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By Pravin Mendis

The Government hopes to move on a fast track with more emphasis on the divestiture of several Government controlled entities while introducing new legislation for a Revenue Authority and Tax Commission soon that will lead to a path of growth this year.

R.Paskaralingam, Advisor to Prime Minister, Ranil Wickremesinghe on Policy Development and Implementation told a budget seminar organised by the National Chamber of Commerce on Monday that the year 2001 was a difficult year for the country. "This budget had to be presented soon after the Government assumed office in December and when all the economic parameters were negative last year. The year 2001 was also the most horrific year financially where the power and petroleum sectors incurred heavy losses in Rs.17 billion and Rs.25 billion respectively. The Government therefore, endeavoured to present a budget that will lead to a path of growth with a minimum burden on the ordinary masses," he said.

"It would have been easy for the Government to keep revenue measures in order to keep expenditure. However, the United National Front Government has chosen not to pass on the burden to the people by presenting a budget that will lead to a path of growth," Mr. Paskaralingam said.

"The monetary policy was difficult to manage with the heavy Government borrowings last year which put pressure on private sector borrowings. The indications are that this budget is oriented towards a rejuvenation of the economy," he said.

The Government has commenced drafting legislation to deregulate the financial sector with additional sections to help local and foreign investors. Legislation in Labour, Land, the setting up of a Revenue Authority, Tax Commission will be presented within the next two months.

However, what is more important than the budget itself is to keep the reforms process on a fast track. Therefore, what is unsaid in the budget proposals itself is important.

Many government corporations and institutions are in for divestiture in the next few weeks with the first being the Sri Lanka Insurance Corporation which Mr.Paskaralingam hinted will be taken up for divestiture in the next three weeks.

Mr.Paskaralingam however, did not elaborate on details on the divestiture program at the budget forum.

The liberalisation process of the government is expected to continue on a fast track with several prominent Government controlled entities including petroleum, insurance, power and the state banks coming under the re-structuring process.

Managing Director of Hatton National Bank, Rienzie T. Wijetilleke said the introduction of a witholding tax on savings reduced from 15% to 10% and the interest on savings liable to a tax of 10% withholding tax for everybody who earns more than Rs.6,000 as interest on savings creates an anomalous situation taking into account the increase in the tax threshold from Rs.144,000 to Rs.240,000. Therefore, he proposed a one off payment by all institutions in the form of a Debit Tax of 0.1%.

Director General of the Industrial Facilitation Forum, Mahendra Amarasuriya said the budget should be viewed as ad-hoc where the pressure on the policy makers was rather high. The permanent Tariff Commission proposed is a welcome move. However, there is no mention of the Norochcholai power plant where a serious power crisis is forecast in 2004, he said.

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Copyright 2001 The Associated Newspapers of Ceylon Ltd.
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