COLOMBO, Nov. 30 (Xinhua) — Wide-ranging tax relief measures undertaken by the new Sri Lankan government are expected to provide a fiscal stimulus of 550 billion Rupees (3.025 billion U. S. dollars) to the economy, State Minister of Investment Promotion, Keheliya Rambukwella, quoted by local media reports, said here Satuday.
Speaking to journalists in capital Colombo, Rambukwella said the previous government had increased government revenue from Rs. 1 trillion to Rs. 2.2 trillion, providing space for the new government to provide a stimulus through tax reliefs without compromising fiscal management.
“With the current state of the economy, this country can no longer depend on loans and facilities. We need to attract direct investments whereby we will stabilise the rupee, look into unemployment and budget deficits to bridge the gaps as far as possible,” he said.
Financial analysts have noted that Sri Lankan shares and the Sri Lankan rupee ended higher after the tax relief measures were announced. Atchuthan Srirangan, assistant manager-Research for Investments at First Capital Holdings, said that consumer demand will see a boost in the coming months due to reduced taxes on goods and services.
“In the coming months, money liquidation will increase in the market and generate GDP growth. We can also expect lower inflation brackets due to reductions in prices,” Srirangan said.
On Nov. 27, Sri Lanka announced wide ranging tax reliefs including a reduction of Value Added Tax from 15 percent to 8 percent and reduction of telecommunications levies from 30 percent to 5 percent. Strategic sectors such as agriculture, fisheries, livestock and IT were made tax exempt while taxes on the construction industry were reduced from 28 percent to 14 percent
Wide ranging tax reliefs were key promises in the election manifesto of President Gotabaya Rajapaksa. (1 Sri Lanka Rupee equals 0.0055 U. S. dollar)