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Sunday December 3rd, 2023

Sri Lanka tax agency gets 198,253 new payers, 16mn more targets found

SALARY BILL: The salary bill has fallen to levels seen before ‘heedless spending’ allowed under revenue based fiscal consolidation began.

ECONOMYNEXT – Sri Lanka’s Inland Revenue Department has found 16 million potential tax payers among citizens agove 18 years of age and 198,253 new tax payers have registered in 2023, a parliamentary panel was told.

About 13,000 firms had registered to pay value added tax, the Committee on Public Accounts (COPA) was told.

The Inland Revenue Department was trying to use technology (RAMIS) to track large numbers of people and collect tax.

However there were still problems with the RAMIS revenue management system, IRD officials had told the parliament panel.

Sri Lanka introduced a new law to make it compulsory to register for tax, after spending zoomed under revenue based fiscal consolidation since 2015 and money was printed wantonly to boost growth under potential output targeting driving the country into default.

Under ‘revenue based fiscal consolidation’ from end 2014 to 2019, where cost-cutting (spending based consolidation) was abandoned current spending went up 74 percent to 2,301 billion rupees while tax revenue went up 65 percent to 1734 billion rupees.

From December 2014 to November 2019 tax revenues went up 65 percent to 1,612 billion rupees and recurrent spending went up 55 percent to 2,053 billion rupees, before taxes were cut in December to target ‘potential output’.

The salary and pension bill of state workers rose 123 percent to 1.26 trillion from 2014 to 2022.

Private citizens have to pay more taxes to support the public service, or face another default and money is borrowed.

By September 2023, the salary and pension bill was still about half of every tax rupee collected.

Related Sri Lanka income taxes up 291-pct to Sept 2023, PAYE up 497-pct

Sri Lanka is now collecting income tax from everyone who earns more that 10 dollars a day, after the revenue based fiscal consolidation and potential output targeting debacles drove the country to external sovereign default, in the wake of serial currency crises and stabilization programs which reduced growth and pushed up debt.

Unlike value added tax, where the state and rulers gets to collect money after a free citizen engages in a growth generating transaction by their own choice, income tax allows the coercive state to appropriate money before a transaction is made by the person who earned the cash.

As a result high income tax rates and the low tax free threshold (about 300 dollars a month) on top of VAT and import duties has been blamed for brain drain.

Though income taxes and other capital consumption taxes like wealth tax kills future growth and jobs by destroying investible capital, they have the advantage of being designed to hurt, and makes tax payers feel the weight the the state and the ruling class more than a painless value added tax would.

VAT which is taken in small quantities everyday, on the other hand conforms to the South Asian tax principle articulated by Chanakya of charging taxes like a bee taking honey from a flower without causing pain to the subject or making them leave the country. (Colombo/Nov18/2023)

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Sri Lanka UGC wants to boost number of IT-related degrees

ECONOMYNEXT – Sri Lanka’s University Grants Commission is of the view to boost the number of Information Technology (IT) related degrees in state universities with an aim to pave the way for a digital economy.

Sri Lanka’shigher education system has been producing more graduates in Arts stream while the degrees in highly demanded IT and other engineering services are being looked at only now.

“We do have a high demand for engineering, science, AI, computer and electronical engineering

studies,” Chairman of University Grants Commission, Sampath Amaratunga, told reporters at aa media briefing on Friday

“However, while avoiding neglecting the humanities, we should develop new IT skills.”

Amaratunga confirmed that a student who studied in any stream could obtain an IT degree, including students who studied in the arts stream.

The UGC data show that out of 18,490 engineering technology stream students who sat for their Advanced Levels (A/L) in 2022, 10634 were eligible for university.

“Even streams like agriculture should be encouraged to use technology,” Amaratunga said. (Colombo/Dec 2/2023)

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Sri Lanka leader inaugurates Climate Justice Forum at COP28 in Dubai

ECONOMYNEXT – Sri Lanka President Ranil Wickremesinghe launched Climate Justice Forum (CJF) at the ongoing 2023 United Nations Climate Change Conference (COP28) held in Dubai in a move to gather support for vulnerable nations hit by climate-change led disasters.

This year’s climate summit held in Dubai’s EXPO2020 features a raft of issues for countries working to find common ground in tackling climate change, including whether to phase out fossil fuels and how to finance the energy transition in developing countries.

Wickremesinghe inaugurated the Climate Justice Forum at COP28 on Saturday and emphasized the critical importance of addressing climate issues with a sense of justice and equity.

The President had been in talks with many nations vulnerable to climate change disasters including African and South American countries to get their support for the CJF.

The move is to compel advanced and developed countries to look into the poor nations hit by the climate changes and help them to get over economic and debt burdens by either investing more in green energy initiatives or writing off debts to ease financial pressure.

Sri Lanka, which is now facing an unprecedented economic crisis, has seen increasing losses and damages, both human lives and physical properties due to climate change-led disasters like floods, drought, and earth slips.

In his speech at the COP28 forum, Wickremesinghe on Friday said the Climate Justice Forum will provide a platform for constructive and proactive engagements. (Dubai/Dec 2/2023)

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Sri Lanka IMF review goes to executive board on December 12

ECONOMYNEXT – The first review of Sri Lanka’s International Monetary Fund program is scheduled to go the lender’s Executive Board for consideration on December 12.

Sri Lanka officials were expecting the review to be completed in December as soon as official creditors gave their assurances.

According to the notice Sri Lanka had missed one performance criterion and has requested modifications.

Sri Lanka has outperformed on a number of quantity targets including inflation. In addition to quantity PCs there was also one non-accumulation of arrears.

There would also be re-phasing of access. The review was originally expected around September with another review based on December data, leading to September and March disbursements.

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