By Ifham Nizam

The Finance Minister intends to bridge the budget deficit from non bank sources, mainly foreign loans and grants. This will hopefully assist interest rates to be maintained at near current rates and also not crowd out the private sector from access to funding," National Chamber of Commerce of Sri Lanka (NCCSL) President Chandra Embuldeniya said that what the Finance Minister has done is to bring in revenue through a simplified tax system.

Embuldeniya, speaking at a press conference held on Saturday at the NCCSL said: "I find this budget development oriented". The minister hopes to bring in revenue through a simplified tax system.

On monetary management, he said that the aim of the minister is to reduce the budget deficit, inflation and contain the public debt to acceptable levels.

NCCSL Chairman Insurance Finance and Taxation Committee A. Nihal Fonseka said that it is clear that an attempt has been made to extensively reform and simplify the tax system.

"The abolition of the National Security Levy (NSL), stamp duties and the capital gains tax is welcome. The minister has also proposed that previously disallowed justified business expenses be allowed as deductions when computing tax."

He added that the proposed introduction of the unified Value Added Tax (VAT) in place of the Goods and Services Tax (GST) is in principle a welcome proposition.

"Although it is not clear what proportion of increased revenue will arise from broadening the tax base as opposed to higher taxes levied on presently exempt services and supply.

For example, while the removal of GST and NSL and exempting VAT from ships and aircrafts are welcome the proposal to impose a 10% VAT on aviation and bunker fuel will have an impact on Sri Lanka being promoted as a maritime and aviation hub and the contemplated open skies policies."

Deputy President NCCSL H. Ananda Wehalle said that the proposed reduction of personal tax and the proposals made on expanding the tax base are welcome. With regard to interest income, in order to avoid evasion, the better option may have been not to permit any exemption, but streamline the operation of the department to enable small depositors to expeditiously obtain refunds.

However, it is acknowledged that such a mechanism would require a very high degree of automation within the Inland Revenue Department. It is hoped that the withholding tax on dividends will not affect the current tax-free inter company dividend flows".

The NCCSL Committee said they welcomed the initiatives proposed to upgrade tertiary education and the establishment of the Tertiary Education Fund. Sri Lanka has a great need for graduates with a business and technical orientation and the proposed private sector, government initiative to achieve this is most welcome".

The NCCSL also welcomed the reintroduction of incentives for housing and construction, NCCSL believes that this will have a positive knock on effect on the local construction industry.

On power and energy, the NCCSL says that though the minister has said that future power generation will be undertaken by the private sector, the policy initiatives do not address transmission and distribution which also require to be overhauled.

This is particularly important in the context of the policy decision proposed that public enterprises will adjust their prices in accordance with the current cost of production or services. The users should not be asked to bear the cost arising from running inefficient state enterprises.

NCCSL Honorary Treasurer S. B. Hewage, Co-Chairman Insurance Finance and Taxation Committee S. R. Balachandran, Chairman Industries Committee M. Naizer Carder, Secretary General NCCSL Neil C. Seneviratne, Chairman Ports and Shipping Committee M. Reza, Chairman Exporters Committee T. J. R. Sinniah and Chairman Textiles and Clothing Committee Felician Peiris also spoke.