The Ministry is contemplating to introduce a temporary COVID-19 cess at the highest income-tax slab, and the much-delayed wealth tax.
Finance Minister Basil Rajapaksa has directed National Budget Department officials to devise public, market and business-friendly proposals in consultation with stakeholders in all sectors of the society and heads of ministries during pre-budgetary meetings.
“The upcoming budget will be the national policy framework at least for the next three years which is expected to address critical issues of demand generation, job creation and placing the economy on a sustained 6 percent+ growth path after the pandemic,” the Treasury official said.
The Ministry is also considering a mechanism to allow motor traders to import vehicles, lifting restrictions with effect from December, and introduce a fiscal instrument of payment of taxes and levies along with 100 percent cash margin deposit in dollars.
This will be included as a revenue proposal in the budget. “As of now, this proposal is being considered but what happens between now and November is anybody’s guess (as to whether this proposal will be announced or not),” the senior Treasury official told the Business Times. The Ministry has projected the budget deficit to widen to about 11.5 percent of GDP in 2022. Sri Lanka’s low revenue-to-GDP ratio has remained a key weakness in the fiscal profile and it is expected to remain below the median of 23 percent, the official said.
State revenue is projected to trend around Rs 2.43 trillion in 2022 compared to Rs.2.01 trillion in 2021, according to provisional estimates of the Treasury.
Public recurrent and capital expenditure is estimated at Rs. 5.13 trillion in 2022 compared to Rs. 3.52 trillion in 2021, estimates showed. The Government is expected to borrow Rs. 3.18 trillion to bridge
the budget deficit and supplementary estimates, a recent cabinet paper presented by Minister
A major portion of this year’s budget will be allocated for livelihood development, public infrastructure, environmental and sustainable development for social welfare.
The efficiency of tax collection will be improved through the introduction of an online – managed single Special Goods and Service Tax (GST) at maximum possible rates on alcohol, cigarettes, telecommunication, betting and gaming and vehicles, which accounts for 50 percent of the income from taxes and levies.
Further, it was proposed to simplify the taxes on Capital Gains, where such taxes will be calculated based on the sale price of a property or the assessed value of a property whichever is higher and to exempt the tax on dividends of foreign companies for three years.
The official said budgetary allocations will be made on a priority basis for those in need of monetary assistance and social protection to alleviate post-pandemic poverty.
Highest financial allocations have been proposed for health, defense and education with emphasis on distant and online education.