President Ranil Wickremesinghe presented an interim budget to parliament today.
The interim budget includes provisions to accommodate the policy package introduced in January 2022, provisions for strengthening social safety net programs, additional cost due to increased interest payments in 2022, receipts of foreign assistance through repurposed projects by the World Bank and the Asian Development Bank (ADB), provisions for financing obtained through the Indian Line of Credit and increased cost of fertilizer subsidy, among others.
The government has directed around Rs. 300 billion out of capital expenditure and less priority spending allocated in the original budget 2022 to accommodate these provisions. It includes the provision of relief to those who are affected by the economic crisis.
To increase government revenue there will be a rise in VAT to 15 percent from the current rate of 12 percent with effect from 1st September 2022. This will be in addition to a number of tax reforms pertaining to Income Tax, Value Added Tax (VAT), Telecommunication Levy and Betting and Gaming Levy that have been already approved to be implemented or have already been implemented. Most revenue proposals introduced in May 2022 will be effective from 1st October 2022.
Social welfare programs will get an allocation of Rs. 46,600 million for a period of 4 months.
To make tax administration more efficient, the government will introduce compulsory tax registration for all residents who are above 18 years of age without considering their annual income and tax-free thresholds. It will also implement the recommendations in the final report of the “Presidential Commission of Inquiry into Sri Lanka Customs”.
Among measures to enhance non-tax revenue, action will be taken to attract foreign investors and/or technology holders to establish joint ventures with Sri Lankan partners for industrial investments with advanced technologies to ensure better utilization of our mineral resources.
The series of public sector reforms will include reducing the retirement age of public sector and semi-governmental employees to 60 years. Those who have been employed beyond 60 years of age who are at present in the government and semi government sectors will be retired as of 31.12.2022. The purchase of fossil fuel-based vehicles for the public sector will be suspended and only electric-powered vehicles will be purchased for its use in future. The private sector will also be encouraged to use electric vehicles. To rationalize the number of government employees, those who are willing to take no pay leave for 5 years and go abroad or engage in educational activities in the country, will be allowed to do so.
Tax concessions will be offered for locally manufactured electric bicycles.
A national agency will be established to identify and facilitate investment to be undertaken in partnership with the public and private sector. A sum of Rs. 250 million will be allocated for the implementation of this proposal.
A sum of Rs 200 million will be allocated to facilitate new jobs based on skills and another Rs 200 million to ensure the employment security of those engaged in micro scale self-employment and livelihoods.
Another sum of Rs 200 million will be set aside to use the railways to transport vegetable and fruit to make the supply chain more efficient by minimizing waste, delays and cost.
