Minister of Finance and Mass Media, Mangala Samaraweera, presented the Budget proposals for 2018 (Second reading of the Appropriation Bill) with the theme, Blue Green Budget.
The government in its Budget proposals 2018 expects a budget deficit of 4.5% and envisages it to drop to 3.5% of the GDP by 2020.
It was proposed that Rs 10,000 million be allocated for establishing an EXIM Bank to provide long-term loans for Small and Medium scale businesses. Women too will receive an interest concession of more than 10% under the Enterprise Sri Lanka loan scheme.
It was also proposed to allocate Rs 800 million for the Export Market Access Program which will be introduced for companies with less than 10 million dollars in earnings.
Finance Minister Mangala Samaraweera presenting the 2018 budget in Parliament yesterday said, Sri Lanka to help repay debt will charge a tax on banking transactions known as the ‘Medamulana Tax at the rate of 20 cents for every 1,000 rupees.
The tax will be applicable for 3 years and will come into effect from April 01, 2018.
According to the Minister, financial institution will have to pay the proposed tax and it will be charged on all cash transactions.
The business community and the Chambers hailed most of the proposals with most of them harping on the point that they should be implemented and not remain as proposals until the next budget. “Most of the proposals in the previous budget are yet to be implemented and we hope this would not be repeated in 2018 as well,” they said.
They also said Ministers too should utilize the budgetary allocations that were allocated to them.
Tax consultant and Council Member Chamber of International Trade Information Services H. I. P. Imaduwa said that the budget has widened the tax base and could be considered a friendlier budget.
“When you compare with previous budgets this budget has moved to reduce tax incentives and tax holidays. New mythology (new technology) has been used for collection of revenue.”
The incentives granted to Export Development companies too are very pleasing. The Budget has looked at the younger generation, particularly their desire for employment opportunities and also facilitated the needs of those seeking foreign education. It has also focused on promoting several eco-friendly environmental measures.”
Kelani Cables Plc, Director and CEO Mahinda Saranapala commenting on government’s decision to allocate Rs 800 million for export market support noted that this key initiative would improve the environment for local businesses and investment, thereby enabling exporters to sell more volumes in the international market.
According to Saranapala, proposals to empower women entrepreneurs and to promote ‘start- up culture’ in Sri Lanka would eventually create more jobs and boost economic growth in the country.
The motor industry was anticipating many changes in the budget for both buyers and sellers and as expected the electric car segment saw major price slashes on electric vehicles that will reduce a vehicle by around Rs one million. The Budget proposals on vehicles include special levies on luxury vehicles with engine capacity of more than 2500cc. The levy on electric vehicles will decrease by Rs10 laks and a levy on luxury vehicles will increase by Rs. 25 lakhs.
Similarly the levy for fuel vehicles will be reformed and import taxes for electrical vehicles be reduced. All government vehicles will be converted to electrical or hybrid by 2025. The government also aims to ensure that all vehicles in the country by 2040 will be environmentally friendly. Electric three wheelers will have a 90% concession from the government, while a ban will be imposed on vehicles which do not have airbags and also a carbon tax will be introduced which are very much welcomed moves.
Meanwhile the budget proposals on motor industry has failed to understand core issues says the Ceylon Motor Traders Association (CMTA). CMTA President Reeza Rauf said the budget proposals on the motor industry have failed to understand the present core issue of the ailing auto industry.
“We don’t see any significant changers that were proposed by CMTA for a level playing field in the budget proposals 2018. More focus is emphasized on electric vehicles which at present does not solve the industry woes as electric vehicles are available only with a couple of manufactures. This creates an opening for more unscrupulous imports, the CMTA President alleged.
Rauf said it was good to have a vision to have all electric vehicles by 2040 as proposed, but in reality the people need to exist for the day and need to come with realistic taxation policies for the survival of the Industry which was not found in it. The Industries contribution towards large number of employment and revenue to the Government is overlooked, Rauf alleged.
“As claimed the revenue leakage is due to grey imports which is being manipulated by used car imports and not by brand new vehicles imported by franchise holders,” Riza emphasized
The unit rate taxation will fail to control the homologation of vehicles coming in to the country and pave the way for all type of vehicles to arrive which can lead to serious after sales and spare parts issues. Further this won’t be able to control the outflow of foreign exchange and can lead to under invoicing, the CMTA President alleged.
Sanjee Balasuriya, Managing Director and CEO of eCybersec Pvt Ltd commenting on budget proposal of investing Rs 3 billion in the next few years for local start ups and to bring in new start ups, said that this key initiative by the government towards a digital economy with a new fund will be conducive to developing a more vibrant IT innovation and technology ecosystem in Sri Lankan Start ups. At the same time, Sri Lanka will produce innovative entrepreneurships with this government key initiative and by bringing more value together with the foreign start ups, the economy will boost with a high pinnacle which will lead to a most advanced digital hub in Asia.
Meanwhile, Nalin Silva, President, Institute of Supply and Material (ISMM) said the budget proposal to amend the Sri Lanka Ports Authority Act and Merchant Shipping Act to suit current times is a step taken in the right direction.
“This will further strengthen supply chain activities in the country and achieving the hub status goal.”
Coral Holdings, Chairman Dr. Piraba Subramaniam, the first international property developer, building Maldives largest condominium project said the budget proposal to relax the regulations enabling foreigners to buy apartments of four floors, will further boost the construction sector.
“I must also say that with our experience of 14 years in the industry there is no property bubble and the industry is strong. We too are investing Rs 4 billion on four new projects and with this new budget proposal we expect more foreign buyers as well.”
Shiran Fernando, Chairman, TESS Group of Companies said that the Government has focused on fisheries sector and they are happy about the positive vision for the 2018 Budget proposals for this segment.
“We import a lot of canned fish in to the country and the current budget proposal has decided to give the opportunity for the Lankan manufacturers which in turn would result in lower exports. We think that we can now reap even better benefits of lifting of the EU fisheries ban with these incentives. We can now look for a better future for the fisheries sector.
Chatham Luxury Watches CEO Indrajith Ranawana said that the proposal on VAT refund scheme to be implemented on foreign passport holders from May 1, 2018 will help Sri Lanka‘s objective of being a major shopping destination. “It would entice both foreigners and expatriates working in Sri Lanka to do more purchases from Sri Lanka which in turn would help to boost their sales.”
An international businessman, CEO, Shan Halamba, Riococo Lanka (Pvt) Ltd - Sri Lanka and Ceyhinz Link International, Inc – USA, he said that the first budget presented by Minister Samaraweera has been given number of opportunities to young people to stand alone as future successful Entrepreneurs. “They should grab this golden opportunity and be creative as well as self-motivated to become self-employed Entrepreneurs and support the Economy of Sri Lanka.”
Today my business after 17 years of hard work and sacrifices, I now export Coir based (growing media) products to 47 countries and I did not get these kind of proposed benefits.”
The Chambers say…
Ramal Jasinghe, President National Chamber of Exporets (NCE) said they welcome these gestures that would hopefully galvanize businesses, particularly the manufacturing and agricultural sectors to develop and focus on export based production and innovation.
“We are keen that the necessary infrastructure would be developed to facilitate easy access to the Rs. 800 million for the proposed Export Market Access program to realize any gains from this measure.”
The immediate past Chairman of the Ceylon National Chamber of Industries (CNCI), Tissa Seneviratne said that their main effort and expectation is to safeguard and develop the industrial sector in the country.
In a press release issued on the 2018 National Budget, Seneviratne highlighted that the new budget shows certain positive signs that offer relief to the common life in the country. Price reduction of essential commodities, concessions and subsidiaries granted to the agricultural sector, insurance systems introduced to cover their growing fields are good measures to improve the living standards of the majority of the masses who depend on agriculture.
“However, as the industrial chamber in the country, our main effort and expectation is to safeguard and uplift the standards of the industrial sector in the country which contributes to the GDP in a great way and generate employment.”
He said that the Government has strived to extend measures to develop local industries and the CNCI do appreciates relief given to the SME sector. Chamber CNCI expects measures of protection from dumping and under invoicing, waste disposal in the absence of sufficient incinerating facilities, inability to submit internationally accepted quality certifications, which has become a great non-tariff barrier.
CNCI expects the anti-dumping legislation be enforced shortly which has been proposed in the past years budgets too.
Also the local industry expects a conducive environment for their businesses to be strong in a manner that they can compete in the international market.
Meanwhile Sujeeve Samaraweera, the National Chamber of Commerce of Sri Lanka said that the introduction of the new concept to encourage the Business Environment by the name of “Enterprise Sri Lanka” would be a positive step taken by the government towards business development.
Under this programme the government is proposing the development of Woman Entrepreneurship, SME Development and Agri and Plantation sector development etc. Additionally the government is proposing to introduce a Development Bank to support the financial needs of the SME Sector.
The encouragement provided for deep sea fishing and infra structure facilities for Fisheries Sector are also appreciated, he said.
The development proposals focusing on Tourism Sector will also help the economy to be expanded. The Information Technology Sector has been given greater attention with the intention of increasing Forex earnings to US 5 billion in the next years to come. Further the government is proposing to develop the capital market by introducing many reforms with a special focus on the State banking sector.
The proposals to develop the Road Infrastructure in the country will also have a positive impact on the economy and also the positive proposals put forward by the government on managing the solid waste in the country and reduction of taxes on all electric vehicles is commendable.
The National Chamber of Commerce of Sri Lanka plans to release a much more detailed analysis on Monday.
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