|Reduction in import duty surcharge will affect local industry
The patron of the "Foundation for Development of Small and Medium Industries", Colombo District Association, Rohan B. Fernando in his comments on Fridays budget says:
The most alarming proposal of all from the point of view of local industry is the proposal to reduce the surcharge on import duty introduced by the previous government. Though the surcharge pushed the prices of imported goods up, it served as a restriction on the free flow of several imported finished goods which was a major threat to the local industry.
At a time when the local small and medium industrial sector is going through a tough time, trying to emerge, with the revival of new hope for peace, the Sector should have been allowed a little more breathing space to win back the lost territories.
Instead the reduction of the level of protection at this crucial moment would not only delay the speed of revival, but would adversely affect the build up of confidence which is a very important prerequisite at this moment. If the government was concerned about the high cost of imports, it could have removed the surcharge on essentials only, whilst leaving the surcharge on others untouched.
We intend making a fervent appeal to the Prime Minister and all those leaders concerned, to revise the said proposal for the sake of the local industry on which the new government intends banking immensely for an economic revival and improved rate of development", he says.
Fernando however says that considering the background in which this years budget was presented where the country experienced a negative economic growth for the first time in its post independent era, and the government debt exceeding GDP, the new government need to be complemented for presenting a reasonably good budget.
Tax reforms proposed are highly commendable. With a large number of taxes, surcharges, frequent amendments, highly elaborate tax returns, not only the tax payer was at sea to grasp what was going on, but the tax administration too was not in a position to cope up with it. As a result, tax collection too got affected adversely.
The proposal to streamline same with a more simplified structure is commendable. However, a substantial reduction in tax burden cannot be anticipated since the existing turnover based taxes would be replaced by a single VAT. Except for a few essential articles where the present 19% tax rate will be reduce to 10% the tax on a majority of items would go up from 19% to 20%.
In addition, the scrapping of stamp duty, removal of capital gains, surcharge on corporate tax, advanced company tax and the application of concessionary tax, rates on interest income, dividend income and retirement benefits are all welcome.
However, the introduction of a debit tax of 0.1% would be a burden on the entrepreneurs in general. In addition, the imposition of a 1% levy on all imports would offset the benefit of the removal of stamp duty on imports.
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