiscal consolidation’ revenue to GDP was raised from 11.6 percent in 2014 from to 13.8 percent by 2017 in a radical departure from the classical economic concept of limited government and state spending was raised from 17.3 percent to 19.3 percent transferring large volumes of money to state workers.

Meanwhile the GDP was also revised upwards raising more questions about the arbitrary plucking of a socialist or ‘Robinhood’ revenue to GDP number as the ultimate fiscal target instead of the deficit.

In another blatantly socialist-New Dealer style move, personal income tax which was previously capped at a proportionate 16 percent was made steeply progressive.

A large number of withholding taxes were also slammed including ‘nuisance taxes’ on royalties of artistes who worked as independent entrepreneurs, who then returned the compliment at the ballot box, while raising the salaries of state workers, who did not.

New Dealer State Expansion

New Dealers raised the US marginal income tax rate and a series of wealth tax though several laws (Revenue Act of 1935 and Revenue Act of 1936 also known as the Wealth Tax Act), prolonging the depression, eventually taking the higher tax bracket to 91 percent, critics say.

The New Dealers, Keynesians who believe in so-called ‘price effects’ also depreciated the US dollar from 22 to 35 dollars an ounce, barred the citizenry from holding gold to protect themselves in a surge of authoritarianism and delivered a series of interventionist shocks including a ‘100-day program’.

Meanwhile Sri Lanka’s last IMF program also gave the central bank free reign to print money, giving an inflation ceiling as high as 8 percent, and removing any external anchor restraint with a ‘flexible exchange rate’, triggering a currency collapse as soon as the economy and credit system started to recover in 2018.

Analysts have warned that under the current ‘Modern Monetary Theory’ of printing unprecedented volumes of money, any recovery of the economy and stronger loan demand would tip the credit system further over the edge exacerbating reserve losses and currency pressure.

The targeting of fuel prices by cutting taxes and filling losses at energy utilities or foregone state revenues with new credit would also worsen the trend, analysts say.

The last IMF program also raised value added tax which brings steady revenues and also captures spending of any undeclared money or earnings that has evaded taxes, and does not destroy employment generating investible capital unlike direct tax.

As part of tax changes in December 2019, VAT rates were also brought down along with direct taxes, hurting the budget and raising pressure on borrowings and interest rates and ultimately currency pressure and forex losses when rates are controlled with printed money.


Sri Lanka domestic borrowings exceed deficit, repays Rs352bn to foreign lenders by Oct 2020

Sri Lanka prints 505 billion rupees in 2020, bank borrowings top 11-pct of GDP

There has been record domestic borrowing from the banking system, backed by printing money amid a loss of external confidence after ‘flexible’ exchange rates in 2020. (Colombo/Mar02/2021)


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  1. Citize Kane says:

    Tax on interest, dividend and part of service fees was not paid directly by the taxpayer in the 3rd quarter of 2019/20 but collected at source. In the 4th quarter, it is paid directly as a personal income tax. The difference in value is this. Is the Secretary to the Treasury a fool or a knave?

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  1. Citize Kane says:

    Tax on interest, dividend and part of service fees was not paid directly by the taxpayer in the 3rd quarter of 2019/20 but collected at source. In the 4th quarter, it is paid directly as a personal income tax. The difference in value is this. Is the Secretary to the Treasury a fool or a knave?

ADB USD200mn loan for Sri Lanka economic stabilization efforts

ECONOMYNEXT – The Asian Development Bank (ADB) has approved a US 200 million dollar concessional loan to Sri Lanka to help stabilize the country’s finance sector.

The Financial Sector Stability and Reforms Program comprises two subprograms of IS 200 million dollars each, according to a statement by the ADB.

“The program’s overarching development objective is fully aligned with the country’s strategy of maintaining finance sector stability, while ensuring that banks are well-positioned for eventual recovery,” ADB Country Director for Sri Lanka Takafumi Kadono was quoted as saying in the statement.

“The expected development outcome is a stable financial system providing access to affordable finance for businesses in various sectors of the economy.”

The ADB statement continues:

“Subprogram 1 targets short-term stabilization and crisis management measures that were implemented in 2023, while subprogram 2 is planned to be implemented in 2024 and focuses on structural reforms and long-term actions to restore growth in the banking sector.

The program will help strengthen the stability and governance of the country’s banking sector; improve the banking sector’s asset quality; and deepen sustainable and inclusive finance, particularly for women-led micro, small, and medium-sized enterprises.

According to the International Monetary Fund’s (IMF) latest review, Sri Lanka’s economy is showing tentative signs of stabilization, although a full economic recovery is not yet assured.

The program is a follow-on assistance from ADB’s crisis response under the special policy-based loan that was approved for Sri Lanka in May 2023.

It is aligned with the fourth pillar of the IMF’s Extended Fund Facility provided to Sri Lanka to help the country regain financial stability.

It is also in line with the government’s reform agenda, including strengthening the operational independence of the Central Bank of Sri Lanka (CBSL) and its designation as the country’s macroprudential authority.

In designing this subprogram 1 loan, ADB has maintained close coordination and collaboration with the IMF to design targeted regulatory reforms for the banking sector—including the asset quality review—and with the World Bank on strengthening the deposit insurance scheme.

“The loan is accompanied by a $1 million grant from ADB’s Technical Assistance Special Fund to provide advisory, knowledge, and institutional capacity building for Sri Lanka’s Ministry of Finance and CBSL.”

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Sri Lank in blackout as power grid hit by cascading failure

ECONOMYNEXT – Sri Lanka suffered a blackout as Saturday evening as the state-run Ceylon Electricity Board grid was hit by a cascading power failure.

The cascading failure is believed to have been triggered by the failure of the Kothmale-Biyagama transmission line.

“The Ceylon Electricity Board wishes to inform our customers that due to the failure of Kotmale – Biyagama main transmission line, an island wide power failure has occurred,” CEB Spokesman Noel Priyantha said.

“Step by step restorations are underway and it may take few hours to completely restore the power supply.”

With hydro plants running flat out, a outage of the line tends to create a big imbalance in the demand and supply, leading to tripping of more lines and generators.

Lines can trip due to lightening strikes, or equipment failures.

Sri Lanka last suffered a cascading failure in December 2021, due to the failure of the same transmission line.

RelatedSri Lanka power blackout as grid hit by cascading failure

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Sri Lanka to host regional Food and Agriculture Organization conference

ECONOMYNEXT – Sri Lanka will host the 37th session of the Asia Pacific Regional Conference (APRC) of the United Nations Food and Agriculture Organization (FAO), from February 19-22, 2024 in Colombo.

The Conference will bring together agriculture ministers and officials from 46 countries across the region to discuss challenges in food and agriculture.

“The 37th APRC will provide a vital platform for regional collaboration, benefitting the agricultural landscape, fisheries sector and environment of Sri Lanka,” Minister Mahinda Amaraweera said at a press briefing on Friday (8) to announce the conference.

FAO has had an active presence in Sri Lanka for over 40 years. “FAO has supported the country in the implementation of Good Agricultural Practices (GAP), and the development of the fisheries sector for growth and climate resilience,” Vimlendra Sharan, FAO Representative for Sri Lanka and the Maldives said.

“The APRC conference will be an opportunity to highlight the innovative approaches introduced in partnership with the government.”

By hosting APRC, Sri Lanka hopes to demonstrate the country’s dedication to the growth of sustainable agriculture, and showcase its commitment to sustainable agricultural development.

The APRC agenda will include a forum on agritourism, especially requested by the Sri Lankan government.

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