The government should not transfer ‘tax’ money from the well-managed corporate sector to bail out the ailing public sector and this may result in both sectors to collapse.
Instead the government should make public institutions more efficient and productive by making reforms such as retrenchment and reallocating existing human resources appropriately and cutting back expenses, said Director of a leading Sri Lankan industrial group, Chaminda Wanigaratne.
Even if the corporates and salaried personnel pay high taxes, one-third of the potential tax collections will be consumed by public sector salaries, another one-third will be used to pay interest on the loans the government has taken, and the balance one-third will be channeled to fund the reeling SOEs.”
‘Raising high levels of revenue from an anti-industrial tax policy may be the easiest way to pay the salaries of government servants, state-sector pensions, meet huge loan and interest payment liabilities payable by the government, and to keep the loss making state-owned-enterprises (SOEs) flying their flag above the water. But the government should evaluate the repercussions of this move before it’s too late,” he says.
A new tax policy is a valid need for Sri Lanka at present, but the government should be careful not to throw the baby out with the bath water, Levying corporate taxes of 30%-36% and personal income taxes from 6%-30% is high.
“The former government gave effect to substantial tax cuts without a mandate from the people and we all know the repercussions it brought to the country at large and the new tax will give effect to historically high corporate and personal income taxes of which the repercussions are going to be grave on the industrial sector and thereby on the overall economy,” he said.
“We are not saying that taxes shouldn’t be levied. In this country, we need to have a minimum of 15% tax to GDP ratio because Sri Lanka doesn’t have alternative earnings. But it should be levied in a strategic and meaningful way. It should be fair to the people and the society.”
“Taxes collected should be well spent to improve education, healthcare, infrastructure, power and energy sector etc. But we don’t hear anything from the government whether it is going to use the tax funds for such purposes. The high personal income taxes will affect our private sector talent pool from middle managers to cluster heads to directors. They have a lifestyle which they have not deliberately embraced but one that circumstances have compelled them to accept.”