Following are highlights extracted from the speech delivered by Minister Ravi Karunanayake a short while ago.

Opening Remarks

  • The structural weakness in the fiscal sector warrants immediate attention without which sustained growth in the long term may not be a reality. The façade of lies churned out did not make good reading for seasoned economists. Fiscal deficit falling from 10% of GDP in 2001 to 5.7% by 2014, total debt, falling from 102% of GDP in 2002 to 72% of GDP in 2014 envisaging to make us believe that some fiscal consolidation had taken place.
  • Declining government revenue to GDP ratio portrays a major macroeconomic concern for the country and this trend has to be reversed on a priority basis. Sri Lanka’s tax revenue was 19% of GDP in 1990 falling drastically to 10.2% of GDP by 2014. Ironically, the growth of tax revenue in absolute terms was just 4.4% in 2014 much below the nominal GDP growth rate of 7.3%. Thus, tax revenue had been unable to keep pace with economic expansion evidenced in recent years which is a serious phenomenon. It is also unfortunate to note that previous attempts to enhance fiscal revenue, have failed miserably during the past.
  • Unbelievably there are about 35 taxes and levies in the system. Some of the laws are outdated and not readily understood by the taxpayers and only a few who are conversant about tax laws could fathom the intricate nature of the system of taxation in Sri Lanka.
  • Falling VAT collection is the main cause of the decline in tax revenue in recent years and the figures depict the malady in no uncertain terms. Revenue from VAT accounted for 41% of total tax collection in 2005, and it falls to 26% in 2014. Further, VAT collection as a share of GDP has decreased sharply from 5.8% in 2004 to 2.7% by 2014. Income tax dilution also had kept pace, falling from a 2.7% of GDP in 2006 to 1.9% of GDP in 2014. As such, although the national income had increased there is no commensurate tax income. Several inherent features are noteworthy as to why tax revenue is falling. The main culprit could be weak compliance due to tax administration issues. A multitude of tax exemptions granted by various institutions also had been hindering positive administration of tax.
  • A majority of the revenue is derived from indirect taxes and the revenue from direct taxes is very low. At the same time, many who could afford to pay taxes and also who are liable for payment of taxes are not in the tax system. It is a well known fact that tax compliance methodology has to improve in an endeavor to eliminate evasion. Further, tax administration also needs strengthening.
  • Tax reforms in isolation to bolster revenue would not contribute to strengthen the fiscal system. It needs to be supported with appropriate expenditure rationalization measures as well which is of utmost importance. The question is how we could realize this necessity.
  • I very strongly believe and am convinced that the line ministries and departments could trim down their current expenditure levels. The time has come to critically analyze and evaluate the expenditure needs of the line ministries and departments to rationalize unnecessary expenditure and eliminate excessive administrative overheads which are spent at the expense of the limited direct taxpayers and also the revenue from indirect taxes, including from the poorer segment of the society.
  • As such, I strongly advocate the concept of zero budgeting in formulating the national budget. In fact, with this budget 2016, we have brought in to focus the concept of zero budgeting under which the spending agencies will have to justify each and every item in their respective budget before requesting for allocations. This process will be strictly adhered to in subsequent budgets as well. Honourable Speaker, zero budgeting although derived from accounting principles is practiced in many countries in the preparation of national budgets and I wonder why we took such a long time in the implementation of zero budgeting.
  • From January 2016, the General Treasury will start follow-up actions on reviewing the allocations for respective ministries and institutions. As a responsible government sensitive to the difficulties of the people, we have managed to maintain our commitments by increasing salaries and pensions substantially. In the meantime, we have to also realize that the employment in the public sector has quadrupled over the last several years.
  • The obvious consequence of this phenomenon had been the significant increase in the salary bill, which we believe has escalated to the maximum and may be beyond any yardstick of rationality unless the efficiency of the Public Sector is improved drastically. Hence, we have to look into the most appropriate ways of maintaining the continuity and sustainability of public sector emoluments. This among others includes improving efficiency, effectiveness and productivity of the public sector service delivery.

Budget Proposals

Encouraging Micro, Small and Medium Enterprises

The importance of Micro, Small and Medium Enterprises (MSMEs) in our economy is underpinned by the role it plays in the creation of employment, addressing the issues of income distribution, regional development and social cohesion. Today MSME sector is a key component of our economic strategy. The thrust areas that has a huge potential in this economy are furniture, IT, dairy industry, horticulture, floriculture, food industry, fruit and vegetable, inland fishing, beauty culture, ornamental fish and etc.

Yet in spite of the significant contribution to the economy, MSME’s find expansion difficult, mainly due to the obstacles they face in accessing funding, both equity and debt.

Our government is therefore keen to partner the growth of MSME’s. As such we have already formulated a “SME Policy” that covers a gamut of issues of the SME sector.

At the same time, a Bill to govern Micro Finance business will be presented to this House and a Regulatory Authority will be established to streamline this sector. I also propose that all Micro Financing Agencies be registered with this proposed Authority for an annual fee of Rs. 25,000/- per unit. As announced by the Prime Minister in his policy statement on the 5 November 2015, we will also be establishing an advisory committee to study the issues faced by Small and Medium Enterprises (SME) sector and our future action in the SME sector will be guided by their recommendations.

I note that the established financial institutions including Banks have shown a marked reluctance to lend to innovative MSME due to high administration costs and high risks involved in these sectors. Financial Institutions have become over reliant on collateral based financing which new entrepreneurs as well as existing entrepreneurs are not in a position to provide. Therefore, I propose to implement a MSMEs Credit Guarantee Scheme in 2016 with Rs.500 million contributed by the government as initial capital together with the assistance of selected financial institutions. Under this scheme the 75 percent of the principal amount if in default of the total facility will be guaranteed.

This will expand MSME’s access to financing options which are relatively cheaper and longer termed. In this regard, we have also been successful in obtaining a credit line of USD 100 million from the ADB to support MSME lending at concessional rates. Further, the funding schemes such as Saubhagya scheme and the Poverty Alleviation Micro-finance Project (PAMP) that Central Bank has implemented to help SMEs will be merged into one large SME facility. The merger of these funds will create synergies that will enable the Central Bank to serve the MSME sector better.

Venture Capital

I propose to initiate a venture capital approach for providing equity financing facilities to SMEs through the establishment of one fund that will be a “Fund of Funds”. This will compriseof stakeholders such as Banks, Insurance Companies, State-Owned funds such as EPF, ETF and foreign funds. I would like to invite the International Finance Corporation (IFC) and Asian Development Bank (ADB) to contribute to the Fund and while encouraging the private sector conglomerates too to be part of this initiative.

The Fund will lend to responsible Venture Capital firms for a guaranteed minimum rate of return, and the Venture Capital Firms will make equity investments in the SMEs. In addition to the equity investments, these firms will provide the SME’s with the most required advisory services, including financial planning, information technology, marketing strategies, etc. and ensure the growth of the SMEs to gain healthy long term returns.

In order to promote this initiative, I propose to reduce the applicable Corporate Income Tax by 50 percent for Venture Capital Firms for a period of 5 years. This will commence by 1 April, 2016.

Incubators Assisting MSMEs

I propose to construct mini-industrial parks which will be incubators in Moneragala, Puttalam, Jaffna/Vanni, and Ampara. I encourage the private sector also to join in this endeavor. In order to promote such investment in designated areas, then applicable tax rate, will be reduced by 50 percent for a period of 03 years from the year in which the profit is generated. I propose to allocate Rs. 150 million for this purpose.

Further, I understand that the SME’s have an issue in marketing their products. Given the lack of funds at SMEs for engaging in marketing and advertising activities, their products do not get displayed prominently at Super markets and shops. Therefore, I urge the large super markets and retail sellers to lend a hand to the SME’s by providing them with some prominent shelf space at a reasonable price.


The President and the Prime Minister, have focused their attention on formulating a new agricultural policy. Our policy is anchored on the requirement to make the country self-sufficient in maize, soya beans, chilies, onions, and potatoes by 2018 through crop diversification and productivity improvements and graduate into an agri-business from subsistence economy whereby we will access export markets by 2020.

We also recognize that the optimal strategy to increase yields from the sector lies in strong collaboration between the private and public sectors, which will strengthen the supply chain management in agriculture. We encourage the private sector to take the lead. As such, I propose several measures including making available a fiscal regime to companies that develop seeds and plants and making available unutilized or underutilized government land for agriculture on request.

Investment to Agriculture especially into productivity improvement is a crying need. To this end, availability of quality seeds plays an important role in ensuring better productivity. As such, to encourage greater collaboration between the private sector and government to produce high quality seeds, unutilized state land would be allocated as an incentive. Therefore, I propose to allocate a sum of Rs.1,000 million for this purpose. Half tax holidays will be granted to companies that use drip irrigation methods, greenhouse technology and endeavor to introduce high yielding seeds. At the same time, having recognized the importance of mechanization in productivity improvement, I also propose to remove the import duties pertaining to import of agriculture machinery and equipment.

At the same time, to strengthen the supply chain linkages via collaborative partnerships, it is proposed that Agriculture Extension Officers to be permitted to disseminate their knowledge to the private sector farms in addition to their normal duties at a fee.

Storage and marketing

I propose to set up warehouses with state of the art technology to address the issue of post-harvest losses, which is about 30-40 percent. These warehouses provide good quality storage facilities for farmers during glut periods to store their produce such as paddy, maize, gingelly, pepper, black gram. Using the receipts issued by the warehouse, 50 percent of the value will be paid to the farmers by the bank, thereby solving the immediate cash flow of the farmer. However, once the prices are favorable the produce could be sold in the market for a better price. This method ensures the farmer is not exploited by unscrupulous middlemen while ensuring that farmers also reap benefit from the higher market prices that will prevail during the off season. Already the government has constructed warehouses in the Districts of Anuradhapura, Monaragala while the Mannar warehouse is under construction. This method also benefits the consumer as price of the produce will be lower, given that the cost incurred from the farm gate to the final consumer will now decrease with the elimination of the middlemen.

As such it is proposed that Rs.1,000 million be allocated to construct 3 more warehouses in the Districts of Polonnaruwa, Kilinochchi and Ratnapura (Embilipitiya) while completing the balance work of the Mannar Warehouse.

Guaranteed Price

I propose to give a guaranteed price of Rs. 50/kg for Keeri Samba, Rs.41/kg for Samba and Rs.38/Kg for Nadu and other varieties. This would help the consumer to get rice at Rs. 65/kg on average. The country’s rice production has increased. We will be utilizing these stocks to be distributed amongst the Samurdhi recipients who are relatively more susceptible to malnutrition. Thus this proposed scheme will improve their nutrient levels.

For this purpose we will be utilizing around 44,000 metric tons of rice. I believe it is time we export our rice and as such we also encourage the farmers to produce rice varieties that could access export markets. As such, I encourage the Export Development Board to find markets and engage in a branding exercise of Sri Lankan rice.

Chronic Kidney Disease Unknown of Aetiology (CKDU)

I propose to provide the existing fertilizer subsidy scheme to small scale paddy farmers. A cash grant of Rs. 25,000/- covering the production year, Yala and Maha, will be provided to farmers for a maximum extent of 1 hectare. This will allow the farmer greater flexibility in selecting his farming inputs and I am confident that this will increase productivity. For this purpose I have allocated Rs.37,500 million, which is an increase over Rs.35,000 million provided in 2015.

Fruit and Vegetable Industry

In a bid to boost this industry, it is proposed to extend interest support on 50 percent of the interest on loans to be taken from Banks by individuals or companies who enter this industry.

Machinery utilized for this purpose will also be allowed to import free from duties and a qualifying payment deduction will be available in addition to depreciation. I encourage the private sector to optimize land usage through intercropping, use of high yield plants and seeds, and technology. Underutilized or unutilized government land will also be leased out to fruit and vegetable farmers on request.

It is also proposed to establish 5 cold rooms managed by private companies for vegetables and fruits within close proximity to economic centres situated in Nuwara Eliya, Dambulla, Embilipitiya, Keppitipola and Thambuthegama. It is envisaged that this will mitigate the post-harvest losses while ensuring price stability in the market. I propose to allocate a sum of Rs.2,000 million for this purpose.

Dairy Industry

I propose to reduce the maximum retail price of a 400g domestically manufactured powdered milk packet to Rs.295 from the existing price of Rs.325. The government will provide the domestic manufacturers with a subsidy of Rs.30 per 400 g packet sold for which I propose to allocate a sum of Rs.1,000 million. This will have the dual impact of helping local producers as well as reducing cost of living.

The country’s dairy sector contribution to the economy is very nominal but it has immense potential to grow. As such, to encourage commercial scale dairy farming on a Public Private Partnership (PPP) arrangement, underutilized or unutilized government land will be provided for a minimum level of investment of Rs 25 million. I would also like to propose to enter into PPP arrangements for such government land that is unutilized or underutilized to grow high yielding grass on an out grower basis.

I propose to grant upfront depreciation on the machinery and a reduction of import taxes on machinery and equipment related to the dairy industry.

Since liquid milk consumption has still not gained momentum in the country, I propose to entrust the Ministry of Upcountry New Villages, Estate Infrastructure and Community Development and the Ministry of Health, Nutrition and Indigenous Medicine to undertake a massive campaign to promote liquid milk consumption in the country.


In keeping with the government’s commitment of providing social safety network to fishermen from vulnerabilities and endemic to their work, we will introduce a life  insurance cover of Rs.1 million for the fishermen who meet with accidents when at sea. This insurance scheme will also cover the expenses incurred in the search and rescue operations.

Approximately Rs. 5,000 million worth of canned fish has been imported to the country annually on average in the last 5 years. Given the potential in the industry, I encourage the private sector to engage in fish canning. To incentivize this industry, I propose to implement a buy back mechanism through Lak Sathosa Ltd., which would be sold at a concessional price of Rs. 125 each. This will help reduce cost of living.

I propose to allocate a sum of Rs. 300 million to Lak Sathosa. Moreover, to protect the local fisheries industry, I propose to increase the Special Commodity Levy (SCL) on the import of fish to Rs. 50/-. Further, import duty on fishing nets will also be reduced.

To facilitate the fisheries industry, I propose to develop and upgrade local fishery harbours with state of the art technology to include cold storages as well. I also propose to allocate further Rs. 750 million for the development of Fisheries Harbours in Chilaw, Mirissa, Kalmunai, Valvettithurai, Karai Nagar and Puranawella. These harbours will also facilitate repair and manufacturing of boats as well.

It is proposed to create agro and fish processing facilities in geographical locations close to the farm gate. This will be cost effective as facilities can be shared. Thus it is proposed to create an Agro Livestock and Fish Processing Park connecting the districts of Anuradhapura, Vavuniya and Kilinochchi. I propose to allocate Rs. 100 million for this purpose.

Inland fisheries

This sector is underutilized. Therefore, I propose to allocate Rs.100 million to National Aquaculture Development Authority (NAQDA) to undertake programmes to enhance fish breeding capacity.

I also propose to set up an Aquaculture Park in Batticaloa District by providing an enabling environment for the potential private sector investors to develop coastal aquaculture without causing environmental degradation. Aquaculture Park provides an ‘investment ready’ platform for organizations that want to set up commercial aquaculture operations.

This Aquaculture Park will be developed and managed as a PPP. I propose to allocate Rs 100 million for the initial activities.

The Shrimp industry has been faced with difficulties in the immediate past which has remained unattended. However, given the potential in the shrimp industry I propose to provide capital and working capital requirements of the shrimp farmers, hatchery operators and processors through the proposed ADB supported SME credit line. I also propose to provide guarantees through the SME credit guarantee fund to those who are engaged in shrimp farming.

I propose to introduce a deep sea fishing licensing scheme where one license holder will have to engage in collaboration with at least 100 persons in the fishing community.


I encourage the local poultry industrialists to further invest for expansion and to improve productivity and quality. I also encourage them to take advantage of Sri Lanka being recognized as a bird flu free country in the region to penetrate overseas markets, especially the Middle East. Government will extend the maximum support in this regard.

Plantation Economy

Regional Plantation Companies (RPC) that were established in 1992 have now run its course. It is time to rejuvenate the RPCs by restructuring them into small manageable units so that all RPCs could seek listing in the Colombo Stock Exchange (CSE).

To strengthen the activities of the RPCs, I also propose to relax restrictions on the usage of RPC land in the cultivation of different crops. However, leases of RPC’s that commits to a long term investment for replanting and modernizing will be extended for 50 years, with management fees to be reviewed.


Tea has remained a key export of our country but the value addition is not as significant to the extent expected. The industry is presently facing issue of significant dip in prices in the international market. This has had an impact on small and medium scale tea growers. Therefore so as to address these issues, we propose to establish a Working Committee consisting of both the government and private sector officials.

Tea Blending

Sri Lanka being one of the main tea producers of the world has lost ground on value addition to centers like Dubai. In the last few months the tea industry made strong submissions to liberalize tea imports to Sri Lanka. As such with the aim of developing Sri Lanka as a tea hub I propose to liberalize the tea imports to the country within a regulatory framework with a view to encouraging value addition through blending etc. I note that strict labeling requirements will be made mandatory so that the brand name “Ceylon Tea” remains uncompromised.


A Master Plan has been developed by the Ministry of Plantation in collaboration with the stakeholders of the rubber sector to carry out feasibility studies. Technical assistance has also being obtained by the government for this purpose.

This plan addresses a wide range of issues faced by the sector and has also identified a way forward. As such I propose to allocate Rs.100 million to the Ministry of Plantation to support the implementation of this plan. Further, I urge manufactures to utilize locally produced natural rubber for their value added products instead of the imported rubber.


The coconut industry too is faced with the issue of lack of coconuts for value addition. This is because a significant portion of the production is used by our households for food. As requested by the coconut industrialists, it is proposed to import coconut for value addition in a specially designated area regulated by the relevant government entities, from where such products will be exported. The proposed importation of coconuts will be allowed subject to strict adherence to quarantine requirements. I also propose to allocate Rs.250 million to coconut cultivation rehabilitation programme, which includes the promotion of practices such as mulching.

In order to incentivize the tea and rubber industries, a two year tax exemption period will be granted for companies engaged in tea and rubber plantation.

Further, with a view to develop the tea, rubber and coconut industries, it is vital that widespread research be conducted while such new findings and techniques be applied effectively. Hence, I propose to strengthen the Tea Research Institute, Rubber Research Institute and Coconut Research Institute, so that they can engage in research in improving productivity, finding new varieties, and etc. For this purpose, I propose to allocate a sum of Rs.200 million within a period of 2 years.

Other Crops

In support of these industries, the Sugarcane Research Institute and the Palmyrah Research Institute will be strengthened for which I propose to allocate a sum of Rs.100 million.

The arecanut industry has been neglected in the last decade with almost no support from the government. Given the potential in the industry, I encourage commercial cultivation of arecanuts and encourage the establishment of an arecanuts value addition zones, to take advantage of the export markets.

Spices and Allied Products

History of the Spice trade in Sri Lanka dates as far back as 7th Century. However, Sri Lankan spice trade has not yet lived upto its expectations, thereby denying the country valuable export earnings.

To address issues faced by the spice industry, the government will collaborate with the Spice Council to undertake a branding exercise of Sri Lankan spices globally, for which, I propose to allocate Rs. 150 million. In order to enhance the production and generate more export revenue, I propose to facilitate the usage of unutilized fertile government land to be leased out to the private sector to grow spices such as cinnamon, pepper, cardamom, nutmeg, etc.


I also encourage RPCs to engage in contract cultivation, especially spices such as pepper, cardamom etc. I further propose to allocate Rs. 50 million to strengthen the Cinnamon Research Unit at the Department of Export Agriculture.

Sri Lanka has the monopoly for the supply of “True Cinnamon” with over 85 percent supply share in the world market. Value chain of cinnamon is under many different agencies which stifles the growth of this industry. Therefore, I propose to set up a Cinnamon Development Authority with private sector participation to bring all activities in the value chain under one entity and I propose to allocate Rs 50 million for this purpose.

Further, in order to enhance the skills required for cinnamon industry, the Cinnamon Training School will be expanded. I propose to allocate Rs 50 million for this purpose.

Given that value addition in this cinnamon industry is at a minimal level, it is proposed to allocate a sum of Rs. 50 million to National Science Foundation to fund research undertaken on cinnamon and cinnamon related activities.

To encourage export of spices, cesses imposed on, pepper, cloves and nutmeg will be removed.

Revival of the Rural Economy

14,022 Grama Niladari divisions will be developed into 2,500 cluster villages as complete rural economic units. Accordingly, projects will be undertaken to develop infrastructure of the villages, and livelihood development to empower local community facilitating an upliftment of their standards of living.

Large scale agricultural enterprises in which farmers can be members will be established under the plan to develop the rural economy. For this rural reawakening programme, I propose to allocate a sum of Rs.1.5 million to each village which will amount to Rs.21,000 million.

I also propose to establish a new economic zone in Vavuniya, for which I propose to allocate a sum of Rs.200 million to the Ministry of Rural Economic Affairs.

I propose to allocate Rs.2,000 million to rehabilitate small tanks and canals to support rural agriculture.

National Environment Conservation Programme

The President has initiated a 3 year National Environmental Conservation Programme considering the impact it has on all spheres of life while managing the Carbon foot print of our country by implementing the best practices in this respect. For these activities and for additional programmes relating to child protection, drug prevention, agriculture, I propose to allocate Rs.2,000 million.

Wild Life

I propose to allocate a sum of Rs. 4,000 million to be utilized within three years to programmes aimed specially at protecting wild life and addressing the human elephant conflict.

Gem and Jewelry

To promote the sale of gems and jewelry and to attract tourists, I propose Sri Lanka to hold “Gem, Jewelry and Diamond” auctions in April and October every year. I also propose a “Gem Emporium” to be established by the private sector in Ratnapura, and further, to harness the benefits of increasing tourism, private sector is encouraged to open duty free gem and jewelry shops at the airport.

In order to protect the world class local jewelry craftsman, a 10 percent cess on imported jewelry will be imposed

With all this support and encouragement, we expect the export earnings from Gems and Jewelry sector to reach USD 2 billion by 2018.


I propose Central Bank to adopt a scheme where 50 licenses will be issued allowing import of gold free of all import duties. These licensees will trade the imported gold to jewelry manufactures. No person will be permitted to trade gold without the said license.

Primary Industries

We will be creating specialized agricultural and fishery export zones in the country. The Ministry of Primary Industries will be allocated Rs. 2,000 million for the establishment of the proposed agricultural and fishery export zones.

Digitalization of the Economy

As promised by our government and as part of our ICT transformation strategy, we have already provided free limited Wifi in selected public places. We will also be extending free Wifi to all our state universities as well.

This government is determined to implement a comprehensive Digital Development Strategy during the next three years, which will have a significant impact on the economy.

As such, it is envisaged that by end 2018 all the government buildings including Divisional Secretariats offices, Provincial Councils, Pradeshiya Sabhas, Sub Post offices and Police Stations will be connected electronically. This will enable the servicing of around 70 percent of their day-to-day transactions online.

National Digital Identity (NDI)

We also propose to introduce a National Digital Identity (NDI), which will ensure that all financial and non-financial digital transactions to be transpired in a secure manner. NDI will have a unique number in all other relevant data bases, namely, passports, tax file, customs documents, vehicle registration, voter registers, welfare registers, bank data bases, utility bills etc. Apart from using it to enhance tax collections, it can also serve to regularize various other systems such as welfare payments which will help reduce corruption, delays, waste and enhance efficiency.

National Payment Platform

Our digital strategy includes the introduction of the National Payment Platform (NPP) enabling the public to transfer funds from any of their bank accounts through the mobile phone for the payment of goods and services using their NDI. The National Payment Platform will bring in savings for the government by increasing efficiency thereby reducing cash movement and the cash float in the market.

I propose to form a special purpose company under the Information and Communication Technology Authority (ICTA) to bring about sharing of telecommunication resources efficiently and to protect air waves and the environment. All the fiber optics owned by telecommunication companies and other authorities including the Ceylon Electricity Board, Road Development Authority and Sri Lanka Railways as well as spectrum and mobile towers are to be brought into this company.

Single Window Concept

We also envisage the implementing of a single window concept for citizen centric services integrating with the national digital identity, in the provision of public services including hospital services, land matters and Samurdi payments. The state land management system and the Land Hub System will also be implemented as part of the single window concept.

200 smart digital classrooms

Initially 200 smart digital classrooms will be established by 2016 and another 1,000 digital classrooms by 2017 across the country.

The government is committed to an Open Government Partnership (OGP). The implementation of the national big data platform will further help Sri Lanka to meet the requirement of OGP.

I propose to allocate Rs. 10,000 million for the purpose of implementing an advanced digitalization programme of economy.

Investment Promotion

Our government will restructure the BOI, the Export Development Board and Sri Lanka Tourism Development Authority with a view to improve operational efficiency and to facilitate investments. Until the restructuring process is completed, an organization under the name “Agency for Development” will be established.

We have identified key thrust areas which has a potential for investment over USD 2 billion to be as follows:

Oil Refinery, Renewable energy, Integrated car manufacturing, Manufacturing Steel bridges for the region,  Fertilizer, manufacturing triple super phosphate, Satellite technology, Air craft repair and logistical support, Integrated sugar industry

In this context, some of the key impediments to attracting investment will be addressed as follows:

I propose to remove the tax imposed on the leasing of land to foreigners and also to consider the removal of restrictions on ownership on identified investments imposed through the Land (Restrictions on Alienation) Act, which has been an impediment for attracting investments to the country.

Exchange Controls

Exchange Controls have been a key point of contention in attracting investments. As such, I propose to repeal the present archaic and draconian Exchange Controls Act and introduce an investor friendly Foreign Exchange Management Bill (FEMB), which would help attract foreign flows from the SAARC and the world at large.

In order to promote foreign investment inflows, the income from dividends on investment made by non-citizens and foreign companies in listed shares through inward remittances will be exempted from income tax.

The Agency for Development which will replace the BOI, will ensure that applications for foreign investment are completed to commence business within 50 days. This will certainly be a game changer in promoting investments.

Export Processing Zones

The existing Export Processing Zones (EPZs) are badly in need of a facelift if we are to retain and attract more investments. I therefore propose to entrust the management of these zones to private sector Management Companies with the necessary skills.

The BOI will also actively engage in setting up of new EPZs and once they are in operation, the management of new zones will also be vested with the private sector Management Companies.

Highly environmentally sensitive industries will be facilitated to operate in specially designated areas such as Puttalam, Hambanthota and Kilinochchi. Government lands and investment related tax concessions will be provided to investors who invest in lagging regions of the country given that the government’s policy of ensuring an equitable development in all parts of the country.

In order to encourage the investors to invest in these areas, I propose to grant a 50 percent tax reduction for a period of 5 years to any new company setting up facilities in such areas with a minimum investment of US dollars 10 million (excluding land and building) or 500 new employment opportunities (with new EPF Numbers). This period will be extended to 8 years if the number of employees exceeds 800. Various other concessionary provisions which are in existence will become redundant with these new concessions. .


I propose to liberalize the lubricant market and I encourage the companies to venture into more value added products with high investment. Further I propose to remove lubricants from BOI negative list.


I also propose to liberalize the Bitumen market so as to enable the expeditious rehabilitation and construction of roads and expressways.

I encourage the expansion and modernization of existing business by investing in machineries and based on the creation of new employment the profits from such expansion will be subjected to half tax rate for 3 years.

Revival of Underperforming Enterprises and Underutilized Assets Act

We wish to review and make the necessary revisions to the Revival of Underperforming Enterprises and Underutilized Assets Act No 43 of 2011, which was introduced by the previous government where many investors were harassed.

Strategic Development Project Act

The Strategic Development Project Act will be continued to be effective for existing companies that have been availed the concessions under the last government. For new investments, instead of Strategic Development Project Act, a new investment Act will be enacted. I propose to extend tax incentives to those private sector companies who wish to invest in mixed development projects that will have a significant impact on the landscape of the country. However, those companies that have already applied for concessions will be made privy to the same in the interim period, pending new legislations.

Super Gain Taxes

We imposed super gain taxes, and many companies complied. This was imposed as a one-off tax. Therefore, I wish to inform this house that there will be no such super gain taxes in future.

Inward Remittances and Investment flows

I propose to engage with international agencies that can provide an insurance to ensure security of their investments and inward remittances. Further, in line with the liberalization of the exchange controls, I propose to abolish Securities Investment Account (SIA) through which the foreign investors have been requested to channel their investments to the country. Instead, I propose that investors should be allowed to bring in money to Sri Lanka through any bank account existing in the formal banking system.

The Government shall not take any criminal action against any persons making inward remittances of such monies held overseas through the banking channel except in instances where the proceeds are the result of terrorism, drugs, human trafficking and corruption.

I also propose to expand the scope of the exemption available under the Inland Revenue Act for services rendered outside Sri Lanka, provided all transactions are made through the banking channels. Therefore, I encourage entities to make use of these provisions.

Bunkering industry

I encourage the private sector to engage in deep sea bunkering, for which licenses will be issued through competitive transparent bidding process.

To encourage ship building, ship breaking and ship repair activities, for which I propose to allocate government land in Hambanthota and Trincomalee.

We also encourage the private sector to partner the public sector in manufacturing Triple Super Phosphate (TSP) in the country. This will result in generating savings in foreign exchange due to reduction in fertilizer imports while also providing relief to the farmers through affordable fertilizer.

Export Promotion

Sri Lanka’s merchandise export, as a share of GDP has declined from 33.3 percent in 2000 to 14 percent in 2014 while Sri Lanka’s share in the global export market also has shrunk from 0.09 per cent to 0.06 per cent during the same period reflecting requirement for further measures to exploit its potential and improve its relative position through export diversification and bilateral regional trading agreements.

A high level body who can take policy decisions and clear bottlenecks will be formed to ensure successful implementation and effective monitoring of the export strategy of the country. Therefore, an Export Development Council of Ministers (EDCM) chaired by the President, as mandated by Statute and comprising of the Prime Minister and other relevant Ministers, will be appointed. This would synergize the strengths of all the stakeholders involved in export promotion, development and facilitation by removing the duplication of work among institutions, ensuring regular monitoring of the progress, taking corrective actions and effectively moving towards the achievement of medium to long term targets on exports.

Export Import Bank

I propose to set up an Export Import Bank (EXIM Bank) to facilitate tapping of such opportunities, with an initial capita of Rs. 25 billion, subscribed jointly by the government and the industry. As such I propose to allocate Rs. 50 million as seed capital being the contribution of the Government EXIM bank will be operational from 01 April, 2016. It is also envisaged to list this company in the CSE.

Sri Lankan Diplomatic missions

I also propose to make it mandatory for commercial sections of Sri Lankan Diplomatic missions to provide a market guide on products and services of interest to local businesses periodically which will be made available on the websites of the Department of Commerce and Export Development Board (EDB).

Further, EDB would be strengthened to enhance export promotion activities and I also propose that EDB should actively be engaged in exploring new markets for Sri Lankan exports and carry out extensive brand promotion particularly for IT, Spices, Gem and Jewelry and to find new markets.

Official Reserves

It has been found that exporters are keeping around 30 percent or over USD 3 billion of the export earnings outside of Sri Lanka. Our government through this budget has given many incentives to the exporters and our commitment to ensuring a fair and transparent business environment in itself should make our businesses happy. It is time that they too reciprocated. They must deliver now. Given that we have now entered into a flexible exchange rate policy, I see no reason why there should be an excuse for exporters not to bring their foreign funds back to Sri Lanka. Therefore, I urge all Sri Lankan exporters to remit their export proceeds in full with immediate effect. This will further strengthen the macro fundamentals that will create the platform for a better economic environment

US$ 10 billion reserves by end June 2016

I do not have to re-emphasize the importance of strengthening foreign reserves to improve the resilience of our economy. With the enhanced inflows generated from exports of goods and services and investments inflows, I expect the official reserves of the country will increase to USD 10 billion by end June 2016.

International Trade

The existing Imports and Exports Control Act has created a license regime and has no teeth to control our country being a dumping ground for substandard goods. As such, I propose to introduce a new legislation replacing the existing Act that will create an improved level playing field for domestic industries and ensure a more efficient import export system in the country.

In order to strengthen our international trade policy framework, the government plans to incorporate an International Trade Agency. I also propose to explore the possibility of entering into Free Trade Agreements (FTA) with countries such as United States, China, South Korea, Singapore, Australia, South Africa and Japan, and also to enhance exports to EU through the GSP+ scheme.


I propose to introduce a “land bank” which is an electronic database of state-owned lands. I propose to allocate Rs. 500 million for this purpose. ICTA will ensure quick migration to an electronic data base. Subsequently, this database can be extended to contain records of the privately owned land as well.


I propose to provide 100,000 units of housing through private public partnerships (PPP) within a period of 5 years to these shanty dwellers ensuring that relocation will not affect their livelihoods and social networks.

Government envisages collaborating with the private sector to provide middle level government and private sector employees with 150,000 housing units while senior officials of the government sector will be provided with 5,000 housing units at reasonable prices.

These houses will be constructed on state-owned lands in Colombo, Jaffna, Kandy, Matara, Batticaloa, Puttlam and Kurunegala. Other community based facilities will also be built around these units. Credit facilities will also be provided to government officials to enable the purchase of such houses, and half tax rate will be granted to such private investors.

Further, our government will undertake new rural housing schemes to uplift the living standards of the rural community. The government will share the cost with the occupant, with the government contribution being a maximum of Rs.300,000 per house (milestone payments) with a floor area of at least 500 square feet. It is envisaged that at least 1,000 such houses will be built in each electorate and I propose to allocate Rs.4,500 million for this purpose.

Necessary legislative enactments will be brought about so that all permit holders of land and houses with occupancy of over 10 years, under the Land Development Ordinance, including the Swarnabhoomi and Udagama, will be given ownership. This will also be extended to those living for more than 10 years in government owned houses and estate sector houses as well.

Local Authority Rates

I propose that the rates charged by local bodies should not exceed 15 percent of the annual value of commercial entities. I also propose to exempt the rates on properties where the current annual rate is Rs. 500 or less.

Also I propose to allow foreigners to borrow 40 percent of their investment in condominiums from banks in local currency.


I propose the construction companies who seek overseas markets to be granted the opportunity to continue with the tax exemption on the income generated outside Sri Lanka.

Further, any foreign contractor entering Sri Lanka to undertake construction work should enter into a joint venture agreement with a local contractor.

I propose to remove the Construction Industry Guarantee Fund Levy, to encourage small and medium scale contractors and to create an improved level playing field. The proposed National Housing Bank will provide the necessary guarantees together with a dedicated and focused operation that will support the construction industry.

I propose to introduce a Payment Guarantee Security Act which will provide adequate cover in recovering their payments.

Construction sector is faced with the lack of building materials such as sand. To encourage private sector to import machinery necessary for purifying sea sand in the deep sea, which could be used for construction, I propose cost of such imports be considered as a double deduction, for tax purpose.

To address the short supply and high prices of building materials such as steel, tiles and sanitary ware, import related duties will be revised downwards. Further, I propose to remove tiles, ceramic, and sanitary ware, from the negative list of the BOI.

The import duties on cranes and concrete mixers will be removed. Also the age limit applicable for imports of heavy equipment machinery used in the construction industry will be extended to 10 years from the present 7 years.

I propose to increase the mobilization advance granted to small and medium scale contractors for government contracts of a value of less than Rs. 50 million to 30% with the objective of improving their cash flows.

I propose to introduce a PPP program with the private sector for practical training and an allowance of Rs 10,000 will be paid monthly to the trainees by the government during the training period limited to 3 months. It is envisaged that at least 7,500 youth will be trained in masonry, carpentry, plumbing, electrical, aluminum extrusion etc. on a quarterly basis. I propose to allocate Rs. 500 million for this purpose.


I propose to provide training to youth keen to join the hospitality industry in collaboration with the private sector. For a 3-month standard training course, 50 percent of the course fee subject to a maximum of 15,000/- will be borne by the

Government, and it is targeted to train a minimum of 3,000 youth every quarter. I propose to allocate a sum of Rs.100 million for this purpose.

Further, as a source of encouragement for the private sector hotels willing to establish training schools on their own, I propose to provide tax benefits in line with the triple deduction made available for skilled development.

MICE  Triangle

To encourage “Meetings Incentives Conferencing and Exhibitions” or “MICE” as it is called, it is proposed to establish the necessary infrastructure to create a MICE  Triangle consisting of the BMICH, Nelum Pokuna Theatre and the New Town Hall.

A convention hall with state of the art facilities will be built adjacent to the Town hall. The proposed facility will have a seating capacity of at least 7,000 and will be built in collaboration with the private sector. As such to encourage such investments, I propose to grant a 50 per cent tax holiday for 5 years for companies incorporated specifically to engage in “MICE” activities. I also propose to allocate Rs.3,000 million for this purpose.

To encourage spending by the tourists and to evolve into the shopping paradise of the region, I propose to revise import taxes on garments, shoes, electronic and electrical items and other accessories.

Money Changers

I also propose to liberalize the foreign currency changing business, subject to a license fees and guidelines issued by the Central Bank. Sri Lanka has an immense potential to attract cultural, religious, environmental and medical health care tourists. Steps will be taken to transform and upgrade the cultural triangle sites, Eastern province beaches, Nuwara Eliya, Badulla and upcountry sites as sought after tourist attractions. Special emphasis will be placed on developing Bentota, Dedduwa, Mirissa, and Colombo Fort locality as tourist zones with the participation of the private sector. Further, Galle will be developed as a heritage city while preserving the Galle Fort in its age old splendor. I propose to allocate Rs. 500 million for these endeavors.

Regulating Medical/healthcare tourism

Medical/healthcare tourism especially our traditional medicinal practices has the capacity to gain traction internationally. However, it is important that we maintain the highest standards in medical/healthcare tourism and do not allow unacceptable practices tarnishing the image of the country. As such, I propose to introduce appropriate legislation to regulate this industry immediately.

Considering the dilapidated condition due to poor maintenance and management of the

government-owned rest houses and circuit bungalows, I propose to allocate these units under a management company, where all stakeholders will be partners. These institutions will be operated by professionals in order to upgrade such facilities enabling an affordable service coupled with comfort.

We will also construct an exhibition centre near the Parliament through a PPP.

I also encourage theme parks to be established in lagging regions for which I propose to provide state lands and half tax holidays for 10 years. This will have the benefit of expanding the economic activities of such regions through expansion of the leisure activities and tourism.

Hotel registration by June 2016

I am aware that almost 60 percent of the hotels operating in the country are not registered. This has caused many issues in terms of maintaining proper standards in the hospitality industry in the country. As such, I propose that all hotels be mandatorily registered under the Tourism Development Authority by 1 June 2016. Strict action should be initiated by the Tourism Development Authority against hotels that are not registered. Given the above requirements, I encourage the hotel industry to adopt star classifications, administered by the Trade Chambers of the hotels registered with the Federation of Chambers.

I also propose to remove import duties on the caravan carriages, yachts, surfing equipment, speed boats and mini cruise boats.

Colombo International Financial Centre (CIFC)

We will establish a “Colombo International Financial Centre”. A specific zone will be built on the lines of the Dubai International Financial Centre and such other off-shore centres around the world. The zone will cover a demarcated area in D R Wijewardena Mawatha, where a 300,000 square feet facility will be constructed.

The proposed financial center will have an own commercial court for resolution of commercial disputes in a quick and equitable manner keeping in line with the financial centre regulatory requirements. We expect that this initiative will convert the infamous casino proposal of the former government into a robust venture of a financial centre which will be creating a number of new employment opportunities. We invite domestic and international banks to operate in Sri Lanka and be part of the proposed centre. This operation will be ready to commence by 1 April, 2016.

Commercial Banking

I also propose to merge the HDFC Bank and State Mortgage and Investment Bank (SMIB) to create a much stronger and larger “National Housing Bank”, Lankaputhra Development Bank (LDB) to be merged with Regional Development Bank (RDB) to create the “Lanka Enterprise Development Bank”, and also Sri Lanka Savings Bank to be merged with National Savings Bank.

I propose to link the Divinaguma Bank to the National Savings Bank for the protection of the fund ensuring professional management.

I propose that licensed banks should concentrate on their core banking activities.

The Leasing business, has become a distraction to core banking functions and as such Banks should cease in engaging in leasing business from 01 June, 2016.

I propose that all the banks should lend at least 10 percent of their loan portfolio to Agriculture, 5 percent to SME and 5 percent to Women and Youth. Given the impact the international gold prices has had on the local banks specially with large pawning portfolios, I urge the banking sector to limit their pawning business to a maximum of 5 percent of their loan portfolios. Further, I encourage Banks to lend to customers who are engaging in stock market activities. I also propose to amend the Pawnbrokers Ordinance to increase the registration fee for pawnbrokers to Rs.25,000.

I propose to consider the situations where cheques are returned as a criminal offence and enforce stringent legal action against such offences.

I propose to revise the exposure on Government securities for nonresidents from 12.5 per cent to 10 per cent of the total outstanding stock of Treasury Bills and Bonds. This will provide more space for local investors to invest in Government securities and also to mitigate fluctuations in exchange rate due to sudden withdrawal of funds by non-residents as witnessed in the recent past creating an undue strain on the reserves.

I also propose that the fee on bank drafts should not exceed Rs.150 per draft.

For the same reason, I propose all employers to instruct their employees to open bank accounts for the purpose of remitting the salaries.

To keep a better track of all statutory payments, I propose each Company to maintain a dedicated Bank account for direct debit purposes.

Fees on valuation certificates

Charges on valuation certificates of vehicles to obtain finance facilities will be revised with effect from 01 January 2016. Accordingly, I propose the charges applicable for motor cycles and three wheelers to be Rs. 2,500 while valuations on all other vehicles, including motor cars, will be Rs. 15,000.

It is proposed to require all banks to expand their branch network by 15 percent by opening branches in lagging regions. Each of these branches will have to employ at least 6 employees.

I encourage the private sector also to establish private Credit Information Bureaus with the Central Bank of Sri Lanka being a stakeholder with cross industry participation, including, financial institutions, insurance companies, utility providers, etc. I propose to amend the necessary legislation for this purpose.

CRIB for the insurance industry

Similarly, I encourage to open a private CRIB for the insurance industry as well.

At the same time I propose that the monies lying in dormant accounts of commercial banks to be remitted to the Consolidated Fund, by 1 January, 2016.

Finance Companies

A Financial Institution Restructuring Agency (FIRA) on the lines of the Resolution Trust Corporation in the United States of America will be established shortly to help failing finance companies to be recapitalized and their troubled assets to be taken over by this agency for purposes of restructuring. The government will provide initial capital of Rs.10 million as equity and also issue a Treasury bond to the value of Rs. 25 billion with a tenure of 5 years for the FIRA. The Central Bank will be entrusted to undertake strict supervision on this restructured finance companies.

However, as a prelude to the above proposal in order to provide the depositors with a sense of comfort and security, the Central Bank of Sri Lanka will give a 100 percent guarantee on all deposits of all the registered finance companies by end January 2016.

Cap on interest rates offered by Finance Companies.

I propose to impose a cap on the interest rates offered by the Finance Companies.

Credit counselling

We will protect the public who have got into difficulties in the payment of the high rates of interest and penalty charges levied by financial institutions on credit cards and other personal lifestyle loans. To ensure this process, the Central Bank will, in association with all other banks operating in Sri Lanka, expand the credit counselling activities. We expect the Central Bank to issue directions that will restrict the ability of financial institutions to grant unlimited amounts of expensive credit to unsuspecting borrowers.

Fixed Deposits of Senior Citizens

At present the 15 percent interest rate offered to senior citizens is limited to Rs.1 million and only to citizens above 60 years. I propose to expand this benefit to citizens above 55 years of age and the 15 percent interest rate to be applicable to deposits up to Rs.1.5 million.

This facility will be granted through Licensed Finance Companies where an interest subsidy of 1.5 percent will be granted by the Government. I propose to allocate Rs. 1,500 million for this purpose. I note that Central Bank guarantee of deposits should increase the confidence of the depositors.

Creating a Savings Culture

I request all banks to open a child savings account for every child attending school by depositing a minimum of Rs. 250 per child per year. The Bankers’ Association has kindly come forward to support the government’s policy and I encourage the Banking community for the initiatives and support provided to this laudable act. This will commence from 1 January 2016.

Capital Market to stimulate growth

It is proposed to conclude the demutualization process of the CSE during 2016.

It is proposed that Securities and Exchange Act be revised to address the regulatory deficiencies in the market.

To facilitate the expansion of the corporate debt securities market, it is proposed to waive the income tax and withholding tax applicable to those activities into 2016.

It is proposed to set up a Bond Clearing House primarily for transactions in government securities which could then be extended to other instruments including the corporate debt securities known as debt exchanges.

The Bond Clearing house will be established by the Central Bank. Once the Bond Clearing House is fully operationalized, it is proposed to be governed by an independent Board of Directors. I propose to allocate Rs.500 million from the Consolidated Fund to establish the trading platform under the supervision of the Central Bank.

At the same time, the Share Transaction Levy which charges 0.3 percent from the buyer and seller on each share transaction will be removed with a view of encouraging activities in the share market so as to boost the sagging movement of share transactions.

Further, as an additional measure, the stamp duty on share certificates will also be removed.

It is proposed to allocate Rs.100 million to the Sri Lanka Accounting and Auditing Standards Monitoring Board (SLAASMB) to strengthen and develop the institution.

It is proposed to introduce Listed Real Estate Trusts (REITs). Transfer of real estate assets to a REIT structure that distributes 90 percent or more of income to REIT unit holders will be exempted from Stamp Duty.

Moreover, with the change in demographics, it would also be best to consider the introduction of “Reverse Mortgages”.

Non-traditional bond markets

At present Sri Lanka has been raising only USD denominated bonds in the international market. I propose that going forward, we should examine nontraditional bond markets including the Chinese Yuan and Sukuk bonds with the aim of reducing our cost of borrowings.

SME Board on CSE

it is proposed to create a new SME board on the Colombo Stock Exchange with less stringent compliance requirements for SME listings. This will also provide a comfortable exit strategy for the Venture Capital firms that have invested in SMEs.

I propose CSE to play an active role to attract foreign companies to be listed in the Exchange. Local companies listing in the CSE will receive tax concessions for 2 years while the concessions will be extended to 3 years if listed in a foreign stock exchange such as, London, Singapore, Hong Kong, Mumbai. At the same time I encourage foreign companies to list in the CSE (dollar listing).

Market capitalisation at present is Rs. 28 billion. With all the measures proposed we expect the market capitalisation to reach Rs. 50 billion.

Commodities exchange

It is now the time to implement a commodity exchange regulated by the Securities and Exchange Commission.

Private sector employees

It is proposed to introduce necessary legislations to extend the time period for making such employees permanent to 1 year from present 6 months.

I encourage the private sector to adopt a 5-day week work culture. This will also allow employees to have more leisure time and spend more time with their families. A 5-day week initiative would help companies to reduce their administrative cost that they incur for 45 hours per week.

I urge the private sector employers to increase the monthly salary by at least Rs.2,500 per month of which Rs.1,500 per month could be given in 2015 and the balance Rs.1,000 per month in 2016.This was agreed by the Employers Federation Council and necessary legislations will be brought in to implement this.

In order to ensure a minimum wage for the working population, an Employment Council will be established, which will be managed by members from the Civil Society and Chambers of Commerce.


I propose that the National Institute of Education (NIE) to formulate a programme where all teachers will be able to undergo continuous teacher training. I also propose that all teachers recruited to Government and Government supported schools must successfully complete a 2 year fulltime teacher training programme within 5 years of recruitment. For this purpose, I propose to allocate Rs.1,000 million.

To facilitate the deployment of teachers to such schools, I propose to provide the rural and regional schools with teacher quarters, rest rooms etc for which I propose to allocate Rs.2,000 million. It is evident that many of our Primary and Secondary schools lack proper sanitary facilities. I propose that by end of 2016 all schools be provided with proper sanitary and water facilities.

For this purpose, I propose to allocate Rs.4,000 million.

Electrification of schools

I also propose that schools without electricity to be provided with electricity either through the national grid or through solar power for which I propose to allocate Rs.2,000 million.

I propose to allocate a sum of Rs.10,000 million to upgrade 3,577 primary schools in the country with the required facilities within the medium term action plan.

At the same time, 1,000 secondary schools will also be provided with other facilities such as activity rooms, laboratories, multimedia facilities, libraries with e-library facility for which I propose to allocate Rs.15,000 million.

I propose to allocate a sum of Rs.30,000 million to implement a project to improve the facilities and the quality of neglected schools.

Further, resources will be allocated to upgrade 25 schools in the plantation sector to secondary level for which I propose to allocate Rs.250 million.

With a view to improving science education in schools which has no permanent laboratories, I propose to allocate Rs.450 million.

Mahapola University in Malabe

I am sure that this house will agree to establish a university named Mahapola University located at Malabe. This university will focus on teaching subjects such as ICT, Business Studies, English, Management and other new market oriented subjects. As such I propose to allocate a sum of Rs.3,000 million for this purpose.

In line with our government’s commitment to expanding the opportunities for education in our society, I propose to establish an Engineering faculty in Kilinochchi and an Agriculture faculty in Vavuniya.

The Post Graduate Institute of Pali and Buddhist Studies will be provided with the necessary infrastructure including a new building. I propose to allocate a sum of Rs. 500 million for this purpose.

It is also proposed to provide laptops for university students on an interest free 3 year loan. Also free wi-fi zones will be provided for all universities. I propose to allocate Rs. 300 million for this purpose

1,000 Kidney dialysis centres

I propose to immediately establish 1,000 kidney dialysis centres in CKDU prevalent areas at a cost of Rs.6,500 million. I also propose the construction of a hospital specializing in kidney disease management in Minneriya for which I propose to allocate a sum of Rs.2,000 million. I propose to allocate Rs.3,000 million to be utilised for the construction of 3 cancer hospitals in Nallur, Kandy and Matara.

To improve better access to quality health care, I also propose to upgrade the Anuradhapura, Kurunegala and Jaffna Hospitals with the state of the art buildings, equipment and other facilities. I propose to allocate Rs. 3,000 million for this purpose.

Mobile hospitals

I propose to allocate a sum of Rs.200 million for this purpose.

It is also proposed to build and equip 10 district-based stroke centres attached to tertiary care hospitals within the next 2 years and also it is proposed to strengthen the accident and emergency care services in the hospitals. As such I propose to allocate a sum of Rs.5,000 million for this purpose.

Research and Development in the health sector

I propose to allocate Rs.250 million to the National Science Foundation (NSF) to support and assist research in Diabetes, Dengue, CKDU and Cancer.

Sri Jayawardenapura hospital will be refurbished and expanded to be able to compete with the private sector. As such I propose to allocate Rs. 1,500 million. At the same time given that qualified nurses are in great demand both in the local and overseasmarket, the infrastructure facilities required to train 2,000 nurses per annum at the Nursing school affiliated to the Jayawardenapura hospital needs to be improved, for which I propose to allocate a sum of Rs. 2,500 million.

To monitor the effective use of funds I also propose the establishment of an oversight unit in every hospital which will ensure value for money concept is practiced.

To curtail draining out of foreign exchange from the country I invite private sector to venture into establishing Pharmaceutical Zones as PPPs. The government will also contribute by providing land. A buy-back arrangement will be agreed upon to purchase the government requirement of the respective pharmaceutical items manufactured and they will also be encouraged to access markets on their own.

Innovation Accelerator

I propose to set up an Innovation Accelerator, a platform that will combine the National Innovation Programmes (NIPs) of the Coordinating Secretariat for Science Technology and Innovation (COSTI) and the National Thematic Research Programme (NTRP) and the technology support schemes of the National Science Foundation (NSF), with clear deliverables directed towards three pillars of sustainability; economic development, social justice and the environmental quality.

I propose to set up a National Innovation Centre in the Ministry of Science, Technology and Research which will manage the Innovation Accelerator Fund set up as a revolving fund. It is proposed to allocate Rs 100 million as seed capital to this Centre while another Rs.3,000 million will also be provided within a period of 3 years.

We are keen to ensure that these innovations are ultimately transferred into commercial successes. COSTI has identified 25 such projects that have the potential to succeed commercially. Some of these innovations include GoviNena, a mobile application to support efficient agricultural commodity production, Energy storage systems etc.

Nenasala centers

I propose to allocate Rs. 100 million to upgrade selected Nenasala centers in These upgraded centres in addition to their usual task of facilitating ICT empowerment will also drive local entrepreneurship and provide technology support to SMEs.

Police Stations

I  propose to increase the number of police stations to 600 from the existing 428 stations in consultation with the Minister of Law and Order and the Inspector General of Police (IGP) which will relate to an additional allocation of Rs. 1,000 million.

State Owned Enterprises (SOEs)

Initially all SOEs will be brought under a Government owned holding company formed similar to that of the Temasek Holdings of Singapore. This public company would be operated based on sound financial principles and market economics. The shares of these enterprises will be passed onto a Public Wealth Trust (PWT), where the Secretary to the Treasury and the Governor of the Central Bank will be the custodians.

This Trust will be managed by a Board comprising of members from civil societies, trade chambers, and trade unions, who will be nominated by the Constitutional Council. The PWT is answerable to Parliament. A new Public Enterprise Act will be enacted to provide the necessary legal framework to this effect.

The Boards of SOEs will be strengthened with the appointment of professionals. Key SOEs will be allowed to operate and be evaluated based on Key Performance Indicators (KPIs).

Key SOEs will also be encouraged to adopt a rating mechanism which will also facilitate the entities to access the domestic and foreign capital markets through various instruments for their capital requirements.

Exit from non-strategic investments

The government is keen to streamline its portfolio of investments and will therefore exit partially or fully from those non-strategic investments in Lanka Hospitals, Hotel Developers PLC (Colombo Hilton), Hyatt Residencies, Waters Edge, Grand Oriental Hotel, Ceylinco Hospital and Mobitel by listing such investments in the Colombo Stock Exchange during 2016. The monies generated through such listings will be used to retire high cost debt accrued by the Rajapaksa regime.

Special Purpose Vehicle for expressways

I propose to establish, a Special Purpose Vehicle (SPV) for the Southern Expressway and the Katunayake Expressway. Private investors will be invited to investment into the SPV for which the government will guarantee a minimum return. The funds generated from the investments in the SPV will be utilized to clear the debt that our country is saddled with.

SPV for Norochcholai coal power plant

I also propose to establish a SPV for the Norochcholai coal fired power plant to be securitized. I emphasize that the ownership structure of power plant will not change but the CEBs liquidity position will improve and thus enable its expansion activities.

The Ceylon Petroleum Corporation will collaborate with investors to form a company that will manage the oil tank farm in Trincomalee which at presently under-utilized. This facility will be operated as a bonding warehouse.

Aviation Sector

Government will pursue an open sky policy with restriction free traffic and I invite the international airlines to make Sri Lanka a preferred destination.

To improve the domestic air transportation, three new domestic airports will be established at Digana, Badulla and Puttlam through a PPP arrangement.

With a view to promoting domestic tourism in the country, I propose to exempt airlines using domestic airports from ground handling charges and other fees. They will be liable to pay only a license fee of Rs.1.5 million per annum.

I propose to increase the over flying charges of commercial planes by 20 percent from 01, January 2016.

SriLankan Airlines

Ground handling and catering operations which at present are profitable will be managed as separate institutions serving all airlines. They will operate as independent entities running as common service provider to all airlines.

Mihin Lanka

Mihin will concentrate its operations mainly on domestic routes and will limit its operations to selected international routes.

Mattala Airport

Our government is keen to turn around Mattala through a private public partnership, where the airport will be utilized for pilot training, logistic aero warehouse activities, cargo services etc.

I also propose to utilize the Mattala airport as a cargo hub, especially for air freight. In order to encourage these activities, I propose the throughput charges to be fixed at USD four (04) cents per kilogramme. I invite integrated courier companies to utilise Mattala airport for their hub operations.

I propose to encourage the private sector to set up flying training school and Maintenance, Repairs and Overhaul (MRO) facilities within the Mattala Airport.

Public Finance

We will enforce strict regulations with respect to all state purchases. A Central Procurement Secretariat will be established which will oversee the awarding of tenders and will handle all purchases over a specific value.

I propose to increase the guarantee limit under the Fiscal Management (Responsibility) Act (FMRA) from current 7 percent of GDP to 10 percent of GDP, and to enable the issuance of guarantees to Public Private Partnerships in which the government holding is less than 50 percent, at a fee. Regulations will be issued enabling the issuance of Treasury Guarantees on a fee basis.

Transport Sector

I propose to introduce legislative amendments to expand the scope of the National Transport Commission (NTC) Act to include the regulation of three wheelers, taxis, school vans and cargo transportation vehicles.

Road Transportation

I urge the SLTB to explore the possibility of partnering with local companies that has the capacity to build road worthy buses. This process will save around Rs. 1.5 million per bus and we expect to save Rs. 10,000 million per annum.

I also propose that the all state sector agencies dispose of their unutilized dilapidated vehicles through the tendering system to ensure that public assets are not wasted.

To save energy and minimize environmental pollution, I encourage the three wheeler owners to convert their vehicles from fuel to electricity. Therefore, I propose to make available a concessional loan of Rs 150,000 for the conversion purpose, for fare-metered three wheelers. I propose to allocate Rs. 50 million for this purpose.

I also propose to install a traffic encoder free of charge into every registered vehicle in the country. This will help better management of traffic, deter theft and improve security. As such I propose to allocate a sum of Rs.500 million for this purpose.


I propose to establish a “Railways Development Council” comprising of 5 members appointed by the Government to identify strategies to improve the yield of the underutilized assets.

Kelani Valley line

Considering the demographics, the Kelani Valley line will be modernized where the speed and the carrying capacity will be increased for which I propose to allocate a sum of Rs.1,500 million.

Park and Ride

“Park and Ride” facilities attached to both railway stations and bus stations will enable better traffic management and also facilitate the commuters in the country in terms of comfort and cost. As such I propose to allocate Rs. 1,000 million to the Ministry of Transport to engage in the improvement of the railways, bus transport in selected towns such as Jaela, Avissawella, Panadura, Kadawatha and Piliyandala.

When the concept of “Park and Ride” is established the vehicles coming to the city will be required to carry a minimum of 4 passengers and any vehicle that does not will be imposed a fee. This mechanism will be implemented before the end of September 2016.


Jaffna Railway line

I also propose to improve the speed of the Jaffna Railway line from Maho to Vavuniya for which I propose to allocate a sum of Rs. 200 million.


I also propose to encourage the public sector to partner the private sector to build and operate monorail projects connecting Negombo- Katunayake- Colombo and Colombo- Kaduwela.

Transportation on Waterways

To improve water transport in the country, I propose to allocate Rs. 250 million.


The business of trans-shipment and non container related shipping has to be increased tomaintain a major trans-shipment hub. Hence, we need to set a realistic target to be within the top 20 trans-shipment ports in the world by 2025.

The government will also encourage ship financing, ship repairing, ship registry status, bunkering, arbitration and allied services which would be governed by modern laws. The competition for such business is increasing in the region.


Government will remove restrictions on Global Logistics Companies, which have the scale, capacity, capital and knowledge to expand services using Sri Lanka as the hub, they should be able to invest, acquire and operate within a reasonable tax regime where new capital, business and employment is generated to the local economy via global trade. Also,  regulation will be issued to stipulate designated areas for logistics hub and these areas will be strictly outside the BOI zones.

Freight Forwarding

Entry into international freight forwarding will be liberalized so that foreign participation could extend up to a maximum of 75 percent with a minimum investment of USD 5 million. But such companies should have at least 90 percent of local employment.

Also I propose the freight forwarding activities to be expanded to sea ports as well and to operate jointly with the Sri Lanka Ports Authority. To encourage skills development and training in shipping related activities, I propose to grant tax concessions on Training and related equipment.

I propose to allocate Rs.50 million to strengthen the activities of Indian Ocean Marine Affairs Cooperation.

Container vehicles entering the Sri Lanka Ports Authority

I propose to liberalize the vehicle movement activities and introduce a license fee of Rs.100,000/- per vehicle per year.

Industrial Estates and Parks

We will establish Industrial Development Zones (IDZs), in Hambantota, Raigama, Mahaoya and Trincomalee along with Information and Agricultural Technology Zones (IATZs) in Kandy. I propose therefore to allocate Rs.500 million to rehabilitate and improve the facilities in these estates.

Water Supply

As part of the accelerated programme to prevent the spread of CKDu in the country, RO Plants (Reverse Osmosis Plants) will be issued to those areas where pipe borne water is unavailable.

Roads Network

I propose to allocate Rs. 15,000 million for the expansion of the road network which includes the expansion of the Ruwanpura Expressway, extension of Marine drive up to Panadura, extension of the Pamankada-Ratmalana Road, new bridge construction over the Kelani River, reconstruction of 25 bridges and 3 flyovers etc.

We also plan to construct an elevated road from Cotta Road to Kaduwela on BOT basis. I also wish to commit a sum of Rs.10,000 million to be the government contribution.

New access road from Kelani Bridge to Colombo Fort

We will be constructing a new access road from the Kelani Bridge to the Colombo Fort improving access to Fort. I wish to allocate a sum of Rs.4,000 million to be utilized within a period of 2 years.

North East Expressway

We will expand the Central Expressway to connect Dambulla, Polonnaruwa, Mullaitvu and Jaffna under a public private partnership, “Infrastructure Development Authority” (IDA). It is also planned that industrial parks be created along the proposed expressways, thereby adding value to the expressway.

Accordingly, it is proposed to set up a Bio Technology Park which will house pharmaceutical companies, a product design engineering manufacturing park and an IT park and also agro and aqua culture parks along the expressway.

It is proposed to allocate Rs.1,000 million in 2016 as seed capital of the proposed IDA. It is also proposed to provide guarantees to the IDA, should the company be engaged in raising debt finance domestically or internationally.

Irrigation Projects

We recognize that irrigation and water resource management is crucial in our policy to ensure self-sufficiency in food. As such, while I have already allocated Rs. 2,000 million for the rehabilitation and improvement of small scale tanks and canals, I propose to allocate a further Rs.1,000 million to expedite the Yaan Oya irrigation project.

Power and Energy

I propose that Letters of Intent issued by the CEB for Non-Conventional Renewable Energy projects (NCRE) that has already been issued but unutilized for more than 1 year as at 31. December, 2015 will cease to be operational.

Megapolis and Urban Development

A Master Plan relating to the Megapolis project is scheduled to be completed in 2016 and most of the projects will be implemented on Public Private Partnership (PPP) basis. I propose to allocate a sum of Rs.10,000 million for projects such as township development, urban solid waste management, etc.

Urban Development

To improve access to clean water, provision of sewerage, and urban development, I propose to allocate Rs.2,500 million to the Ministry of City Planning and Water Supply.

Southern Development

Our efforts in Southern Development will be concentrated mainly on developing seaport and airport logistic support services, agro based industries, agriculture support services improvement, urban facility improvement, rural sanitation facility etc. For this purpose, I propose to allocate Rs.1,000 million.

Wayamba Development

I propose to allocate Rs.2,500 million for the implementation of drinking water projects, improvement of irrigation facilities, fisheries development etc. in the North Western Province.

“Pubudamu Polonnaruwa”

This programme will cover the expansion of access to clean water, development of health care facilities, rehabilitation of tanks, improvement of school infrastructure and better sports facilities.

It is also planned to integrate the Kaduruwela, Hospital Town, New Town and the Polonnaruwa ancient City into an integrated modern city. In addition to the Rs.2,000 million allocated for the proposed Kidney Treatment hospital in Minneriya, I propose to allocate a further sum of Rs.10,000 million.

Rs. 14bn for North and East Development

We plan to convene a Donor Conference in 2016, to generate support from bilateral and multilateral agencies to enhance the rehabilitation of the North and the East.

We are also committed to ensuring that the issues of the internally displaced people are addressed immediately. In this regard, we will initiate a rapid large scale resettlement programme for the internally displaced people and provide basic needs and livelihood opportunities to the already resettled families. In this respect, we will be building 20,000 houses especially in the Districts of Mannar and Mulativu, with proper sanitation facilities, access to clean water and electricity. Further, improvement of the construction of the Delft Jetty, renovation of roads from Velanai to Kayts, establishment of clinical waste management system etc., also will be accommodated. As such I propose to allocate a sum of Rs. 14,000 million for this purpose.

I also propose to establish through a PPP, a Red clay factory in Oddusuddan enhancing livelihood development in the area.

Estate Infrastructure

Our Government will undertake housing programmes to build low cost houses and amenities for the plantation community for which I propose to allocate Rs.1,000 million.

Strengthening Local Government authorities

I propose to allocate Rs.1,500 million for local government authorities to be utilized for the upgrading of infrastructure facilities.

Special Projects

I allocate Rs.150 million to the recently instituted Ministry of Special Assignments.

Rs.15 million per Parliamentarian

Members of the Parliament should also be actively involved in the governance mechanism more so specially since this is a National Unity government. They were keen to  increase the decentralized budget to Rs.15 million per Parliamentarian. As such, I propose to allocate a sum of Rs. 3,375 million for this purpose.

Culture and Arts

I encourage the Association of Artists to initiate a mechanism for a contributory pension scheme for which I propose to allocate Rs. 15 million as the government’s contribution.


I propose to allocate Rs.1,000 million for our proposals while removing import taxes applicable on sports goods.

Foreign Employment

I encourage the Sri Lanka Foreign Employment Bureau to engage with foreign countries who are desirous of employing our labour to agree to a minimum monthly wage of at least USD 300 for unskilled and semi-skilled migrant workers.

Agent fee

I propose to increase the agent fee per worker collected by the Sri Lanka Foreign Employment Bureau to Rs. 15,000 per worker. All the migrant workers prior to departure should possess a bank account, insurance cover and information with regard to contact details.

I also propose to adopt a transparent and competitive bidding process to select the insurance agents who provide insurance coverage to migrant employees.

Dedicated Immigration / Emigration Counters

In order to appreciate Middle Eastern migrant workers’ contribution to the country, I propose to operate two dedicated immigration / emigration counters at the Bandaranaike International Airport with “Commercially Important Persons” (CIP) status, for the Middle Eastern traffic.

Regulate Cosmetics

I propose to introduce legislations to regulate cosmetics and devices. In the interim, Consumer Affairs Authority will gazette regulations to make it mandatory for all cosmetic products to include total ingredients list using International Nomenclature Cosmetics Ingredients (INCI) at least in English language on all labels, including Ayurveda Cosmetics.

In order to ensure the quality of imported products such as milk powder, cosmetics, toiletries, shampoos etc., I propose that Sri Lanka Standards Institute, Industrial Technological Institute and Pharmaceuticals Research Laboratory be strengthened by increasing the technical cadre and the laboratory facilities for which I allocate Rs.200 million.

Competition Authority

I propose to establish a Competition Authority to regulate the market for anti-competitive behavior of businesses which includes unfair monopolies, dumping, exclusive dealings, price fixing, etc.

Satellite Space of Sri Lanka

Our satellite space which has not been used will be tendered internationally through a transparent procedure.

Apparel Mall

A need has arisen to operate a permanent exhibition centre where manufacturers will have their own stall with required facilities to offer only Sri Lankan branded goods made in Sri Lanka of comparable quality with labels and a complete range of products from head to toe.

The centre will offer a meeting place for domestic and foreign buyers for on the spot purchase or placing orders for the domestic market. Therefore, I propose to assist this brand journey by establishing a wholesale and retail mall exclusively for domestic apparel brands as a Public Private Partnership at a cost of Rs. 2,500 million where the Government  would offer a plot of leased land for the construction of a mall with a floor area of at least 400,000 square feet.

Insurance against Natural Disasters

I propose the entire country be protected against natural disasters, such as Cyclones, Storm, Tempest, Flood, Landslide, Hurricane, Earthquake, Tsunami and any other natural peril.

This natural disaster insurance will totally cover damages up to a maximum of Rs. 10,000 million with individual covers up to a maximum of Rs. 2.5 million and also Rs. 1 million life insurance.

Search and rescue operations for the fishermen will also be covered by this scheme. I propose to allocate Rs. 300 million as insurance premium.

Price reductions on 11 selected essential commodities

I propose to reduce the Special Commodity Levy (SCL) of potatoes by Rs 25/- per kilogram.

Accordingly, it is expected to provide a price ranging from Rs 75/- to 85/- for a kilogram of potatoes for the consumers. I also propose to reduce the SCL for big onions by Rs 25/- and to provide consumers with a price ranging from Rs 85/- to 95/- per a kilogram of big onions.

I also propose to reduce the price of a 400 gram packet of locally manufactured milk powder which is another main commodity to Rs 295/- and in order to cover the loss incurred by the local milk powder manufacturer, the Government will provide a subsidy of Rs 30/-. Considering the significance of the nutritional requirement of infants, I also propose to reduce price of infant milk powder by Rs 100/- per kilo.

I also propose to reduce the price of a canned fish tin of 425 grams to Rs 125/-. Accordingly, I propose to provide a subsidy of Rs 15/- for a canned fish tin of 425 grams.

I propose to limit the maximum retail price of Sprats to Rs 410/- per kilogram. I propose to implement a maximum retail price of Rs 169/- per kilo of dhal in order to provide a reasonable price for the consumers. To do so, I will completely remove the SCL imposed on dhal.

I also propose to impose a maximum retail price of Rs 1,100/- for a kilo of “Katta” which is the most consumer demanded dried fish variety and to impose a maximum retail price of Rs 425/- for a dried fish kilo of “Salaya”. By doing so, I expect to protect the local dried fish producers and to provide consumers with a reasonable price for dried fish.

I propose to impose a maximum retail price of Rs 169/- for a kilo of chick pea in order to provide relief for the consumers.  I also propose to reduce the price of a 12.5 Kg gas cylinder by Rs 150/- with immediate effect and to reduce the price of 1 liter of kerosene by Rs 10/- in order to provide relief for the poor. Stern legal action will be taken against the sale of kerosene oil mixed with other oil in order to prevent discrepancies faced by the poor.

I propose to allocate a sum of Rs.3,000 million for the provision of these concessions. At the same time to ensure that the benefits envisaged from the reduction of taxes and the imposition of a price limit are passed on to the consumer as expected the effective and efficient functioning Consumer Affairs Authority (CAA) is crucial.

Project Monitoring

I wish to allocate Rs.200 million to the Ministry of National Policies and Economic Affairs to enhance the policy formulation and policy analysis mechanism of the country to enable better design and monitoring of development polices.

All branding activities that is undertaken as private public partnerships will be coordinated by the Ministry of National Policies and Economic Affairs.


The allowance of Rs.10,000 per month that has been made available to the public sector employees as a promise of our government. This allowance and the previously granted two interim allowances will be considered for the pension payment at the time of retirement.

Corruption-free Country

I propose to allocate a sum of Rs. 500 million for strengthening Bribery Commission.

Parliamentary Affairs

I propose to allocate a sum of Rs. 250 million to strengthen the oversight committees.

I also propose to allocate a sum of Rs.50 million to the J R Jayawardene Centre to be utilized to strengthen the capacities of the members of the parliament.


Tax Policy and Tax Administration

Simplification of Tax System

I propose the amalgamation of certain taxes which have failed to generate the expected revenue and to improve the revenue collection of the country. I also propose the elimination of certain non relevant nuisance taxes that prevail in the system which would benefit the tax payer as well as the business community.

Accordingly, with a view to simplify the tax system, I propose to remove the Share Transaction Levy, Construction Industry Guarantee Fund Levy, Luxury & Semi-Luxury Motor Vehicle Tax and Tourism Development Levy (TDL).

Income Tax

Corporate Income Tax

I propose to restructure the present corporate income tax rate structure to a two rate band system with a higher rate of 30 percent and a standard rate of 15 percent. Higher rate will be applicable for the profit and income of betting and gaming, liquor, tobacco and banking and financial services, including insurance and leasing industry and the trading activities. All the other sectors will be subject to the standard rate of 15 percent. The identified long term concessions such as institutional, miscellaneous and other exemptions granted without having any policy rationale will be revisited.

Minimum Dividend

The minimum amount of dividend to be distributed by quoted companies will be increased to 15 percent of the distributable profits.

Surtax on Tobacco, Liquor and Casinos

I propose to impose a surtax at the rate of 25 percent of income tax liability for tobacco, liquor and casino industries.

Personal Income Tax

With a view to further simplifying the PAYE tax system and to ensure better compliance, I propose to amend the law applicable to the PAYE tax to ensure equal treatment to all employees. In order to provide concessions to employees, I also propose to increase the tax free annual threshold to Rs.2.4 million.

The PAYE tax over and above this limit to be charged at a uniform 15 percent and the taxable income will be inclusive of all the earnings by the employee with no exemptions. This method and rate will also be applied for individual income earners instead of the present progressive rate of up to 24 percent. Further, any income from secondary employment will also be taxed at the same rate without any exemptions.

I propose to abolish applying 2.5 percent withholding tax on deposits with effect from 01 January, 2016.


Economic Service Charge (ESC)

The present exclusion of profit making businesses and the minimum threshold of payment of Rs 120 million per year will be removed and the applicable rate will be increased to 0.5 per cent. In addition, the period of carried forward balances will be limited to 3 years.

Value Added Tax (VAT)

I propose to remove certain exemptions with the view to increase revenue. The present single rate will be revised to 3 bands 0%, standard rate of 8% and 12.5% higher rate for service sector and the minimum threshold for the liability for VAT will be Rs.12 million per annum.

The wholesale and retail trade will be excluded from VAT. 

Nation Building Tax (NBT)

I propose to reduce the NBT threshold in line with VAT and the rate will be increased to 4% and certain exemptions will be removed. Revenue generated from the increase of rate will be transferred to the Consolidated Fund.

Betting and Gaming

The casino entrance fee imposed in the last budget will be removed and the annual levy imposed on the business of gaming other than rujino, will be increased to Rs.400 million. I also propose to amend the Finance Act to make directors and shareholders personally liable for non-payment or any act which is taken to avoid payment of Casino Industry Levy introduced in Interim Budget.

Tax Incentive Regime

The government would also like to propose to do away with ad-hoc and unproductive tax concessions offered by different agencies as it has led to the existence of different tax regimes in the system, which has created un-competitiveness among the entrepreneurs.

I propose that the concessions granted for any investment should be strictly under the supervision and monitoring of the Ministry of Finance which would be governed by regulations issued by the Ministry.


Unit Rate on Excise for Vehicles

I propose to introduce a simple unit rate of excise duty for the vehicles on the basis of cubic centimeters. Duties on the percentage basis on certain vehicles will also be revised.

Tax Incentives for Environment Friendly Vehicles

For encouraging the use of environment friendly vehicles with reduced emission, I propose to reduce Excise duty to 2.5 percent for the vehicles which are run entirely on Solar, Hydrogen or Helium.

Motor Vehicle Entitlement Certificate

I propose to introduce a vehicle import fee to obtain a Vehicle Entitlement Certificate for each vehicle. This certificate will be issued by the Department of Inland Revenue and the certificate will be necessary for opening of Letter of Credit for importing a vehicle. I propose a Vehicle Entitlement Certificate fee of Rs. 2,000 per Motor Cycle and Three Wheeler, Rs.15,000/- for a Motor Car and Rs.10,000/- per vehicle for all other vehicles.

Revenue License and Emission Test

I propose to revise revenue license fee for motor vehicles. A fee charged on the certificate of emission test will be enhanced to Rs. 5,000. Issuance of vehicle emission certificates will be liberalized and opened up for competition by allowing more players to come in.

Registration of Vehicles

It has been brought to our notice that 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. I urge the owners of such vehicles to register their vehicles by 31 March 2016, by paying a fee of Rs. 750,000 for commercial vehicles and Rs. 1 million for motor cars.

I propose to export such vehicles after being reconditioned. For every 20 vehicles exported by the same exporter under this scheme, a 50 percent tax credit will be given for the importation of one motor car.

I propose to introduce a unique vehicle number plate system which could be auctioned.

Concessionary Permit Schemes

I propose to abolish all the vehicle permits granted under different schemes, including to Parliamentarians. However, I ensure all government officers will be financially compensated for the benefit foregone. Further, all the vehicles purchased to the Government will be subject to all applicable taxes and necessary allocations will be provided in the budget.

Stamp Duty Reduction on Credit Cards

I propose to remove stamp duty on credit cards for local purchases and stamp duty for foreign purchases will be increased to 2.5 percent.

Mansion Tax

Provisions in relation to Mansion Tax which was introduced in the interim budget will continue to be applicable except for condominium units.

Rationalization of Customs Duty Structure

Presently 4 tariff bands are applied for customs duty i.e. exempt, 7.5 percent, 15 percent, 25 percent and a fixed higher rate. Out of around 7,000 HS codes, nearly 50 percent of the items are at 0 percent. Only 2 percent of items are in 7.5 percent band. To simplify the tariff bands further, I propose to remove the 7.5 percent band and increase the 25 percent band to 30 percent. Accordingly, Sri Lanka will have a 3-band structure of exempt, 15 percent and 30 percent.

Ports and Airports Development Levy (PAL)

I propose to increase the PAL from 5 percent to 7.5 percent, other than plant and machineries used for construction, dairy and agricultural industries which will be exempted.

Taxes on Liquor, Fool-proof Sticker

I propose that every tax-paid liquor bottle must be labeled with a foolproof sticker. This provides a visual identification for the excise officers in identifying the tax paid liquor bottles. The manufacturer of this sticker will be selected in a transparent manner through international competitive bidding applying government procurement procedures. The enforcement of this transparent measure will help stop unregulated liquor being made available to consumer.

Increasing Liquor Manufacturing License Fee

I propose to increase the annual manufacturing license fee for a distillery to Rs.150 million.

Further, I propose to impose a single fee of Rs.150 million for liquor manufacturers as an annual licence fee instead of the present complicated per bottle license fee system. Excise Duty on liquor will be revised from mid night today.

Simplification of Licensing Scheme

The complicated licensing scheme will be simplified and certain time restrictions applicable on the sale will be removed.

Minimum Excise Duty Payable

Necessary amendments to the Excise Ordinance will be introduced to make provisions to collect a minimum Excise Duty of Rs.250 million per month from liquor manufacturers who are having distilleries and Rs.50 million per month from persons engaged only in liquor manufacturing based on the minimum quantity of liquor required to be manufactured.

Increasing Import Duty on Liquor

I propose that tax on all types of foreign liquor and imported ethanol be increased on par with locally produced liquor-price increase.

Imported Foreign Liquor License

At present, permission is granted to transport only 10 bulk litres of locally manufactured liquor and there are no restrictions in place on the transportation of imported liquor. Therefore, I propose to apply the same procedure applicable on locally produced liquor to imported liquor as well.

Customs Duty on Beedi Leaves

I propose to increase Customs Duty on beedi leaves. Further, beedi manufacturing licence fee also to be increased from Rs.1500/- to Rs.5,000/-. I also propose to discourage the importation of beedi as a finished product, by increasing Customs Duty. This will be an indirect benefit for the beedi manufactures.

Increase of Embarkation Levy

I propose to increase the Embarkation Levy from USD 25/- to USD 30/-. This will be applied for both ship and air passengers. I also propose to increase the contribution to the Consolidated Fund from the Embarkation Levy from present one third to two thirds of the total collection through this levy.

Passport Fee

Passport fee has not been revised recently. Meanwhile, the cost of printing of passports has increased. Accordingly, I propose to increase one day service of passports from Rs.7,500/- to Rs.10,000/- per application. Further, I propose to increase application fee for dual citizenship from 250,000 to Rs.300,000/- per application and SAARC Visa fee to USD 20/- per application.

Introduction of Residence Visa

To encourage foreign investment, I propose to introduce a fee of USD 250,000 for residence visa for a three year period and USD 5 million for a permanent residence visa for foreigners, with the approval of the Cabinet of Ministers.

Tax on Telecommunication industry

I propose to increase International Telecommunication Operator Levy (ITOL) from USD Cents 9 to USD Cents 12 and total increase to be credited to the Consolidated Fund. The TRCSL has requested that the transit tariff revenue be exempted from the gross turnover for the purpose of cess payment in order to increase the competitiveness for international transit traffic and thus increasing the inflow of foreign revenue. Considering the negative environmental impact, I also like to propose an annual fee of Rs.50,000/- per tower.

Sale in the Domestic Market by Export Oriented Companies

Export oriented BOI companies will be permitted to supply to the local market only 5 percent of its products.

Introduction of an Annual Registration Fee on Companies

I propose to impose an annual fee on all the registered companies collectible by the Registrar of Companies. Further in order to discourage voluntary registration, I propose to charge Rs. 500,000/- on voluntary liquidation of companies.

With effect from January 01, 2016, all business entities should be registered with their respective local councils at a nominal fee of Rs. 100 per year. For new business entities, this registration would be a pre requisite to obtain the electricity and water connections, and loan facilities from Banks.

Teledrama Levy

English being a link language in Sri Lanka, levies currently exempted on Tamil teledramas, films and advertisements will also be extended to English teledramas, films and advertisements as well.

Reforms in Tax Administration 

Inland Revenue Department

The first phase of the Revenue Administration Management Information System (RAMIS), to enable the automated services for filing of returns, payment of taxes, etc., will be effective from 1 January 2016.

I also propose the mandatory inclusion of the Taxpayer Identification Number (TIN) or the Business Registration Number (BRN) in all transactions in capturing all business transactions, leading to increased tax collection.

Personal taxpayers who pay more than Rs. 25 million per year will be granted with special privileges such as VIP counter at the airport, priority treatment at government institutions and hospitals, special invitations for state functions, once a year felicitation meeting with the President and Prime Minister.

Import Customs Declarations

With a view of controlling human intervention in Customs activities, and enhancing trade facilitation, submission of Import Customs Declarations electronically will be implemented by June 2016. The government agencies which provide authorization will be linked online to the SLC by 1 January 2016.

To monitor unaccompanied baggage related activities, CCTV systems will be operated in every customs bonding areas, ensuring transparency and elimination of waste and corruption. These apparatus will be linked to the SLC headquarters. Any new bonding  warehouses that come into operation after 1 April 2016 should have a minimum floor area of 50,000 square feet. Further, the existing warehouses should also be expanded to meet this floor area requirement.

A new valuation system will be introduced to curb under invoicing of motor spare parts, tiles, tires etc with effect from January 01, 2016.

To avoid Sri Lanka being a dumping ground, the importation of used washing machines, used TVs and used mobile phones will be banned with effect from January 01, 2016.

In order to streamline the Customs activities and as a revenue protection measure, all the regular importers should be registered with the SLC from January 01, 2016.

In future, duty free shops at Ports and Airports should be operated on joint venture basis with local or foreign counterparts. Accordingly, any local operator who intends to enter into this business should have a foreign counterpart and vice versa.

Charges for Road Accidents

I propose to impose a fine of Rs. 10,000/- in addition to the damages to the public property, in case of a road accident.

Incentives for Thrust Industries

Sri Lanka would be free of Asbestos by 2018. In this background, we have to find environment friendly roofing  materials by 2018. To encourage the manufacturing of red clay tiles, the red clay industry will be granted a half tax holiday on income tax for a period of 3 years.

Import Taxes on Garments and Footwear

In order to achieve a balance between the accesses to branded products and to protect the local industries, a uniform rate will be applicable for garments and footwear imported or manufactured and supplied to local market by export oriented companies.

Special Commodity Levy

In order to protect the local confectionery industry the Special Commodity Levy applicable on vegetable fat will be reduced.

Multi-tasking Officers

Graduates attached to the Divisional Secretariats (DS) will be deployed as Multi-Tasking Officers. They will be assigned with special tasks, to ensure the government revenue collection at DS level.


CLICK HERE for the Fiscal Management Report 2016