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The Ceylon Chamber of Commerce endorses the budget 2003 announced at a time the country is emerging from a nineteen- year conflict. The Chamber also recognises the steady and consistent progress achieved during the last ten months in many areas such as growth, interest rates, inflation and the stock market. These factors together with an increased level of stability have led to an improvement in overall business confidence.

The budget is also consistent with the government's policy and incentive framework to facilitate growth through public-private sector partnership. It focuses on an improved framework of governance and accountability.

Tax holidays provided in the context of the current difficult environment to encourage new investments are welcome.

This would help to generate long term economic and social growth. Given the large public debt burden faced by the nation, initiatives taken to manage it in a professional manner is laudable.

All these factors will lead to greater employment opportunities for our youth.

Budget 2003 also supports and encourages initiatives to implement the Regaining Sri Lanka program as a direct measure to cement the peace initiative.

It also supports;

* Sustained private sector led economic growth within a framework of economic reform and deregulation

* Employment creation and human capital development and an improved good governance framework

In addition the Chamber sees the following proposals as positive developments;

* Incentives to promote competitiveness initiatives of selected sectors

* Creation of a Human Resource Endowment Fund

* Promotion of new investments and innovative enterprises via concessions offered to venture capital companies

* Development of the corporate bond market and mandatory credit rating of deposit taking institutions

* Providing an Indian credit line for the import of machinery and equipment on concessionary terms to revive the rural economy

* Enabling unit trusts to invest abroad

* Introduction of a road tax to raise funds towards improving infrastructure

* Continued commitment to labour reforms from the point of view of the employer and the employee

* Steps taken to curtail the consumption and manufacture of illicit alcohol and the resultant increase in government revenue

The concerns expressed by the members of the Ceylon Chamber of Commerce are on the following;

* Proposal preventing the setting off of losses between activities within a company being contradictory to the global practice and Chamber proposals on group taxation. There is concern that this may lead to the closure of activities which otherwise may have been restructured into profitability.

* Reduction in the Port and Airport levy of 0.75 percent to 0.5 percent is welcome but grossly inadequate to revive the export sector. The Chamber continues to support the complete withdrawal of this levy.

* Whilst we support the creation of a Human Resource Endowment Fund, the possibility of quoted public companies being levied an additional 2.5 percent to the existing rate of 30 percent (after the 5 percent rebate) applicable since 1998 will discourage the listing of companies.

* Repatriation of foreign earnings by individuals which will be discouraged with the introduction of a tax of 15 percent

* Proposed expansion of the Debit tax to cover all accounts is a further retrograde step. Moreover the debit tax discourages the use of the banking sector and contradicts the government's intent of formalising the informal sector

* Extension of VAT to the banking sector being inconsistent with the government's policy of ensuring low cost credit

* Introduction of 2 to 10 percent duty on imports, which will result in an increase in costs for the manufacturing sector and of essential goods

* Increasing the maximum permissible age on import of reconditioned road vehicles to 10 years is a retrograde step which is totally inconsistent with the policy direction on this issue.

This will also adversely affect the environment.We also believe that the government's medium term fiscal targets seem too optimistic and somewhat ambitious given the estimated current and past revenue performance as indicated in the table above.The budget proposals place emphasis on positive actions to efficiently manage the economy. Proposals are included to set up joint public-private sector funds and institutions as an enabling framework.

The Chamber recognises that the private sector has been called on to play a key role in ensuring that these funds and institutions will be efficiently managed.

The government also needs to create a stable system of governance, effective cohabitation between the executive and legislature, a clear and consistent long term policy framework to regain Sri Lanka.

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Copyright 2001 The Associated Newspapers of Ceylon Ltd.
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