Sri Lanka Prime Minister Ranil Wickremesinghe on Tuesday said that the country is presently in a debt trap of Rs 9.5 trillion ‘owing to the economic mismanagement of the Rajapaksa regime’. Noting that the government received certain information only after the Budget 2016 was presented; he said that according to latest documents, the island’s total outstanding loans at the end of year 2015 stood at Rs. 8.475 trilions, which amounts to 74.9 percent of the GDP.

In this light, he said that many world renowned economic experts have advised Sri Lanka to increase national income while taking utmost care in spending.

“To get out of this crisis situation, we should increase the national income. We are just doing that. We have to streamline the tax revenue of the government,” Wickremesinghe said announcing a revision to the government’s tax policies.

The PM proposed to withhold proposals with regard to Corporate Taxes and non-corporate taxes for one year and to continue the rates proposed in the budget 2015 for those two taxes.

“Since 1987 Capital Gain Taxes were not levied in Sri Lanka. However, there has been a growth in private capitals in the country during the last decade. As a result the prices of lands and shares in the stock market increased because there was no levying of the Capital Gain Taxes. We propose that capital gain tax should be imposed again,” Wickremesinghe said
He further said that the Nation Building Tax which in Budget 2016 was proposed to be increased from 2 percent to 4 percent will now be maintained at 2 percent. The proposal to exempt electricity, lubricants and telecommunications would be further continued, he noted.

“In budget 2016 it has been proposed to implement two rates of Value Added Taxes as 8 percent and 12.5 percent instead of the 11 percent of single rate. However, it seems that it is prudent that we maintain a single rate of 15 percent. We would remove the tax reliefs granted to telecommunication services, private education and private medical care. We would not let the low income groups to suffer the increase of VAT. We would not impose the VAT for essential commodities,” Wickremesinghe said noting that all these moves are aimed at maintaining the fiscal deficit at 5.4 percent and the economic growth rate at 6 percent in 2016.

Country in 9.5 trillion debt trap PM (1)