Cavalier election handouts, reason to impose high VAT – Mahinda
Posted on August 4th, 2016

Former President and Kurunegala District parliamentarian Mahinda Rajapaksa yesterday called on all MPs to oppose the VAT Bill when it is taken up by parliament next week. He said unbearable taxes were being imposed on the public due to costly election handouts like the salary hike given against all economic reasoning, just to win the August 2015 general election.

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“No previous government has taken such liberties with public finances for political purposes. I call upon all members of parliament to oppose the Value Added Tax (Amendment) Bill when it comes before parliament on 11 August. I believe the president will also make an intervention in this matter as he has stated publicly that he will not allow unreasonable taxes to be imposed on the people. The VAT on ill-health and the VAT on the small and medium retail and wholesale trade should not under any circumstances be allowed to be passed into law”, the ex-President pointed out.Following is the text of his statement titled “All parliamentarians should oppose the VAT Bill on 11 August”: The Bill to increase and broaden the application of the Value Added Tax will be taken up in parliament on 11 August. This draft legislation seeks to revive and give legal effect to all the objectionable features of the VAT reforms that were suspended by the Supreme Court last month. The new VAT Bill seeks to increase the VAT rate from 11% to 15%, to bring the small and medium retail and wholesale trade and the private health care services within the ambit of VAT and to mandatorily require all establishments with a turnover exceeding Rs. 33,000 a day to register for VAT. A tax on health care is in effect a tax on ill health. The more serious the illness, the more revenue the government will make from that patient. Everyone knows that those who make use of private health services are not only the rich.

Traders and small businessmen countrywide, opposed the 15% VAT imposed on the wholesale and retail trade because it will cause an increase in the prices of goods when it is passed onto the consumer and lead to reduced sales. Previously the VAT on the retail and wholesale trade was limited to large establishments with a turnover of more than Rs. one million a day. But when the threshold is brought down to Rs. 33,000 a day, that brings even small establishments within the ambit of VAT. When retail sales drop as a result of increased prices that in turn leads to a chain reaction whereby the manufacturers who supply the goods don’t get enough orders to be able to break even.

The small and medium sector has already suffered a reduction in turnover due to the general economic slowdown after the yahapalana government came into power. It was reported in the press that even the profitability of many large listed companies had declined in 2015. The fear is that the reduction in sales which will result from the VAT increase will destroy the small and medium sector. We have heard that due to the widespread opposition to VAT, the government is contemplating reducing the VAT rate and increasing the Nation Building Tax (NBT) rate. The public should be aware that VAT and NBT are both taxes imposed on turnover and the threshold for registering for both taxes is Rs. 33,000 and they are applicable to virtually the same goods and services so no difference will be made as far as the public is concerned by reducing the VAT rate and increasing the NBT rate.

Such attempts at deception must be resisted. The imposition of VAT/NBT on small business like eateries, barber shops, retail shops, repair shops, service stations, furniture shops etc., as well as cottage industries will be a severe burden on that sector as they operate mostly on credit. Operations of small and medium business places in economic hubs like Dambulla, Embilipitiya, Pamunuwa, Pettah – just to mention a few – will be endangered. The government should be mindful of the fact that the small and medium sector is the largest employer in the country – not the government or the formal private sector.

What makes this increase in VAT most objectionable is that it is being imposed on the public to finance the salary increase and various other concessions that the yahapalana government gave against all economic reasoning in order to win the August 2015 parliamentary election. No previous government has taken such liberties with public finances for political purposes. I call upon all members of parliament to oppose the Value Added Tax (Amendment) Bill when it comes before parliament on 11 August. I believe the president will also make an intervention in this matter as he has stated publicly that he will not allow unreasonable taxes to be imposed on the people. The VAT on ill-health and the VAT on the small and medium retail and wholesale trade should not under any circumstances be allowed to be passed into law.

6 Responses to “Cavalier election handouts, reason to impose high VAT – Mahinda”

  1. Dilrook Says:

    Excellent Mahinda. Thank you for boldly standing up for the people.

    I say, Mahinda (as we knew him) is back which is a very good sign. Looks like imprisoning Namal for a long time angered Mahinda and now he is on the war path again as he used to be in early 1990s. This may mark the end of the time when Mahinda avoided parliament on budget and finance minister’s impeachment.

  2. Ananda-USA Says:

    Sri Lanka heading towards a monumental victory over Australia in Test 2 in Galle! SL 281, AUS 106 in 1st innings.

    We need this victory to hold up our spirits as a nation.

    Jayawewa, chaps!

  3. S.Gonsal Says:

    Jayaweva,
    Paada Yathra working again ! We lost 3 wickets though.

  4. Ananda-USA Says:

    Yes, Gonsal … losing 3 wickets so cheaply like that was crushing, especially Kusal Mendis’s! Let us hope we don’t mess this up!

  5. S.Gonsal Says:

    Poor Aussies trembling! 7 more wickets to go Ananda ! This will push us above South Africa. Jayaweva !

  6. Ananda-USA Says:

    Hooray!

    Sri Lanka won Test 2 vs Australia handily by 225 runs and captured the Warne-Muralithran Trophy!

    I hope they will win Test 3 in Colombo beginning Aug 13 CONVINCINGLY TOO …. just to make the point that Sri Lanka’s new cricket team full of newly minted Sri Lankan talent has ARRIVED WITH A BANG!

    Jayawewa!

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