Business Chamber of Commerce statement on Budget 2004|
Nov 26 (IL) Rationalisation of VAT to a single rate will make implementation easier both for the Government as well as the business sector. However, our Chamber still feels that further lowering of VAT to 10% and making it non deductible/non refundable will increase net revenue and make record keeping and filing of returns simpler.
The decision of the Government to ensure that the entirety of companies registered should become active tax payers, is in our view commendable, as the current narrow base of tax payers of only 10% of all registered companies is now broadened to include all companies, at the same time we envisage a substantial reduction in the number of registered companies due to closures of inactive, shell and paper companies.
From the macro economic perspective, we appreciate the growth levels the country has achieved in the past one year. In 2002 the GDP increased by 4% and in 2003 it is expected to rise to 5.6%. If such a growth momentum is maintained the country as a whole could gain substantially. However, our infrastructure especially the roads are in bad shape and should improve considerably if progress is to be achieved.
We commend the Government's reduction of inflation and also reduction of interest rates to be more in line with rates prevalent in the international market, since ours is an open economy, to be competitive, we must have international costs. We feel the Government should also bring down the cost of electricity and port charges, as both these are way above international norms, making ourselves uncompetitive in an open market thus encouraging imports of manufactured goods from lower cost nations at the expense of closing down of our own industries and also making uncompetitive the commencement of new industries for the export sector.
We are also glad that the Government has realised the importance of developing Sri Lanka as a regional shopping centre. It is quite evident that many tourists who visit this country have an additional interest on account of the low cost purchases they could make of a range of consumer products. In this connection, we should recall developments achieved by Hong Kong and Singapore which were hubs of international marketing as far as consumer goods are concerned.
The fact that we could attract some of the international shoppers on account of low value yet high quality local products is a very reasonable consideration in developing Sri Lanka as a regional shopping centre.
We feel the imposition of a tax of 15% on the profits earned for the sale of shares will stifle the development and expansion of our nascent stock market. We feel this is a good revenue earning measure on a profitable sector, but implementation from April 1, 2004 is too early, as the market should be allowed to mature before introduction of this tax.
We commend the new rates of penalty and interest on non-payment and delayed payment of taxes as these rates are fair and reasonable compared to the existing structure, which is so high that most often it is waived in arriving at a settlement.
We feel the transfer to economic depreciation from lump sum depreciation is too early as this will be a disincentive to establishing new industries and should be implemented only after substantial industries have been established.
From the overall perspective, this year's budget is a commendable exercise in revenue generation and rationalisation of financial management.