Budget 2013

By The Nation

Sri Lanka's President Mahinda Rajapakse on Thursday increased import taxes in an annual budget which allocated a record $2.2 billion for defence, three years after ending a war with Tamil rebels.

Rajapakse, who also holds the defence and finance portfolios, told parliament the country had suffered the effects of a global economic downturn as it emerged from nearly four decades of ethnic bloodshed.

"The economic crisis in the US and Europe, the political uncertainties in the Middle East and the slower growth in China and India have adversely affected us," Rajapakse said.

"In an uncertain world, we have managed to maintain a 6.8 percent economic growth this year."

Expansion was 8.0 percent in the first two full years after the military crushed Tiger rebels in May 2009.

Rajapakse said a trade deficit of $10 billion last year was too high and announced tax incentives for local manufacturers. Customs duties on cars and luxury goods were raised to discourage imports.

The figures showed the government allocating $2.2 billion for the Ministry of Defence and Urban Development in 2013, compared to estimated spending of $1.77 billion this year.

The government has maintained that it needs to boost the defence budget to pay for weapons bought with loans during the fight against the rebels.

Revised estimates put overall government spending next year at $13.73 billion, up from $11.8 billion in 2012.

But official figures showed the budget deficit narrowing to 5.8 percent of GDP in 2013, down from 6.2 percent of GDP in 2012.

Rajapakse also announced several populist measures, including a ban on the sale of land to foreigners whose purchases have raised local prices.

He offered free school uniforms and shoes to children in rural areas of the country of 20 million people and lifted all taxes on racing cars, saying it would encourage the development of motor sports in the country. AFP
http://www.nation.lk/edition/breaking-news/item/12278-sri-lanka-raises-taxes-to-boost-defence-spending.html

* Taxes are to be reduced for vehicles that are used for racing.

This is indeed a must.. What we now need is car racing as the development of the country is almost at par..

The roads in galle-face and surroundings to be closed and racing to be encouraged at all cost;

Why?

1) Then we have a chance to waste so much of fuel and our fuel bills are also going up and we pay foreigners a hefty amt for this.
2) There could be ppl who think a country's development is reflected by the expensive cars it has and the race tracks it can make..

Wow what a wisdom? Who actually gives these kind of ideas to the govt.?

smallville wrote:

* Taxes are to be reduced for vehicles that are used for racing.

This is indeed a must.. What we now need is car racing as the development of the country is almost at par..

The roads in galle-face and surroundings to be closed and racing to be encouraged at all cost;

Why?

1) Then we have a chance to waste so much of fuel and our fuel bills are also going up and we pay foreigners a hefty amt for this.
2) There could be ppl who think a country's development is reflected by the expensive cars it has and the race tracks it can make..

Wow what a wisdom? Who actually gives these kind of ideas to the govt.?

Other question is why government is foolish enough to accept these kind of ideas ?

Car racing is to the benefit of Carlton Sports Network....the obvious owner....

The main opposition UNP said today the budget was meant for the country’s super-rich and contained no relief to the ordinary people as evident by the exemption of taxes on sports cars and the permission granted to transfer funds deposited in foreign banks.

UNP MP and economist Harsha De Silva told the Daily Mirror that 99% of the population had been left in the lurch.

“It was presented by 1% of the country to the 0.1% of the country’s population. Who wants racing cars being imported to this country? Is that one of the issues that the people want addressed? The budget catered to the super rich. In fact it even allows the bringing down of deposits from foreign countries which I believe is to be invested in the stock market,” Dr. De Silva said.

“The rest of the country is left in the lurch. The farmers, fishermen and the hardworking people of the country have received no benefit at all. When they asked for a salary hike the government provides an exemption on taxes for racing cars,” he said

UNP MP Sujeewa Senasinghe said the budget was complete eyewash and contained no material benefit for the people except that it had permitted the free flow of black money and the import of racing cars for the elite.

“The only material benefit of the budget is bringing down racing cars such as Aston Martins, Lamborghinis and Mazaratis for the super-rich. It has also permitted the free flow of black money which has been deposited abroad,” he said.

Mr. Senasinghe said there was no salary increase or benefit to the ordinary people.

“The farmers, fishermen, private sector and public sector employees received little or nothing from this budget and it is only going to be harder for the people. Nothing has changed and it is a waste of two hours” he said. (Hafeel Farisz)
http://www.dailymirror.lk/news/23337-a-budget-for-the-super-rich-unp.html

The main opposition UNP said today the budget was meant for the country’s super-rich and contained no relief to the ordinary people as evident by the exemption of taxes on sports cars and the permission granted to transfer funds deposited in foreign banks.

UNP MP and economist Harsha De Silva told the Daily Mirror that 99% of the population had been left in the lurch.

“It was presented by 1% of the country to the 0.1% of the country’s population. Who wants racing cars being imported to this country? Is that one of the issues that the people want addressed? The budget catered to the super rich. In fact it even allows the bringing down of deposits from foreign countries which I believe is to be invested in the stock market,” Dr. De Silva said.

“The rest of the country is left in the lurch. The farmers, fishermen and the hardworking people of the country have received no benefit at all. When they asked for a salary hike the government provides an exemption on taxes for racing cars,” he said

UNP MP Sujeewa Senasinghe said the budget was complete eyewash and contained no material benefit for the people except that it had permitted the free flow of black money and the import of racing cars for the elite.

“The only material benefit of the budget is bringing down racing cars such as Aston Martins, Lamborghinis and Mazaratis for the super-rich. It has also permitted the free flow of black money which has been deposited abroad,” he said.

Mr. Senasinghe said there was no salary increase or benefit to the ordinary people.

“The farmers, fishermen, private sector and public sector employees received little or nothing from this budget and it is only going to be harder for the people. Nothing has changed and it is a waste of two hours” he said. (Hafeel Farisz)
http://www.dailymirror.lk/news/23337-a-budget-for-the-super-rich-unp.html

Betting and Gaming business see increase in fees and taxes

Sri Lanka has decided to increase the registration fees on ‘betting’ businesses to Rs. 2 million and on ‘gaming’ activities to Rs. 100 million.

Apart from those decisions, the government has also decided to impose a 5% tax on the turnover of a gaming business.

President Mahinda Rajapaksa, presenting the 2013 budget proposals this evening also said, the highest income tax rate of 40% will be maintained for profits of such businesses.

The President also requested from all such businesses to get registered with the Department of Inland Revenue, within a three month period starting from today.

“All such businesses which do not comply with the proposal will be removed from their operations”, warned Rajapaksa, who is also the Finance Minister.

He said, this step is necessary to limit the operation of the gaming business to identified locations and require such businesses to comply with prescribed regulations as well as minimum investment requirements.
http://www.news360.lk/business-finance/news-sri-lanka-08-11-2012-increase-fees-and-taxes-on-%E2%80%98betting%E2%80%99-and-%E2%80%98gaming%E2%80%99-businesses-45091

shoes for rural babies, racing cars for colombo babies

Racing car thing is the biggest carrot given... now opposition have some thing to talk about

[quote="opfdo"]can you tell us what is the bank ?

Hanoifortune wrote:

sriranga wrote:*

* Foreign employees who intend to build houses will receive a loan of Rs. 250,000 at an interest rate of 10 %.

No, thank you!
I can get loans of 4 times of my salary with out any interest here,Just have to pay bank admin fee only.

DBS

* Revenue license fees charged for motor vehicles to be cinreased by 10-20%.

this could continuously go up for few years. they will try to cover the lost revenue by reduced vehicle importation from this

[quote="Hanoifortune"]

opfdo wrote:can you tell us what is the bank ?

Hanoifortune wrote:

sriranga wrote:*

* Foreign employees who intend to build houses will receive a loan of Rs. 250,000 at an interest rate of 10 %.

No, thank you!
I can get loans of 4 times of my salary with out any interest here,Just have to pay bank admin fee only.

DBS

this loan is not for people like you, could be mainly for house maids

Bad bugget. Still no relief to public. Can't expect economic boom without a good flowing of cash

Nov 09, 2012 (LBO) - Sri Lanka's Ceylon Chamber of Commerce said it was encouraged by government plans to cut the budget deficit which will help create a stable economy which will allow economic targets to be achieved.

"Prudent monetary policies and the maintenance of fiscal discipline are required if the medium term macro targets announced are to be met and will play a key role if the real benefits of the progressive budgets since 2010 are to be realized," the Chamber said in a statement.

The Chamber also welcomed moves to encourage small and medium enterprises, research and development, capital markets, and investments in agriculture.

But the state also had to improve transparency and rule of law

"Whilst appreciating the positive initiatives proposed in Budget 2013 to enhance equitable growth, the Ceylon Chamber of Commerce firmly believes that transparency, good governance and the rule of law are essential pre-requisites to achieve the development targets set out," the business group said.

The full statement is reproduced below:

A bold government sets itself challenging targets

The Ceylon Chamber of Commerce is encouraged by the commitment to fiscal discipline displayed in Budget 2013. We are also pleased by the commitment to maintain a flexible exchange rate regime and the investment and growth targets outlined by the Authorities.

The fiscal consolidation envisaged constitutes a welcome advance towards creating a macroeconomic environment conducive for achieving these. Notwithstanding the difficult macroeconomic environment, we appreciate the efforts of the Government to continue with the tax reforms announced in the Budget 2011.

We note that the overall thrust of the budget is towards poverty alleviation and food security. The Ceylon Chamber of Commerce supports these objectives as they are important components towards achieving sustainable and equitable growth. We specifically welcome the measures to encourage SMEs, private sector led R&D, capital market development, investments in agriculture and the promotion of the IT and BPO sectors.

Prudent monetary policies and the maintenance of fiscal discipline are required if the medium term macro targets announced are to be met and will play a key role if the real benefits of the progressive budgets since 2010 are to be realized.

Implementation will play a crucial role in achieving these objectives. Further, in order to sustain the medium term growth target of 8%, we encourage the Government to lay further emphasis in creating an enabling environment to attract the necessary investments and enhance exports. We believe that a focus on exports is a fundamental requirement for sustaining a high level of economic growth in a relatively small developing nation such as ours.

Whilst appreciating the positive initiatives proposed in Budget 2013 to enhance equitable growth, the Ceylon Chamber of Commerce firmly believes that transparency, good governance and the rule of law are essential pre-requisites to achieve the development targets set out.
http://lbo.lk/fullstory.php?nid=268158945

Sri lanka economic Association and AAUP(colombo) have organize a Public
Seminar on 12 Nov 2012 At meteorological Dept Auditorium from 5.00 p.m to 7.00 p.m( Free of Charge)
Speakers

1.Dr Saman Kelegama

2.Prof Sirimal Aberatne
3.Mr Gajendran Tax Consultant
4.Mr Seneviratne Deputy commissioner Inland Revenue

This may be useful for forum members

By Cheranka Mendis
Treasury Secretary Dr. P.B. Jayasundera yesterday emphasised that the 2013 Budget was developed to unleash a new wave of growth and reforms to make Sri Lanka a poverty-free country by 2016.

Addressing an audience exceeding 1,200 persons at the first-ever post-Budget seminar organised by Ernst & Young, Jayasundera assured that the Government would maintain continuity, consistency and clarity in implementing the Budget decisions announced on Thursday and that the main thinking behind the formation of the proposals was to create a new wave of growth and not lose the momentum created thus far.

Noting that the reforms had been shaped with President Mahinda Rajapaksa’s vision of going beyond the Millennium Development Goals and a US$ 4,000 per capita income to become a ‘poverty-free Sri Lanka’ by 2016, he stated that “every single line in the Budget has been made to outline these aspects and looks at equitability in terms of opportunities, livelihoods, and way of power”.

Jayasundera firmly assured that the Government would not borrow in the capital market in the coming year, secure in the knowledge of having US$ 3 million worth of solid 10-year bonds, with good rates for Sri Lanka international bonds.However, the country needs capital in every way possible, he said. “Restrictions on capital formation have to move out. The country has developed activity to improve capital formation.”

“The country needs a mindset change, and this is what the Budget has done by driving actions such as import substitution and import replacement. Instead of money moving out, we need money to come in and do the value addition here. This is what we need and what the reforms will do.”

The Government has also created space for banks to go global without competing for the same customers locally. “Banks must also go global. They must raise the money and show their balance sheets and strength in the world market. BOC cannot always be the ‘Banker to the Nation’. Other banks must support it.”

What matters is the sustainability in the market in capital formation, he said.

Offering support for a financial boost, the Government has given the Municipal Councils an opportunity to raise capital by issuing municipal bonds, which are five times bigger than the Municipals’ Budget surplus. “We need certain reforms creating investment opportunities in the Municipal areas, because those areas must also be developed.”

With industries requiring long-term funds and not just short-term overdrafts, the country’s two development financial institutions, DFCC and NDB, with their ‘super balance sheets,’ must take more risks in the market.
Jayasundera stated that US$ 250 million has been earmarked for each of the institutions to take their balance sheets and go global to raise money. “We hope either together or individually they will bring this money to the country and lend for much-needed investment such as to plantation companies.”

On the tax front, the corporate large tax unit of the Inland Revenue Department will be strengthened while the department will be expected to carry out ‘decent tax audits’ of 30% more than at present and to give faster interpretations on tax, etc. The Tax Appeal Commission should be strengthened as well, he said.

“The tax system will not compromise for short-term gains. We were pressed for revenue mid this year but did not compromise. We balanced it by expenditure management, being more cautious, and delaying new project commencement rather than making ad hoc changes. We will continue this in the same manner as the theory has worked well for the country.”

He commented: “Policies have been created to set the stage on a much bigger ground of growth, maintaining single digit inflation, creating a strategic exchange regime not by running down reserves but by maintaining strategies on trade deficit and draining capital inflows rather than capital outflows. “

Noting that the country could have still gone for 8% growth if not for the drought, which did not just leave the earth dry but also the growth of the country, he assured that poverty reduction across all levels had significant importance in the 2013 Budget.

Presently the poverty level is at 8.9% and unemployment at 4.5%. He appealed to the private sector to join the Government in reducing poverty, not just by way of employment generation, but by addressing issues such as malnutrition, poor health and sanitary conditions, education, etc. He pointed out that this could be carried forward as companies’ CSR projects.

Skills development, IT and language literacy, and creating space for students who do not qualify to enter local universities must be addressed.

“We have identified the areas for improvement and the Government is doing all the changes in the next wave of reforms,” Jayasundera said. “The Government thought the Budget must spend, recognise, and design policies towards education, skills, technology, and research.”

Increasing research is also an integral part in the development process; hence the decision to extend a triple deduction of expenditure in research to the private sector in the Budget.

He also noted that the Government had committed 6% of GDP as public investment in infrastructure development as well.
http://www.ft.lk/2012/11/10/new-wave-of-growth-reforms-via-budget-2013-dr-pb/

The Colombo Stock Brokers Association (CSBA), representing 23 stock broking companies today praised the government for the unprecedented policy initiatives proposed to develop the capital market Budget 2013.

“We, as one of the major stakeholders of the capital market of Sri Lanka are elated that the important and the urgent need to develop the capital market has been duly recognized by the Finance Minister. The key proposals announced in the Budget impacting the capital market demonstrate the desire of the government to see a vibrant capital market in the immediate future,” a CSBA statement said.

“Introducing a 3-year 50% tax holiday for new companies to be listed at the CSE with a public float of at least 20% on or after 01/04/2013, exempting stamp duty for the transfer of shares to and from margin trading account effective from 01/01/2013 are some of the measures that will translate into improved liquidity at the Colombo bourse,” CSBA noted.

The proposal to set up a Presidential Task Force to implement a Capital Market Development Plan was also haled by the CSBA.
http://www.dailymirror.lk/business/economy/23422-stockbrokers-praise-govt-for-budget-2013.html

The Colombo Stock Brokers Association (CSBA), representing 23 Stock Broking companies wishes to thank His Excellency the President Mahinda Rajapakse on the unprecedented policy initiatives proposed to develop the capital market in 2013 according to the proposals included in the National Budget presented in parliament on last Friday.

We, as one of the major stakeholders of the capital market of Sri Lanka are elated that the important and the urgent need to develop the capital market has been duly recognized by as the Finance Minister. The key proposals announced in the Budget impacting the capital market demonstrate the desire of the government to see a vibrant capital market in the immediate future.

We are also grateful to Dr.P.B.Jayasundara ,the Secretary to the Treasury, , for giving due considerations to the urgent needs of the capital market when formulating the budget proposals for 2013.

Introducing a 3-year 50% tax holiday for new companies to be listed at the CSE with a public float of at least 20% on or after 01/04/2013, exempting stamp duty for the transfer of shares to and from margin trading account effective from 01/01/2013 are some of the measures that will translate into improved liquidity at the Colombo bourse.

Permitting lump sum depreciation up to 100% for the stock broking companies for IT infrastructure development and branch office establishment with effect form 01/04/2013 would no doubt help the market intermediaries to evolve into full fledged brokerage houses on par with their peers in the international arena. Proposals impacting the debt market and the unit trust industry are also very encouraging.

CSBA is extremely happy that the H.E. President has proposed to appoint a Presidential Task Force to implement a Capital Market Development Master Plan. We see this as the most important proposal impacting positively on the capital market. Therefore we thank H.E. the President for the long term vision to create and nurture a capital market that would contribute towards nation building.

We also take this opportunity to thank the SEC Chairman for submitting market positive proposals during the budget preparation stage while supporting the CSBA’s proposals and following a consultative approach since his appointment.
http://www.dailynews.lk/2012/11/13/bus10.asp

Selection of members for presidential task force is very important

Most probably govt will appoint 'HORAGE AMMALA' and get advice

Budget 2013:
* Little room for lower interest rates as country grapples with trust deficit, warn experts

The government proposes not to go for any foreign commercial borrowings next year, according to the 2013 budget, but domestic non bank borrowings will surge in order to finance a growing fiscal deficit leaving little room for monetary policy easing next year as the country continues to grapple with a trust deficit, experts warned.

According to 2013 budget proposals the government will not seek foreign commercial loans next year after borrowing Rs. 109.5 billion in 2011 and Rs. 128 billion in 2012.

With the budget deficit estimated at Rs. 507.4 billion next year, the government hopes to raise Rs. 86 billion from foreign sources to finance the deficit, a sharp decline from Rs. 205.6 billion estimated for this year, while domestic borrowings are estimated at Rs. 421.4 billion, almost doubling from 259.6 billion in 2012.

Non bank domestic borrowings are expected to carry the weight of the deficit, surging to Rs. 289.4 billion next year from 84.6 billion this year.

"Non bank borrowings will be high next year. This means more funds would be mobilised by selling Treasury bills and bonds to the public and borrowing from EPF, NSB and Sri Lanka Insurance," Institute of Policy Studies Executive Director Dr. Saman Kelegama said, addressing a post budget seminar organised by the Sri Lanka Economic Association and Alumni Association of the University of Peradeniya (Colombo Branch) earlier this week.

"For such borrowings to be effective interest rates would have to be attractive and this, among other factors, implies there is limited space for a reduction in policy interest rates," he said.

Dr. Kelegama also pointed out there was limited headroom for additional commercial borrowings from abroad to boost investment and growth.

"Public debt as a percentage of GDP may have declined from 80 percent to 78 percent in 2012, but the stock of foreign debt in total public debt has increased from 7.3 percent in 2003 to 37.5 percent in 2010, thereby raising risks associated with the economy. The share of commercial debt in total public debt has also increased. Within that, the external short-term debt has increased. As a result, despite the decline in the stock of government debt as a percentage of GDP, the external debt service ratio is heading in a risky direction," Dr. Kelegama said.

The government’s fiscal policy is under strain this year because authorities failed to take early action to rectify a balance of payments problem last year.

The budget deficit for the first eight months of this year reached 6 percent of GDP, the full year target being 6.2 percent.

The budget for this year had estimated the government’s debt requirement for 2012 was Rs. 776.2 billion from domestic sources and Rs. 327.8 billion from external sources. However, by end July 2012, the domestic debt component grew by Rs. 381.6 billion from end December 2011 while foreign debt surged to Rs. 646 billion.

Tax expert N. R. Gajendran addressing the seminar said Sri Lanka’s biggest challenge was bridging a trust deficit.

"The problem is not with the revenue deficit. It’s not the budget deficit. It’s not the trade deficit. It’s not the balance of payments deficit. The problem we have is the trust deficit.

"After three years since the war ended, and with foreign investors fleeing US and European markets, we have not been able to attract enough FDIs. Investors are pulling their monies from Switzerland and going to Singapore. We might miss this bus," Gajendran warned.

FDI inflows were estimated at US$ 2 billion this year, but for the first six months of this year inflows amounted to less than US$ 500 million and official estimates have been revised downwards to between US$ 1 to 1.5 billion.
http://island.lk/index.php?page_cat=article-details&page=article-details&code_title=65989

Ok let's issue $ bonds for couple of years and then print money for couple of years.

easy peasy lemon squeezy

Money is just a material thing. just prinintg on paper mostly. Here is a thought, what happens if the whole world agrees to cancel all debt and each country be given only 50% of their current savings to start fresh.
Will the world do better than now or worse in 25-50 years?

UKboy wrote:Ok let's issue $ bonds for couple of years and then print money for couple of years.

easy peasy lemon squeezy

slstock wrote:Money is just a material thing. just prinintg on paper mostly. Here is a thought, what happens if the whole world agrees to cancel all debt and each country be given only 50% of their current savings to start fresh.
Will the world do better than now or worse in 25-50 years?

UKboy wrote:Ok let's issue $ bonds for couple of years and then print money for couple of years.

easy peasy lemon squeezy

no need 20-50yrs, pls wait& see another 7- 10years

"The problem is not with the revenue deficit. It’s not the budget deficit. It’s not the trade deficit. It’s not the balance of payments deficit. The problem we have is the trust deficit."

What are the reasons for trust deficit ?
1Govt do not trust institutions and system
2 Destroy institutions by unnecessary interventions Best
Example is Stock market
Latest one is Judiciary
3.No rule of law It apply only on people who do not support the govt
4.Poor relationship with the countries who can invest