Sri Lanka will be among the first countries in the world that showed the quickest recovery after a huge economic crisis and with an IMF bailout, said Duminda Hulangamuwa, Senior Partner and Head of Tax, E &Y on the second day of the National Law Conference yesterday.
He said that today some of the negativity in the country (like fuel queues, long power cuts, gas shortages, high inflation ect.) has disappeared while the rupee has strengthened and this is not an artificial scenario.
“We are now in sight of the ‘IMF agreement approval’ and with it more positive economic sentiments like more FDI and better credit facilities will come Sri Lanka’s way. “If you take these positive factors into consideration Sri Lanka may be the first country in the world to have recovered from an economic crisis in such a short time.” He said that it took 13 years for Greece to recover from their economic crisis and Lebanon now having only two hours of power per day has not recovered and a recovery for them seems a tall order. A worker in Greece who earned 10, 000 in 2010 paid 5% as tax but today after their crisis worker pay has decreased to 6,000 and tax has increased to 25%. He said that all this was possible as the Sri Lankan government implemented the long overdue reforms on time.
“Over the years since independence politicians have taken decisions to please the public and hence they cannot be blamed.
“We too have to take blame for this current economic slump as politicians delivered what people wanted them to do by taking popular decisions. They borrowed and printed money to feed and please us.”
The Government also spent more to provide subsidies, subsidized fuel and electricity to people allowing the two institutions to fall into huge debt. He pointed out that the last Electricity tariff revision was done in 2007 which was 16 years ago and then in 2014 tariff was reduced by 25% and today the electricity board is a loss making entity. “Due to the current tariffs CEB can be turned around.”
Hulangamuwa who is also a Senior Vice President of the Ceylon Chamber of Commerce said that due to this consolidation process Ceylon Petroleum Corporation is now no longer in debt. Justifying the tax reforms he said that this too was something necessary to usher economic stability.
“If we don’t support these tax policies making sacrifices, Sri Lankans may have to face a longer painful period in the near future. I am not batting for any political party but this is the bitter truth.“Our chamber too has pointed these facts to political parties and unions.
*****
“Govt has no option but to breach gap by increasing taxes”
Senior Partner and Head of Tax, E &Y Duminda Hulangamuwa challenged the unions who are protesting against high taxes as to what protests and opposition they did when state entities were stuffed with over 100,000 graduates as employees. The State owned enterprises as well as government institutions are today suffering because the government has to now pay for their salaries but the government finds it hard to raise this amount. The annual government revenue is around Rs. 2 trillion but the expenses including salaries for over-staffed armed forces and state entities is around Rs. 4.5 trillion.
“The only way to breach this gap is by increasing taxes and adopting other cost cutting measures.”