Targets 5.5% growth for 2021 | Daily News
Budget 2021
With greater emphasis on Agriculture, Fisheries and Livestock development

Targets 5.5% growth for 2021

Plans to maintain budget gap at 9% of GDP; targets 4% budget deficit by 2025
An uncomplicated online income tax system for all income tax payers

Prime Minister and Finance Minister Mahinda Rajapaksa presenting the budget for 2021 yesterday in parliament said that the Government hopes to achieve 5.5% economic growth.

The Premier also said that to give more encouragement towards the development of local Agriculture, Fisheries and Livestock these three sectors will be exempted from income tax for the next 5 years.

“Sri Lanka should be more dependent locally rather than being depended on foreign products,” he said. Identifying the need for digitalisation he said that special emphasis would be made for the digitalization of the State sector.

“Government’s vision is a technology-based society and for this purpose, the government plans to establish five ‘plug and play’ technological parks across the country. PM also underlined plans to invest Rs 15,000 million to expand telecom services and achieve 100% coverage for 4G fibre broadband.

Telecommunication towers are to be built in State lands as a joint operation by the TRC and CEB with the help of local contractors towards meeting this target. In a bid to encourage local companies for stock market listing he said special tax concessions will be offered and a 50% income tax exemption will be offered to local companies if they register before December 31, 2020 to be listed in the stock market.

Making proposals in the tax collection, he proposed a relief system to pay National Building tax (NBT). The premier also said that a special goods and services tax will be introduced. A special tax appeals court is to be established. He said that the government would also take stern action against companies that forward bogus tax statements.

Rajapaksa said the taxes that will be proposed would stay unchanged at least for five years. Government will seek the allocation of Rs. 2,678 billion for the service expenditure and according to the Bill, limit on borrowings for the financial year 2021 has been set at Rs. 2,900 billion. He said they would look for ‘policy-based borrowings’ from foreign for development clusters.

The vote on the second reading will take place on November 21 while the debate of the Committee Stage will commence on November 23 and is scheduled to conclude on December 10 followed by the vote at 5 pm.

Meanwhile, Chairman Managing Director – Pelawatta Sugar and Dairy Ariyaseela Wickramanayake said that exempting tax on Agriculture, Fisheries and Livestock will have a major positive impact on the local economy and especially exports. “This is a ‘concession’ the local industrialists have been waiting for several decades and it’s a step taken in the right direction.”

He said that many countries including England do not charge income tax from the Agri sector. He said this gives not only bigger players like them but also SME sector to invest newly in these three segments. “While increasing exports the move will also help to take Sri Lanka towards self-sufficiency sooner than expected in some areas.”

Commenting on the Agri tax exemption, Chairman and CEO of Serendib Horticulture Technologies Dilip de Silva said; “This is a progressive move to encourage the agriculture, fisheries and livestock sectors. This will also give some respite to the exporters who are involved in these sectors.”

“Exporters are now facing many challenges due to high freight rates, reduced global demand and high cost of raw material. The government’s drive to encourage exporters allowing the exports to continue amidst the pandemic situation is appreciated.”

He said further those sectors where the global demand has increased significantly, such as the floriculture sector should be incentivized to increase their exports.

“Such sectors once identified, could make a significant contribution to the country’s foreign exchange earnings, with the support of the government in the critical areas of the supply chain”, de Silva said.

Chairman CIC Group S H Amarasekera said, “Exemption of income from Agriculture from income tax will encourage additional investment by companies already in the space as well as encourage new corporates to move into agriculture, which will enhance local production, boost rural economies, increase employment opportunities in rural areas and reduce imports which will eventually help save foreign exchange.”

President City Hotels Association, M. Shanthikumar said that the proposal to defer repayment of refinancing loan facilities provided by the Central Bank of Sri Lanka to the tourism sector extended until September 30, 2021 is very timely and laudable.

Despite talks of vaccines for COVID-19 tourism sector will take around a year to recover and this move will help hotels to financially look after their staff. “Taxes and charges levied by local government institutions on tourism businesses to be simplified and be subjected to a maximum limit too is praiseworthy and will also lead to less red tape for new leisure sector investments.”

Managing Director and Chief Executive Officer of eCybersec Sanjee Balasuriya said that there are a number of measures to support information technology businesses and to promote investment and encourage opportunities to retain and create more jobs. The proposal for potential changes to the current cyber security laws in the country by introducing new laws in relation to data security, cyber security and intellectual property will facilitate and enrich the current setup.

Chairman IWS Holdings Group, Arthur Senanayake said the Budget is presented at a very crucial time for the country. At a time when the whole world has been struck down the COVID 19 the economies of the countries have been affected. Whilst the country needs taxes to be imposed this period poses several challenges. Especially there is a large number of people who are unemployed at the moment this brings their spending capacity into question.

“Now the priority in spending among the people is for food and medicines. Therefore it is very advisable and prudent to put off the taxes at least until the income streams have been re-established. Such a step will enable money available to be utilized better until the situation improves.”

Proposal to reduce the import taxes on vehicle spare parts will have many positive effects on the industry, said Executive Chairman Ideal Group, Nalin Welgama. He said firstly this will help to bring more genuine spare parts and keep some of the used vehicles in better shape.

He also said that the pledge by the government to further discourage the import of motor vehicles will give confidence for them to invest more in their Mahindra assembly plant and look at the assembly of other vehicles.

Ceylon Motor Traders Association (CMTA) Chairman Yasendra Amarasinghe welcomed the move by the government to reduce taxes on motor vehicle spare parts

“Firstly we thank the government for their pledge to reduce taxes on motor vehicle spare parts. In these challenging times, this concession will be welcomed by both franchise holders and consumers. Further, the CMTA reaffirms its commitment to work closely with the government in all matters related to motor vehicles, for the benefit of the industry and the nation,” Amarasinghe said.

Meanwhile, Home Lands Group Chairman Nalin Herath hailed the Government’s decision to allow Non-residents to purchase super-luxury condominiums using foreign currency. This will pave the way for an increase in sales of local apartments among foreigners and Sri Lankans living abroad.

Executive committee member Sri Lanka Gem and Jewellery Association Rizwan Nayeem said that offering a 3-year income tax holiday on gem export income will help to revive the industry which is battered by taxes and COVID.

“Tax exemption on earnings generated from the sale of gem and jewellery from foreign exchange has been the norm since 1971 but the Yahapalana government in 2017 unwisely changed this through the new Inland Revenue bill which badly affected us and gave undue advantage to competitive countries like Hong Kong and Thailand,” Nayeem said.

The development of Ratnapura as an International Gem Industrial City was welcomed.

Director Administration Neil Marine Kapila Sumanapala on the proposal to incentivize boat construction said, “Boatbuilding is one of the six focus sectors of the national export strategy. This will help take the industry forward. This will definitely bring Foreign Exchange.”

A member of senior management at a leading company wishing to remain anonymous noted that he preferred the WHT system on rent and interest income. The requirement to pay income tax on those receipts would increase the effective rate of tax on those asset classes. He noted there was much scope to increase revenues by cancelling BOI agreements as opposed to taxing professionals.

Director Demak Sri Lanka Y. Jeyaraj was happy in principle to see the proposal on the reduction of duty of spare parts and hoped to work with the government to see how to structure the proposal to benefit the country. Jeyaraj said, that this proposal will benefit the end-users more than the suppliers or manufacturers.”

President Canned Food Manufacturers Association Shiran Fernando, said at a time like this when every industry in the country is undergoing severe hardships due to the Coronavirus this income tax relief is greatly appreciated and welcome. However, looking at the point from the local canned fish industry the importation of canned fish into the country is making a massive drain on the coffers. “Every container of canned fish imported into the country is a container of unemployment. The country losses Rs. 320 million per month on duty.”

This amount could be collected and used to develop the fisheries industry. This way it would not lay an unnecessary burden on the country’s coffers to develop this very profitable industry which not only would save a lot of foreign exchange but generate employment as well.

This is money that the country desperately needs especially at a time like this. With a country that has a sea which is seven times larger than the land area, we import US$ 76 million worth of canned fish annually. This should be discouraged.” he said.