Govt announces several economic relief measures
Posted on November 1st, 2018

Courtesy Adaderana

Ministry of Finance and Economic Affairs

The Ministry of Finance and Economic Affairs today announced several important economic policy changes and initiatives to provide relief to the masses and revive the economy.

Considering the high tax imposed on the Telecommunication services, the government has decided to reduce the Telecommunication Levy from 25% to 15%.

The statement said that the Special Commodity Levy will be reduced on Dhal by Rs. 5 per Kg, Chickpeas by Rs. 5 per Kg, Black gram by Rs. 25 per Kg. Customs Duty will also be waived on Wheat grain to Rs. 9 per Kg from the existing waiver of Rs. 6 per Kg.

Sugar will be brought under the Special Commodity Levy (SCL) whereby the applicable taxes on Sugar will also be reduced by Rs.10 per Kg. Accordingly, the commodity prices will be reduced with immediate effect,” the ministry said.

Meanwhile the price of Petrol (Octane 92) will be reduced by Rs. 10 per litre, Auto Diesel by Rs.7 per litre and Lubricants including the 2T lubricants used in three-wheelers and small agricultural engines is to be reduced by Rs.10 per litre with effect from midnight today (Nov. 1).

At the same time a cost based pricing mechanism will be implemented on fuel in place of the monthly fuel price formula,” the statement said.

A guaranteed price scheme is to be introduced for Paddy, Onion and Potatoes produced locally by farmers.  Accordingly, SCL will be raised during harvesting period to protect farmers through remunerative guaranteed prices. As potatoes and B-Onions are being harvested, SCL on potatoes and B-Onions will be maintained at Rs.40 per Kg.

In order to mitigate the impact of adverse weather conditions which resulted in farmers losing their livelihood and becoming heavily indebted, interest and the penal interest incurred by farmers and small Paddy Mill owners on loans up to a maximum of Rs.50 million, from all Commercial Banks during the past 3 years, will be written off in full and will be borne by the Government.

Meanwhile the maximum threshold on Loan advances given by Samurdhi Banks to Samurdhi beneficiaries to support their livelihood activities will be increased by Rs.10,000.

Fertilizer prices for paddy will be maintained at Rs.500/50kg bag and fertilizer prices for other crops will be reduced to Rs. 1,000/50kg bag from Rs. 1,500/50kg bag.

The ministry said that the concessionary income tax rate of 14% on agriculture is presently applied only for the companies engaged in agricultural businesses. The income of individuals from Agricultural undertakings will also be reduced from the existing maximum rate of 24% to 14% so that individual farming agriculture is also encouraged.

The concessionary Income Tax rate of 14% is presently applicable under the SME categories only for Companies. This rate will be extended to include individuals including those providing professional services. Therefore, the income tax rate for professional services will be reduced from 24 percent to 14 percent.

Withholding tax will be exempted on Interest on any savings and fixed deposits maintained in any financial institution.

To encourage local entrepreneurs, professionals and migrant workers to remit their earnings in foreign currency on services provided outside Sri Lanka, Income tax will be exempted on such remittances.

The adverse impact created by high indirect taxes will be mitigated by simplification of VAT and NBT. The VAT threshold will be increased from Rs.12 million per annum to Rs.24 million per annum.

The threshold for the VAT liability of wholesale and retail sector also will be increased from Rs.50 million to Rs.100 million per twelve months providing benefits to small traders and businesses, the statement said.

The VAT rate applicable on the import of Sawn Timber will be reduced to 5% to support the local Construction Industry.

VAT on import of fabric will be exempt providing benefits to the small and medium garment manufacturers.

Read the full statement issued by the Ministry of Finance and Economic Affairs below:

 

Programme for Economic Revival

His Excellency the President, and the Honorable Prime Minister and Minister of Finance and Economic Affairs have raised concerns regarding the serious setback in the economy as reflected in the persistently low growth rates during the last 3 years along with the rising cost of living. The Honorable Prime Minister is of the view that ill-conceived economic and financial policies of the previous Government have led to this situation by marginalizing local entrepreneurs, industries and domestic production.

As 2018/2019 Maha cultivation season has begun with extremely favorable weather throughout the country, the economy is set to get a new revival as all hydro power reservoirs and irrigated schemes have reached full storage capacity to generate electricity, provision of drinking water and water for cultivation. The Government thinks that this is the best opportunity to prepare the country to get the maximum benefit from agricultural production. At the same time the consumers are saddled with high cost of living. In this background the Prime Minister and Minister of Finance and Economic Affairs has given direction to implement following initiatives to revive the economy.

  1. In order to ease the pressure on high cost of living while also protecting the local farmer, Special Commodity Levy will be reduced on Dhal by Rs.5 per Kg, Chickpeas by Rs. 5 per Kg, Black gram by Rs.25 per Kg. Customs Duty will also be waived on Wheat grain to Rs. 9 per Kg from the existing waiver of Rs.6 per Kg. Sugar will be brought under the Special Commodity Levy whereby the applicable taxes on Sugar will also be reduced by Rs.10 per Kg. Accordingly, the commodity prices will be reduced with immediate effect.
  2. Given the impact of fuel pricing on all strata of the society specially those engaged in transport, agriculture and fisheries sectors, price of Petrol (Octane 92) will be reduced by Rs. 10 per litre, Auto Diesel by Rs.7 per litre and Lubricants including the 2T lubricants used in three-wheelers and small agricultural engines by Rs.10 per litre with effect from mid night today. At the same time a cost based pricing mechanism will be implemented on fuel in place of the monthly fuel price formula.
  3. A guaranteed price scheme will be introduced for Paddy, Onion and Potatoes produced locally by our farmers.  Accordingly, SCL will be raised during harvesting period to protect farmers through remunerative guaranteed prices. As potatoes and B-Onions are being harvested, SCL on potatoes  and B-Onions will be maintained at Rs.40 per Kg.
  4. In order to mitigate the impact of adverse weather conditions which resulted in farmers losing their livelihood and becoming heavily indebted, interest and the penal interest incurred by farmers and small Paddy Mill owners on loans up to a maximum of Rs.50 million, from all Commercial Banks during the past 3 years, will be written off in full and will be borne by the Government.
  5. The maximum threshold on Loan advances given by Samurdhi Banks to Samurdhi beneficiaries to support their livelihood activities will be increased by Rs.10,000/-.
  6. Fertilizer prices for paddy will be maintained at Rs.500/50kg bag and fertilizer prices for other crops will be reduced to Rs. 1,000/50kg bag from Rs. 1,500/50kg bag.
  7. The concessionary income tax rate of 14% on agriculture is presently applied only for the companies engaged in agricultural businesses. The income of individuals from Agricultural undertakings will also be reduced from the existing maximum rate of 24% to 14% so that individual farming agriculture is also encouraged.
  8. The concessionary Income Tax rate of 14% is presently applicable under the SME categories only for Companies. This rate will be extended to include individuals including those providing professional services. Therefore, the income tax rate for professional services will be reduced from 24 percent to 14 percent.
  9. Withholding tax will be exempted on Interest on any savings and fixed deposits maintained in any financial institution.
  10. To encourage local entrepreneurs, professionals and migrant workers to remit their earnings in foreign currencyon services provided outside Sri Lanka, Income tax will be exempted on such remittances.
  11. The adverse impact created by high indirect taxes will be mitigated by simplification of VAT and NBT. The VAT threshold will be increased from Rs.12 million per annum to Rs.24 million per annum.
  12. The threshold for the VAT liability of wholesale and retail sector also will be increased from Rs.50 million to Rs.100 million per twelve months providing benefits to small traders and businesses.
  13. The VAT rate applicable on the import of Sawn Timber will be reduced to 5% to support the local Construction Industry.
  14. VAT on import of fabric will be exempt providing benefits to the small and medium garment manufacturers.
  15. Considering the high tax imposed on the Telecommunication services, the Telecommunication Levy of 25% will be reduced to 15%.

The thrust if these initiatives are to encourage production and simplify the tax system. It will certainly help households with additional income in their hands. The proposed changes to the tax system will also encourage inward remittances and savings.

The Government also expects to reduce its expenditure with the rationalization of Cabinet ministries as reflected in a lessor number of ministries and reexamination of capital expenditure programs. Accordingly, the government is confident that the primary surplus of 1.8 percent of GDP and the budget deficit of around 4.9 percent of GDP that have been targeted for 2018 could be achieved in support for further fiscal consolidation to provide economic stability. The measures to further consolidation of external trade and payment transactions are also being examined to provide much needed stability to the exchange rate.

His Excellency the President and Honorable Prime Minister and Minister of Finance and Economic Affairs have directed the implantation of the above policy measures. The necessary Gazettes for the aforementioned tax related proposals will be issued today and Cabinet approval is sought to amend the necessary tax laws.

Ministry of Finance and Economic Affairs
01.11.2018

One Response to “Govt announces several economic relief measures”

  1. Ananda-USA Says:

    Excellent Financial Policy by the NEW PM/Finance Minister, Mahinda Rajapaksa to JUMP-START Local Manufacturing and Farming! RAISE TAXES on what can be PRODUCED LOCALLY!

    While these INITIATIVES are ESSENTIAL, let us not forget National Infrastructure Development, especially those serving regions OUTSIDE Colombo!

    DISCIPLINE, DISCIPLINE, and MORE DISCIPLINE is NEEDED in the Megalopolis DEvelopment Project! In the FEW SHORT Years he was in charge, that is what Gothabhaya Rajapaksa EXCELLED in DOING! We, the PATRITIC CITIZENS of Mother Lanka, NEED HIM BADLY as a National Leader, hopefully as the NEXT PRESIDENT!

    Ask NOT what your COUNTRY can do for you, but what YOU can do for your country!

    ……………………………
    JLL comments on the Western Region Megapolis Masterplan’s sustainability and progress

    Nov 03, Colombo: In its monthly Compass bulletin, real estate consultancy Jones Lang Lasalle examined the relevance of the Western Region Megapolis Masterplan to Sri Lanka’s ambitions of improving citizen wealth and rapid economic growth.

    The statement also questioned the sporadic nature of the progress reported by the project since March 2017, noting that a cornerstone of the government’s modernization policy must be more frequently communicated to the public.

    The Western Megapolis Development Plan was first conceptualized in 1998 by the newly established Urban Development Authority, leading to a first version in 2002.

    The newest version of this plan was revealed in January 2016 under the newly established coalition government at the time, as the Western Region Megapolis Masterplan.

    This was pitched, and has since been floated, as a cornerstone of the government’s strategy to bring Sri Lanka to upper middle and then high-income status. This ambitious plan sets targets of tripling per-capita income in the western region to USD 12,000 by 2020, creating 500,000 jobs, and making the western region one of the 10 most livable cities in Asia to reverse current brain drain trends.

    For this ambition two transformations are necessary, notes JLL. Spatial transformation of the urban western region is one, the national economy’s structural transformation is another.

    The plan flagged three broad national issues: issues arising from congestion pressures being exerted on urban infrastructure, services and amenities due to messy urbanization; weak enabling environment to propel Sri Lanka to high-income status; and the lack of a framework to harness the benefits of a knowledge based, innovation driven economic environment, characterized by the new industrial revolution and smart cities. The plan aimed to address all these weaknesses.

    There are other institutional challenges to be overcome as well. A lack of appropriate land use policy, ad-hoc development and planning, a mono-centric urban spatial structure, and a poor public transportation system are a few of these challenges that the plan must maneuver.

    “Transforming the western region into a world class metropolis in such sensitive times brings immense challenges in delivering the high-level goals of diversity, inclusivity and sustainability that the plan promises,” says Steven Mayes, Managing Director of JLL Lanka (Pvt) Ltd.

    “If this wish list is to be accomplished then infrastructure and public transformation will be key. If we look at public transport, developing the planned LRT (Light Rail Transit) system will be paramount.”

    Mr Mayes also noted that the Government of Sri Lanka must carefully examine the robustness of the PPP model to underwrite the additional capital sums necessary to upgrade existing bus and rail systems and to initiate the water bus transport system, utilizing existing waterways, envisaged in the master plan.

    JLL also highlighted the importance of regularly updating the news portals used by the government with details on the progress of the Megapolis plan.

    The current website- http://www.megapolis.gov.lk -reveals no new entries since June 2017, while the consultations portal has not been updated since March 2017.

    “The sustainability of this project will also depend to a significant extent on public engagement and support- communicating what the progress is, even if it is minor, will help to build ownership and awareness. More importantly it’s the government’s duty to inform the public of the progress- or lack of- that is being made with one of Sri Lanka’s most ambitious development plans in recent history.”

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