Given the revenue growth projection of 27 percent, a revenue less recurrent expenditure of Rs. 64 billion and public expenditure to GDP at around 5.7 percent and total debt servicing at Rs. 1.4 trillion in 2017 are indications that there will be more public-private partnership for public investment in education, health care and infrastructure development said tax analysts.
Tax consultant and Partner Gajma and Company, N.R. Gajendran said fiscal policy pronouncements for 2017 shows that the country is on tract to achieve the 2020 targets of a budget deficit of 3.5 percent to GDP and debt to GDP at 65 percent.
Unlike in the past this time the country has a revenue surplus. In the past the public expenditure was 6 to 7 percent of the GDP and this time it is around 5.5 percent to the GDP. In the past the total debt servicing including capital has been equal to tax revenue or more. This time the tax revenue is Rs. 1.8 trillion and debt service is RS. 1.4 trillion.
“Apart from the constitutional changes pertaining to presidential powers, electoral reforms and national reconciliation, macroeconomic fiscal stability is utmost for the country to leapfrog to a upper middle income country,” Gajendran said.
However, he said there are few significant challenges which should be focused on with research work been done urgently such as uncertainty in policy perspectives as in the case of the Capital Gains Tax which lacks detail, lack of coherent and consistent polices where the country wants to achieve the 70th position in the ease of doing business index in 2020 from the present position of 100.
The multiple dates for tax payment and tax returns have not been dwelt with. Also with no discussion time period to issue assessments has been reduced to nine months and the time to finalise appeals have been brought down to six months. Apart from other complicating issues that may arise the above will in no way help to improve the ease of doing business index for Sri Lanka.
‘Steps have to be taken to bring in legislation to be in place by January 1, 2017 for some taxes. If not the problems faced in 2016 may arise. There has to be a more positive message for foreigners to invest in the country since FDIs are a critical factor for growth stability and employment creation. Foreigners should know as to why Sri Lanka is a darling for investments particularly now that the country is terror-free,” Gajendran said.
Public education and information on a regular basis is of great significance so that a strong relationship and understanding is built with the public at large to manage undue expectations. There should be an urgency to conclude the much talked about corruption cases and the wrong doers should be brought to justice.
On the tax on telecommunication, Gajendran said the government is taxing where people spend with ease and comfort. Today there are more mobile phones than the population and people spend a significant amount on phone calls though it may not be as large when taken collectively.