Development oriented budget

Benefits to ease Cost of Living:

BUSINESS desk

President Mahinda Rajapaksa, delivering the 2008 Budget, said the Budget deficit would narrow to seven per cent of gross domestic product from an expected 7.2 percent in 2007.

Due to the setbacks suffered in agriculture and the tourism sectors the GDP was around 6.3 percent in the first six months, he said.

Presenting the Government’s third Budget the President said with the mega developments, improvement in the security situation and the involvement of the private sector, the country would be able to achieve over 7.5 per cent economic growth in 2008,” President said.

Total revenue next year is expected to be Rs. 750.74 billion, up from an upwardly revised Rs. 605.31 billion for 2007. Spending for 2007 was a revised to Rs. 861.95 billion, a budget summary showed. President Rajapaksa announced an additional 2.5 percent levy on motor vehicles and higher tax on imports of non-essential goods.

He also plans to extend a 10 percent tax on calls made on GSM mobile phones to other wireless telephones and said the Government was raising the licence fee for telecom service providers.

The business community and the Chambers expressed mixed reactions on the 2008 Budget.

Chairman Ceylinco Consolidated Lalith Kotelawela said the President has presented a wonderful, practical and down to earth financial plan that will take Sri Lanka into an era of new development.

“I am delighted that the budget contains encouragement and motivation for a lot of Ceylinco’s new projects, which include loans for dairy farming, the milch cow sanctuary with its by product of organic fertilizer and bio gas. It also gives relief to projects in the Eastern Province and we have already set in motion a massive development plan for the Eastern Province.

Development of alternate energy to replace petroleum and the many poverty alleviation proposals within the budget would be very successful.

Also tax exemptions for housing for the lower income groups and shanty clearance, abolishing of VAT on rice based products, increase in the price of liquor and cigarettes, tax free concessions for cattle imports are very encouraging.

Finally in raising the fine from Rs. 250 to Rs. 50,000 for the illegal slaughter of milch cows shows the eventual substitution of milk for milk powder, Besides being a humane and compassionate gesture by saving thousands of cows.

As far as I and my Ceylinco Group is concerned, we will give our fullest co-operation and commitment to ensure that this noble vision presented to our country today would be fruitful and will abolish poverty and misery in our Motherland, Kotelawala said.

Deputy Director/Head Corporate and Capital, Merchant Bank of A. M. A. Cader said the development of the co-operative system is very laudable.

The five years tax relaxation on the co-operative sector will lift the low income earning society. “I can say this is a new out look of protecting the low income earners. This was the step taken by the Indian Government to lift low-income earners.

Development of local milk production is a right step in this situation. Since the world milk powder market has increased this is a good time to promote the dairy industry.

If dairy production can improve and provide sufficient dairy foods to the local market, this will be the most successful budget so far” he said.

Chairman CEO, Access Group Sumal Perera said that the steps proposed to be taken to develop the local shipping sector are highly commendable. He said taking off unwanted taxes is commendable.

He also endorsed the move to widen the tax net. “It’s only the corporate sector that pays high taxes and I think more people should be paying taxes,” he said. However the tax policy should be consistent.

Deputy General Manger, Hatton National Bank Chandula Abeywickrama said the proposals to provide incentives for foreign remittances by way of their remittance being exempted from duty would lead to increased of foreign remittances to the country via banking channels. “It would also lead to the halt of remittance coming to the country through non-banking channels,” he said.

Director General Rubber Development Department Wimal Rubasinghe said the budget this year has given priority to the employment of youth and development of the country than before.

The Government has paid attention to the proposal submitted by the Rubber Development Department requesting a fertilizer subsidy to rubber smallholders who own less than 50 acres of rubber.

Accordingly they will be getting a subsidy at Rs. 1,200 per bag and this would have a strong impact on rubber production as rubber smallholders did not use the correct quantity of fertilizer due to high prices.

Chairman Ceylon National Chamber of Industries A. K. Ratnarajah said the allocation for infrastructure has been done without to accommodate overruns of the recurrent expenditure.

He said that there are some benefits for the textile, gem, SMEs and food processing industry but the packaging industry is unhappy about the environmental tax which is not very clear.

Ratnarajah said the President’s proposals on increasing productivity and reducing wastage in the Government sector which will help to reduce cost of living which was a very important proposal.

But he was disappointed that sufficient attention has not been given to the request for tax simplification of industries.

President Federation of Chamber of Commerce and Industry Nawaz Rajabdeen said the budget is formulated with long term development in mind. It has also provided incentives to woo more investors and also improve infrastructure facilities in Special economic zones. He has spelled out his vision to develop the Eastern Province.

Chairman Sri Lanka Tea Board Lalith Hettiarachchi said the Tea Board made some proposals to introduce a fund to promote tea and allocate Rs. 800 million from the cess fund so Rs. One billion can be used for tea promotion.

He said that at present the 3kg packs exported are considered as value added packs but 5kg packs are treated as bulk tea which is wrong.

He said the Tea Board has proposed to treat all of them as value added packs. He was yet to go through the Budget to confirm whether these proposals have been included.

President Chamber of Exporters Sri Lanka D. K. Rajapaksa said the budget is very good this year in several aspects.

Firstly, the proposal to purchase a ship and exemption of the existing port levy on the cargo sailing under the Sri Lankan flag would strengthen the Shipping Corporation.

The levy on textile imported for domestic consumption has been exempted and the handloom industry will benefit by that.

He said that the exemption of income tax from foreign exchange earners is also a good move where they will be motivated to remit their income to Sri Lankan bank accounts.

He appreciated that the proposal made by the Exporters’ Association to simplify the tax system has been accepted in principle. The exemption of VAT for dairy products, local sugar and rice based products will promote the industries.

However, Rajapaksa objected to the Rs. 20 tax imposed on people having a car, house and electricity as it will further complicate the tax system instead of simplifying it.

President of the Electronic Manufacturing Association Merrick Gooneratne said giving more priority for infrastructure development is a good move, which could pave the way for local companies to be globally competitive in the long run.

He said Sri Lanka has the potential for to be globally competitive in the electronic industry with the supporting of the local infrastructure development.

The Chief Executive Officer (CEO) Lanka Insurance Nalaka Godahewa said that he does not see any significant emphasis on the development on the macro-economic sector in the country which is the need of the hour now.

Managing Director, PABC Bank, R. Nadarajah said this year’s budget proposal covers the problems in various sectors. It seems to be much friendly.

The development side of the budget has been given much attention on the development of children and their education. Giving scholarships to promote education is laudable, he said.

“I think the BOI companies are connected to banks to find the investments on a solid liquidity form, That will balance the countries cash flow to an extent. Through this the Government can assure the investment since money flows into the bank account,” he said.