Govt to raise Rs20bn from new excise duty for motor cars

(LBO) – Sri Lanka’s government is to introduce a unit rate of excise duty for the vehicles on the basis of cubic centimeters (cc) that generate 20 billion rupees for government, Finance Minister told Parliament Friday.

A new valuation system was introduced recently taking full option manufactures price as the tax base, due to the reports on revenue leakages from the under valuation of motor vehicles for tax purposes.

“To further strengthen this process of collecting the duly payable taxes, I propose to introduce a simple unit rate of excise duty for the vehicles on the basis of cubic centimeters,” Karunanayake said.

“Duties on the percentage basis on certain vehicles will also be revised.” He said.

Meanwhile, 2016 budget has reduced excise duty to 2.5 percent for the vehicles which are run entirely on Solar, Hydrogen or Helium.

Ravi Karunanayake said some of the vehicles which are being assembled in the country have not been registered with the Department of Motor Traffic Department due to various reasons.

He urged the owners of unregistered vehicles to register their vehicles by 31 March 2016, by paying a fee of 750,000 rupees for commercial vehicles and 1 million rupees for motor cars.

Finance minister is also to introduce a new emission fee for motor vehicles which generate 18 billion rupees for the government.

A fee charged on the certificate of emission test will be enhanced to 5,000 rupees per vehicle.

Sri Lanka banks banned from giving leases from June 2016, withdrawals taxed

ECONOMYNEXT - Sri Lanka's banks will be banned from giving leases from June 01, 2016 and pawning will be limited to five percent of total lending, and large withdrawals will be taxed, Finance Minister Ravi Karunanayake said.

In another move that can hit banks and make people hoard cash at home, withdrawals over a million rupees will be taxed at 2.0 percent, he said.

Higher volumes will be taxed at a higher rate. But people will be allowed to transfer funds by drafts he said.

People who issued rubber cheques will also be prosecuted under a new law.

All banks will have to open 15 percent more branches in lagging regions, he said, in a another potentially controversial move that increase the operational costs of banks.

Such branches should have at least 6 employees, he said.

He claimed that some areas were 'overbanked' and others were underbanked.

Sri Lanka raises PAYE threshold, corporate tax at 15 and 30-pct

ECONOMYNEXT - Sri Lanka has raised a tax free threshold for pay as you earn (PAYE) tax on salaries from 750,000 to 2.4 million rupees a year and corporate income tax will be at 15 and 30 percent, Finance Minister Ravi Karunanayake said.

All other personal income tax will be charged 15 percent, he said. No exemptions will be given.

Corporate income tax will be brought down to 15 percent for most companies. The higher 30 percent rate will apply to alcohol, tobacco and gaming firms.

They will also be charged a 25 percent sur-tax he said.

Casino will be charged a 400 million rupee annual fee.

Cars older than three years would be charged 5,000 rupees as an emission tax, yielding 18 billion rupees.

A tax on stock transactions would be removed losing 2.5 billion rupees.

Exemptions to value added tax would be removed.

The rate on Nation Building Tax (NBT), a cascading tax would raised to 4.0 percent. The goverment is expecting 90 billion rupees from the move.

Sri Lanka needs more money to pay salaries of state workers which were hiked by 10,000 rupees a month and also higher pensions and fertilizer subsidies for farmers, for which taxes are needed.

In 2015 by printing money to finance the spending, the rupee has collapsed from 131 to 142 to the US dollar this year, destroying the real salaries of workers and their lifetime savings in banks. The administration has now started slamming price controls to prevent prices going up due to excess demand from money printing.

Sri Lanka's small state banks to be merged

ECONOMYNEXT: The government will merge several small state run banks while private sector banks have been asked to merge on a voluntary basis and increase the number of branches, Finance Minister Ravi Karunanayake said.

Listed Housing Development Finance Corporation Bank and the unlisted State Mortgage and Investment Bank will merged into a single mortgage bank.

National Savings Bank will absorb two smaller state banks, Sri Lanka Savings Bank and Divinaguma Bank.

Loss making Lankaputhra Development Bank, which is ridded in bad loans will be merged with better managed Regional Development Banks.

"We also encourage private sector banks to merge. They have been talking about it for a long time so now it is time for them to walk the talk,” the minister said.

Private banks have been asked to increase their island-wide branch network by 15 percnet with each new branch employing at least six people.

Sri Lanka to lift land lease tax on foreigners

ECONOMYNEXT - Sri Lanka will lift a tax on lands leased to foreigners, Finance Minister Ravi Karunanayake said.

Impediments to foreign investors to get land in the country will also be relaxed, he said, without elaborating specifically.

The last regime blocked the sale of land to foreigners, in an Eastern European style nationalist move.

Sri Lanka to set up EXIM Bank

ECONOMYNEXT - Sri Lanka will set up an export import bank with a capital of 25 billion rupees to promote exports, Finance Minister Ravi Karunanayake said.

The proposed EXIM Bank will be set up with private partnership, he told parliament presenting a budget for 2016.

The EXIM Bank is planned to be in operation by April 2016, he said.

Sri Lanka listed plantation land lease to be extended to 50 years

ECONOMYNEXT - Land leases of Sri Lanka's listed plantations will be extended to 50 years and they will also be allowed to grow different crops Finance Minister Ravi Karunanayake said.

Leases on listed plantations are now nearing the end of their life he said.

A committee is now going into the matter, he said.

Sri Lankan shares end steady in low trade; budget worries remain

Reuters: Sri Lankan shares ended steady on Friday in thin trade as investors awaited details of the government's 2016 budget.

Sri Lanka will reduce its budget deficit marginally to 5.9 percent of gross domestic product from this year's revised 6 percent, the 2016 official budget document showed on Friday.

The main stock index ended 0.04 percent, or 2.74 points, weaker at 7,017.44, from its highest close since Nov. 9 hit in the previous session.

"Turnover and volume declined during the day while foreign participation remained (low) recording a marginal net foreign inflow to the market," First capital securities said in a note to investors.

Turnover was 447.2 million rupees ($3.14 million) on Friday, less than half of this year's daily average of 1.1 billion rupees.

Shares in Aitken Spence Plc fell 2.30 percent while Commercial Leasing & Finance Company Plc fell 2.44 percent.

Foreign investors, who had sold a net 3.59 billion rupee worth of equities so far this year, were net buyers of 7.9 million rupees worth of shares on Friday. 

($1 = 142.4000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Anand Basu)