COLOMBO (EconomyNext) – Sri Lanka should withdraw a budget proposal ordering telecom firms to absorb a 25 percent tax which makes no difference to state revenues, but gives body blow to the finances and future investments of the sector, a top regional expert has said.
"The proposal that the mobile operators should pay the 25 percent tax on voice calls currently paid by mobile users should be withdrawn," Rohan Samarajiva, head of LirneAsia, a regional policy research body said.
"It makes no difference to the government’s revenue requirements."
Samarajiva is a top expert in infrastructure policy and as Sri Lanka’s telecom regulator in the 1990s was responsible transforming the sector into a high growth area that made it a model for the world.
He said the taxes would be hit retrospectively taking away about 32 billion rupees from the revenues of five operators.
Retrospective taxes undermine freedoms of the people and are in the same class as expropriation, he said.
While the state engages in budgeting to plan its finances, retrospective taxes upsets the budget of private firms he said.
Samarajiva said Sri Lanka already had one of the lowest tariffs for mobile firms in the world, along with Bangladesh.
"There is no complaint from the public about high mobile prices," he pointed out. "It is an unnecessary solution to a non-existent problem."
Samarajiva said the loss of 32 billion to the sector comes at a time when funds were needed for capital expenditure, to boost data and broadband services to the island.
Sri Lanka’s stock market dived after the so-called interim budget on January 29, which raised salaries of state workers and hit large firms employing tens of thousands of private sector workers with a 25 percent one-off tax, which was also retrospective.