Latest Tax cuts to win the masses over

From the Sri Lanka government’s stance in November 2015 which introduced a unit rate of excise duty for the vehicles on the basis of cubic centimeters (cc) that could generate 20 billion rupees for government, the new stance is more friendly to the middle income segment of the country.

In November, a new valuation system was introduced taking full option manufacturing price as the tax base, due to frequent reports on revenue leakages from the under valuation of motor vehicles for tax purposes.

This was the thinking of the former finance minister Ravi Karunanayake and his goal was to further strengthen the process of collecting the duly payable taxes.

We later observed another move with the 2016 budget reducing excise duty to 2.5% for vehicles which are run entirely on Solar, Hydrogen or Helium.

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

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

He also introduced a new emission fee for motor vehicles aiming to generate a further 18 billion rupees for the government.

He introduced a new fee charged on the certificate of emission and also increased the emission test fee upto 5,000 rupees per vehicle.

So taking all these quick changes in the recent past made by the people friendly unity government, it is unclear at this moment of time what the government hopes to establish with this carrot to the masses now.

The latest moves by the newly appointed finance minister (Mangala Samaraweera):

·         Tax cut on trucks, motorbikes; 10% telecom levy on data removed

·         Tax cut on trucks, motorbikes; 10% telecom levy on data removed

·         Customs duty on small trucks have been reduced by Rs.300, 000 while the duty on motorcycles (less than 150 cc) has been reduced by 90%.

·         Data capacity per user would be increased by 10%

·         The 10% telecommunications levy imposed on data will be removed from September 1.

As Sri Lanka is struggling to pay debt (IMF and World Bank) and trying hard to forge ahead with the heavily publicized Western Region Megapolis Masterplan used as the catalyst to turn the ailing economy around, these type of sudden moves will only kill the trust of overseas investors as no long term fiscal policy is demonstrated by the Unity Government.