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Sunday December 3rd, 2023

Sri Lanka to bring 87 items to value added tax

ECONOMYNEXT – Sri Lanka will bring 87 items now exempted from value added tax in to law from December 2023, with the rate also to be hiked to 18 percent to help pay higher wages to state workers.

“…[A] policy decision was taken to remove VAT exemptions for 87 out of the 137 exempted items to enhance revenue mobilization from VAT and to increase the efficiency of VAT, which is to be effective from December 2023,” a Finance Ministry report said.

Up to September 2023 Sri Lanka had collected 505 billion rupees in value added tax, up 62.6 percent from 310 billion rupees.

In 2022 Sri Lanka hiked the VAT rate from 8 to 12 percent and later to 15 percent.

The VAT registration threshold was reduced to 80 million rupees per year from 300 million rupees.

Unlike value added tax, where the coercive state takes money from citizens before growth generating investments or consumption takes place, VAT is taken after a gainful economic choice is made by a free people and given to the elected ruling class of bureaucrats to spend.

Regardless of where the money comes from, whether from white or black economy, the state gets taxes when the money is spent.

It is the practice to exempt basic foods, health and education from VAT.

Some analysts have called for 20 percent VAT, by folding the current cascading social security levy into the value added system, and charging 15 or 20 percent income tax.

If VAT is charged on electricity and fuel (after reducing excise taxes from and giving excise tax free fuel for power generation) Sri Lanka’s export competitiveness would also be improved.

It will allow price discrimination in power to end to some extent, analysts say.

At 20 percent VAT and 20 percent income the state will take about 40 percent of the earning of a private citizen.

From next year state worker salaries would be raised by 10,000 rupees a month. The public service expanded from around 2004 after the Janatha Vimukthi Peramuna called for unemployed graduates to be given pensionable jobs.

“The govemment has also become the employer of last resort, with the public service now reaching close to 1.5 million individuals, most of whom have non-contributory pensions,” the budget speech said.

“Governments that have significantlydeviated from these norms in the past have typically faced electoral punishment.”

The size of the state should then be limited to accommodate the ability of the people to pay. (Colombo/Nov17/2023)

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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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