{"id":41194,"date":"2015-02-02T23:07:43","date_gmt":"2015-02-03T05:07:43","guid":{"rendered":"http:\/\/www.lankaweb.com\/news\/items\/?p=41194"},"modified":"2015-02-02T09:24:16","modified_gmt":"2015-02-02T16:24:16","slug":"sri-lankan-economy-down-its-slippery-slope-shares-hit-5-month-low-after-govts-retrospective-tax-plan","status":"publish","type":"post","link":"https:\/\/www.lankaweb.com\/news\/items\/2015\/02\/02\/sri-lankan-economy-down-its-slippery-slope-shares-hit-5-month-low-after-govts-retrospective-tax-plan\/","title":{"rendered":"Sri Lankan Economy Down Its Slippery Slope: Shares hit 5-month low after govt’s retrospective tax plan"},"content":{"rendered":"

Yahapalanaya News<\/em><\/span><\/h2>\n

Reuters reports\u00a0Sri Lankan shares fell to over five-month lows on Monday due to panic selling in blue-chips, led by John Keells Holdings Plc as concerns over future earnings weighed on sentiment after the government raised taxes on cash-rich firms.<\/p>\n

The day’s fall erased market capitalisation by 76.3 billion rupees ($577.2 million) on Monday after erasing 83.2 billion on Friday. The market is valued at 2.97 trillion rupees as on Monday.<\/p>\n

The index has fallen 5.10 percent since Sri Lanka’s new government on Thursday announced a budget that imposed a one-time ‘super gain tax’ of 25 percent on companies or individuals who earned over 2 billion rupees profits in 2013\/2014.<\/p>\n

The main stock index, ended 2.51 percent, or 179.99 points, down at 7,000.06, its lowest since Aug. 28.<\/p>\n

Reuters further report of\u00a0panic selling, Keells is the main reason for today’s fall,” said Reshan Wediwardana, research analyst at First Capital Equities (Pvt) Ltd.<\/p>\n

“Still it’s not clear how the super gain tax is going to be charged,” he said.<\/p>\n

Analysts said the market would continue to fall on ‘super gain tax’ worries and the reaction of foreign investors would be the key.<\/p>\n

Meanwhile the Gradient Alliance in its monthly report predicts that the Interim budget 2015may bring sweet news for the masses for the time but the big business may suffer.<\/p>\n

The new administration presented its interim budget providing significant concessions to the public (via removal of taxes on consumer goods), increasing public sector wages and taxing conventional (high earning companies, casinos, telecoms etc.) as well as remote avenues. Widely considered as one of the most populist budgets in recent times, a number of proposals are clearly introduced with an eagle eye on the upcoming general elections in April\/May 2015<\/p>\n

Notable winners are the masses, but notable losers are big business as a number of one -time taxes and a new super gain tax were introduced, applicable immediately.<\/p>\n

While these businesses may have benefitted from the previous regime\u2019s lax tax policies applying such significant levies suddenly is not helpful when the country is seeking to encourage greater local investment and attract foreign funds.<\/p>\n

Moreover, amidst the euphoria of concessions and taxes, initiatives are to be outlined to gradually increase education spending to 6% of GDP and healthcare spending to 3% of GDP.<\/p>\n

Sri Lanka falls to its worst position in the Global Economic Freedom Index.<\/strong><\/h3>\n

Sri Lanka was ranked 101st out of 178 countries in the 2015 Global Economic Freedom Index, a staggering 11 place drop since 2014 and remained in the mostly unfree\u201d group. A reflection of the policies adopted by the previous government, the 2015 position is lower than in 2013 (81st) and 2012 (97th). The index compiled by The Wall Street Journal and The Heritage Foundation noted that Sri Lanka had made; \u00a0Modest gains in freedom from corruption and the management of Government spending in Sri Lanka were outweighed by declines in half of the 10 economic freedoms, including investment freedom, property rights, and trade freedom. \u00a0Overall, however, the foundations of economic freedom remain weak. Property rights are hard to enforce because of fraud, and a weak Judiciary fails to mediate disputes effectively. \u00a0Government industrial policies distort trade and shelter domestic industry from competition. The Central Bank is not fully independent, raising the fear of inflation and monetised Government deficits. Sri Lanka score of 58.6 was below the world average of 60.4.. Hong Kong was ranked number one followed by Singapore and New Zealand. In South Asia Sri Lanka was ahead of Bhutan (115th), India (128th), Pakistan (121st), Bangladesh (131st) and Nepal (152nd).<\/p>\n

We are going to create an even playing field for investment in Sri Lanka\u201d: Eran W. Mr. Eran Wickramaratne, new Deputy Minister, Investment Promotion and Highways speaking to LBO said that a level playing environment would be created to attract investors as well as new projects. Preferential treatment for certain projects and individuals was a norm under A few such deals have been temporarily halted significantly the USD 3.4bn Colombo Port City Project and the proposed Northern Expressway (USD 4.5bn). Mr. Wickramaratne added;<\/p>\n

While these businesses may have benefitted from the previous regime\u2019s lax tax policies applying such significant levies suddenly is not helpful when the country is seeking to encourage greater local investment and attract foreign funds.<\/p>\n

Fuel price cut to cost CPC Rs.65bn.<\/strong><\/h3>\n

The recent reduction in petrol, diesel and kerosene prices is to cause a loss of Rs.65bn in revenue at the Ceylon Petroleum Corporation (CPC).<\/p>\n

According to Mr. Champika Ranawaka, Minister, Power and Energy, most of the price reduction relates to the withdrawal of taxes from these commodities and further went to state that future revisions will be based on a transparent formula for fuel pricing and electricity tariffs to be introduced mid-year\u201d. Mr. Ranawaka requested the public transport providers and others to pass on the relief but to date private bus operators have agreed to a 7-8% reduction in fares while three-wheelers have refused to lower prices.<\/strong><\/p>\n

($1 = 132.2000 Sri Lankan rupees)<\/p>\n","protected":false},"excerpt":{"rendered":"

Yahapalanaya News Reuters reports\u00a0Sri Lankan shares fell to over five-month lows on Monday due to panic selling in blue-chips, led by John Keells Holdings Plc as concerns over future earnings weighed on sentiment after the government raised taxes on cash-rich firms. The day’s fall erased market capitalisation by 76.3 billion rupees ($577.2 million) on Monday […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[12],"tags":[],"class_list":["post-41194","post","type-post","status-publish","format-standard","hentry","category-forum"],"_links":{"self":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/posts\/41194","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/comments?post=41194"}],"version-history":[{"count":0,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/posts\/41194\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/media?parent=41194"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/categories?post=41194"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/tags?post=41194"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}