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FINANCIAL CHRONICLE™ » FINANCIAL CHRONICLE™ » How 2 1/2 Years of increased taxation by 'Adooradarshipalanaya' has slowed down the Economy and how the new proposed taxation will further bring down our economy

How 2 1/2 Years of increased taxation by 'Adooradarshipalanaya' has slowed down the Economy and how the new proposed taxation will further bring down our economy

Go down  Message [Page 1 of 1]

DS Wijesinghe


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
I heard today Eran Wickramaratne saying " The ratio of taxation to GDP had fallen to a dangerou level of 12% during MR govt and that the new tax laws will increase this % to higher levels." whilst his 'deputy' in finance matters, empty looking Mangala Samaraweera was aimlessly looking down, probably not understanding at all what is being elaborated by Eran.

If that's how Eran sees it, whom I thought is one of the better UNP ministers as far as the Economy is concerned, it is crystal clear to me now, that there is no hope for Sri Lankan economy to take off and beat other Asian Nations until the term of this govt ends in 2020. Reduction of the Tax revenue to GDP ratio was yet another key, significant achievement during Mahinda Rajapaksha's Presidency.

When top Indian Economist, B.R. Shenoy, a rebel looked down upon by his own country, was commissioned by JR in 1966 for a detailed study on the ailing economy of the then Ceylon, he pointed out that a revenue to GDP ratio of 22%, prevalent at that time was too high to allow for private individuals to grow business. " Taxation in Ceylon is too high and needs to be scaled down. Any program on increased revenue collection would impinge heavily on national Savings" Shenoy said, aptly pointing out the danger of rulers raising more taxes from the people.

The revenue to GDP ratio shows the ultimate burden of the state on the people, reducing the total share of their earnings people are free to spend or more importantly SAVE to be invested in the creation of future jobs. Any taxes taken from people, will reduce Savings & money will be diverted to state consumption or low return or loss making state enterprises, reducing capital formation for investment and the citizen's own discretionary spending.

He says in his " The Economic Situation & Trends in Ceylon-A Programme for Reform" that, past experience in Ceylon, which is in line with the experience in virtually all parts of the world is that under a democratic set up, political & other pressures are heavily on the side of spending by the government. When revenue increase under the weight of these pressures, expenditure too increases to meet or even exceed revenue collection. " There is real danger that any program for increased revenue collection may be attended by a corresponding increase in the expenditures of govt. and little may be left of the additional revenue to cover Budget Deficit. The problem with raising revenue to GDP is that expenses will keep pace or increase".

Devan Daniel, in January 2015 who wrote in Economy Next on tax complexities in Sri Lanka says it is important not to increase state revenue to GDP if more economic freedom is to be given to people, especially if there are any intentions to create a "social market economy which gave birth to the so called German Economic Miracle".
At the time Shenoy did his report, West Germany Revenue to GDP was 13.7% and Japan 13.9% whilst India's was half of Ceylon.

Sadly SL PM at that time Dudley Senanayake didn't have the courage and foresight to implement the Reform package recommended by Shenoy, but Singapore which adopted a similar reform package produced an economic miracle by becoming a developed nation with just 1 generation

Sri Lanka was fortunate to have such golden opportunities in the past, but sadly was always unfortunate to miss the bus every time. We will miss the bus this time too with the current Driver and Conductor.

Chinwi

Chinwi
Associate Director - Equity Analytics
Associate Director - Equity Analytics
Me katath red daapu buruwek innawa. Most probably a Green blooded stranded stray dog.

samaritan


Moderator
Moderator
@Chinwi wrote:Me katath red daapu buruwek innawa. Most probably a  Green blooded stranded stray dog.
Please don't compare these buggers with stray dogs, b'cos strays are much better!
These guys are suffering from Mad Cow disease which has infected the CSE bull as well.
God save Sri Lanka!


_________________




The biggest risk in life is not taking any risk at all.

DS Wijesinghe


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
@DS Wijesinghe wrote:I heard today Eran Wickramaratne saying " The ratio of taxation to GDP had fallen to a dangerou level of 12% during MR govt and that the new tax laws will increase this % to higher levels." whilst his 'deputy' in finance matters, empty looking Mangala Samaraweera was aimlessly looking down, probably not understanding at all what is being elaborated by Eran.

If that's how Eran sees it, whom I thought is one of the better UNP ministers as far as the Economy is concerned, it is crystal clear to me now, that there is no hope for Sri Lankan economy to take off and beat other Asian Nations until the term of this govt ends in 2020. Reduction of the Tax revenue to GDP ratio was yet another key, significant achievement during Mahinda Rajapaksha's Presidency.

When top Indian Economist, B.R. Shenoy, a rebel looked down upon by his own country, was commissioned by JR in 1966 for a detailed study on the ailing economy of the then Ceylon, he pointed out that a revenue to GDP ratio of 22%, prevalent at that time was too high to allow for private individuals to grow business. " Taxation in Ceylon is too high and needs to be scaled down. Any program on increased revenue collection would impinge heavily on national Savings" Shenoy said, aptly pointing out the danger of rulers raising more taxes from the people.

The revenue to GDP ratio shows the ultimate burden of the state on the people, reducing the total share of their earnings people are free to spend or more importantly SAVE to be invested in the creation of future jobs. Any taxes taken from people, will reduce Savings & money will be diverted to state consumption or low return or loss making state enterprises, reducing capital formation for investment and the citizen's own discretionary spending.

He says in his " The Economic Situation & Trends in Ceylon-A Programme for Reform" that, past experience in Ceylon, which is in line with the experience in virtually all parts of the world is that under a democratic set up, political & other pressures are heavily on the side of spending by the government. When revenue increase under the weight of these pressures, expenditure too increases to meet or even exceed revenue collection. " There is real danger that any program for increased revenue collection may be attended by a corresponding increase in the expenditures of govt. and little may be left of the additional revenue to cover Budget Deficit. The problem with raising revenue to GDP is that expenses will keep pace or increase".

Devan Daniel, in January 2015 who wrote in Economy Next on tax complexities in Sri Lanka says it is important not to increase state revenue to GDP if more economic freedom is to be given to people, especially if there are any intentions to create a "social market economy which gave birth to the so called German Economic Miracle".  
At the time  Shenoy did his report, West Germany Revenue to GDP was 13.7% and Japan 13.9% whilst India's was half of Ceylon.

Sadly SL PM at that time Dudley Senanayake didn't have the courage and foresight to implement the Reform package recommended by Shenoy, but Singapore which adopted a similar reform package produced an economic miracle by becoming a developed nation with just 1 generation

Sri Lanka was fortunate to have such golden opportunities in the past, but sadly was always unfortunate to miss the bus every time. We will miss the bus this time too with the current Driver and Conductor.

The concerns we have being raising more than a year ago where our economy is heading is slowly and surely becoming a reality day by day

janith123


Senior Equity Analytic
Senior Equity Analytic
Steps taken by Govt.regarding importing luxurious goods is good decision but with 200% LC margin means ,it is doubtf ul that tax income can be achieved.
Srilanka should refrain from importing all apples,grapes ..etx foreign fruits. As well .
But all MPs imported their permit vehicle ,now govt .should give them double cab or SUV and re export luxury vehicles to other countries.or auctioned.
Otherwise general public think these steps only a burden on them only.

ranferdi

ranferdi
Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
@DS Wijesinghe wrote:I heard today Eran Wickramaratne saying " The ratio of taxation to GDP had fallen to a dangerou level of 12% during MR govt and that the new tax laws will increase this % to higher levels." whilst his 'deputy' in finance matters, empty looking Mangala Samaraweera was aimlessly looking down, probably not understanding at all what is being elaborated by Eran.

If that's how Eran sees it, whom I thought is one of the better UNP ministers as far as the Economy is concerned, it is crystal clear to me now, that there is no hope for Sri Lankan economy to take off and beat other Asian Nations until the term of this govt ends in 2020. Reduction of the Tax revenue to GDP ratio was yet another key, significant achievement during Mahinda Rajapaksha's Presidency.

When top Indian Economist, B.R. Shenoy, a rebel looked down upon by his own country, was commissioned by JR in 1966 for a detailed study on the ailing economy of the then Ceylon, he pointed out that a revenue to GDP ratio of 22%, prevalent at that time was too high to allow for private individuals to grow business. " Taxation in Ceylon is too high and needs to be scaled down. Any program on increased revenue collection would impinge heavily on national Savings" Shenoy said, aptly pointing out the danger of rulers raising more taxes from the people.

The revenue to GDP ratio shows the ultimate burden of the state on the people, reducing the total share of their earnings people are free to spend or more importantly SAVE to be invested in the creation of future jobs. Any taxes taken from people, will reduce Savings & money will be diverted to state consumption or low return or loss making state enterprises, reducing capital formation for investment and the citizen's own discretionary spending.

He says in his " The Economic Situation & Trends in Ceylon-A Programme for Reform" that, past experience in Ceylon, which is in line with the experience in virtually all parts of the world is that under a democratic set up, political & other pressures are heavily on the side of spending by the government. When revenue increase under the weight of these pressures, expenditure too increases to meet or even exceed revenue collection. " There is real danger that any program for increased revenue collection may be attended by a corresponding increase in the expenditures of govt. and little may be left of the additional revenue to cover Budget Deficit. The problem with raising revenue to GDP is that expenses will keep pace or increase".

Devan Daniel, in January 2015 who wrote in Economy Next on tax complexities in Sri Lanka says it is important not to increase state revenue to GDP if more economic freedom is to be given to people, especially if there are any intentions to create a "social market economy which gave birth to the so called German Economic Miracle".  
At the time  Shenoy did his report, West Germany Revenue to GDP was 13.7% and Japan 13.9% whilst India's was half of Ceylon.

Sadly SL PM at that time Dudley Senanayake didn't have the courage and foresight to implement the Reform package recommended by Shenoy, but Singapore which adopted a similar reform package produced an economic miracle by becoming a developed nation with just 1 generation

Sri Lanka was fortunate to have such golden opportunities in the past, but sadly was always unfortunate to miss the bus every time. We will miss the bus this time too with the current Driver and Conductor.

Yes the argument by the ministers who increases tax is that we have low tax to GDP ratio and they use well developed countries for comparison. This is wrong, for countries like SRi Lanka that looks for aggressive development needs to have low tax to GDP ratio and the comparison needs to be done with peers.

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