Sri Lanka ‘senior citizen’ interest subsidies Rs22bn in arrears: report
ECONOMYNEXT – Sri Lanka’s finance ministry is in arrears of 22.92 billion rupees for interest subsidies owed on so-called senior citizens deposits in 2016, 2017 and the first quarter of 2018, a media report said.
Sri Lanka had a scheme under the Rajapaksa regime where up to 12 percent interest was given as a top-up for senior citizens for one year fixed deposits.
But in 2015, then Finance Minister Ravi Karunanayake raised it to 15 percent for one million rupees, widening the gap between market rate and the floor rate, encouraging more people to go for the scheme.
The high rate made children place their own deposits in their parent’s name, if they were above 60 years of age.
In 2017, the qualifying deposit been raised further to 1.5 million rupees.
In 2015, the Treasury had settled the full amount to 3.361 billion rupees. In 2016, only 6,156 million rupees out of 14,518 million rupees of interest top ups had been settled, the newspaper reported saying the data was released under the right to information act.
In 2017, the subsidy was 13.462 billion rupees but none of it had been paid. In the first quarter of this year 3.304 billion rupees was incurred, but none of it had been paid.
Fixed deposit interest now attracts a tax under a new income tax law.
Sri Lanka’s new administration went on a so-called ‘revenue based fiscal consolidation’, laboring under a belief that there was a vast amount uncollected tax to be collected, instead of cutting state spending and reducing the tax burden on the people.
Interest subsidies have also been announced for a number of credit schemes under a Enterprise Sri Lanka brand, if loans are taken for investment. (Colombo/Sept09/2018)