Windfall for State from Super Gain Tax

• Finance Minister Ravi K says Rs. 65 b envisaged as opposed to Rs. 50 b target from one-off retrospective tax
• 22 qualifying companies have paid the first installment by 31 October
• 2016 Budget to be “revolutionary and sensational,” assures Ravi K
• All will be happy but those who should pay tax will be required to comply; 60% of affluent class are not paying taxes Govt. to link Samurdhi support to employment; capital expenditure to be stepped up with preference to local contractors
• Ravi K describes “private sector” in general as “absolute laggards”

By Nisthar Cassim

Widely criticised by the private sector but justified by the ‘Yahapalana’ Government, the one-off Super Gains Tax (SGT) is expected to bring in much higher revenue, Finance Minister Ravi Karunanayake revealed yesterday.

“We originally estimated Rs. 50 billion from the one-time Super Gains Tax but we are likely to get around Rs. 65 billion,” Karunanayake told a group of editors yesterday at his Ministry.

He said 22 companies had paid the first instalment of SGT which was due by 30 October.
SGT rate is 25% on the taxable income for 2013/14 for any individual or each company including subsidiaries and holding company (including subsidiaries and holding company in a group of companies notwithstanding that the profit before income tax of any such company in the group does not exceed Rs. 2 billion.

The second instalment is due on 30 November and the final portion is on or before 31 December.

Banks have been offered the option of lending to the Government at 6% interest in lieu of the SGT component.

In a meeting to outline the broader objectives of the upcoming Budget, the Finance Minister told editors that extra revenue via new taxes such as SGT was necessary to finance the relief package announced in the 100-Dayprogram of the Yahapalana Government.

He said the cost of most of the relief and stimulus package under the 100-day program was Rs. 220billion. Of this Rs. 120 billion was to be financed via new one-off taxes, the Mansion Tax and other measures. The balance was met by saving Rs. 90 billion expenditure as part of better fiscal prudence.The Finance Minister also said that Prime Minister Ranil Wickremesinghe would today (5 November) in Parliament outline the broader future direction of the Government as well as the policy framework. “The 2016 Budget to be presented on 20 November will be revolutionary and sensational,”Karunanayake said.Without revealing specific proposals, he said that in terms of taxation, the rich who evade will be compelled to pay taxes whilst those who are compliant will not be burdened. According to the Minister, 60% of the affluent class are not paying taxes. He also suggested that Budget 2016 would benefit all sections of society. “We will make life very easy for people. You won’t believe what we are going to do. The general feeling is that Budget 2016 will be tough. I won’t say what it will be like; I like to give that surprise on the Budget date. All will be happy,” the Finance Minister assured. He was of the view that the economy needed to be properly structured, reformed and strengthened. The 2016 Budget will start this process and lay a strong foundation. Ruling out a financial crisis in the country, Minister Karunanayake however clarified the economy was facing several structural issues which would be addressed by the Government. Budget 2016 will be one exercise. He noted that the public sector salary bill of Rs. 600 billion and pension cost of Rs. 177 billion had to be met, which is 65% of Government income. Additionally, the debt servicing is Rs. 1.3 trillion. To ensure subsidies are better targeted, the Government will link Samurdhi payments to employment of eligible members of the beneficiary families.
He also said that capital expenditure would be stepped up whilst encouraging local contractors to take on projects. Karunanayake also described the private sector as “absolute laggards” as they maintain a “wait-and-see” attitude or wait till things fall into their laps. He also opined that when foreigners seize opportunities, the local private sector complains.
What will Ranil reveal today?

By Shehana Dain
Finance Minister Ravi Karunanayake yesterday gave what could be described as a sneak preview of the policy statement to be delivered by Prime Minister Ranil Wickremesinghe in Parliament today.Speaking at a taxation seminar, Minister Karunanayake said to boost FDIs to the country, Premier Wickremesinghe would be making an announcement today to cancel the leasing rates currently implemented with regard to foreigners, which has been a de-motivator.The Premier is believed to propose the scrapping of controversial Expropriation Act and some changes to land ownership laws during a special statement in Parliament today ahead of the much-anticipated Budget which will be on 20 November.

“Land which is investment related will be given more ease but we will not just open the system. If we be too flexible, it will be too inimical to the Sri Lankan point of view,” Karunanayake said.Expropriation laws that were implemented by the former regime were heavily criticised by the business community following the acquiring of 37 formerly State-owned institutionsunder the 2011 Revival of Underperforming Enterprises and Underutilised Assets Act No. 37.When asked what was stopping the new regime from doing away with the much-debated and criticised Expropriation Act, Karunanayake stressed that there were certain legal limitations that had dragged on which needed rectification. 
Govt.-IMF-WB talks today

The Government will hold talks with officials of the IMF and World Bank to discuss the future support program today.

Finance Minister Ravi Karunanayake, who attended the annual meetings of the IMF-World Bank last month in Lima, Peru, said yesterday that multilateral funding agencies had expressed support to the Government’s future economic and fiscal program.However he categorically denied that the upcoming Budget would be dictated by the IMF or World Bank. “It is not an IMF or World Bank Budget. The Government will implement what is good for Sri Lanka,” he added.The Finance Minister said that there were prospects for $ 4.5 billion support from the IMF on a long-term concessionary basis. He hinted that IMF support would be via an Enhancement Facility to make the Balance of Payments situation for Sri Lanka more comfortable. “This support will be based on the Government’s home-grown future economic program,” he added.
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