Futuristic budget
*Focus on development, productivity
increase
*Comprehensive tax revision
*Human resource development top
priority
*Redress for public servants
President Mahinda Rajapaksa in his capacity as Finance and Planning
Minister yesterday presented Budget 2011 in Parliament which could be
best described as futuristic. The total revenue and grants envisaged in
the Budget amounts to Rs 986.1 billion where as the total expenditure
proposed amounts to Rs 1419.9 billion. The Budget deficit which was
eight percent of the GDP excluding grants in 2010 will be brought down
to 6.8 percent under the current Budget.
A series of concessions have been given to industrialists,
agricultural entrepreneurs and public and private sector employees under
the Budget.
A highlight of the Budget is a proposed revision of salaries and
allowances to public servants. All public servants will be paid a
special allowance equivalent to five percent of the basic salary with
effect from January 2011. Also increased is the Cost of Living allowance
to Rs 5,850 per month, an increase of Rs 600.
This will be paid to non-staff grades with effect from January 2011
and to staff grades from July 2011. Pensioners also get a Cost of Living
allowance increase of Rs 300 per month with effect from January 2011.
Pensions will also be increased by Rs 750 per month for those retired
before January 1, 2004 while those who retired between January 1, 2004
and December 31, 2005 will get an increase of Rs 250 per month with
effect from July 2011 thus correcting an existing anomaly in pensions.
University academic staff and staff grade researchers in other
institutions will get a monthly research allowance equivalent to 25
percent to their basic salary. This allowance will be availed for two
years from January 2011 during which period such research has to be
completed and findings published.
On -call allowance paid to doctors will be increased by 25 percent
from January 2011. Personal allowance paid to members of the judiciary
coming under the purview of the Judicial Services Commission will be
similarly increased.
The President also said 10,000 graduates will be recruited to
services in the fields of Engineering, administration, planning,
teaching, technical services, agriculture extensions and other skills.
Another 1,500 graduates will be recruited as management trainees to
banks and financial institutions.
The Budget outlined a simple income tax system. Current tax rates on
personal income ranging from five to 35 percent will be reduced to a
range of four to 24 percent. The tax free income threshold will be
increased from Rs 300,000 to Rs 500,000 and the tax slabs will be
increased from Rs 400,000 to Rs 500,000. This will also be extended to
non- resident Sri Lankans. PAYE tax will be deducted only from employees
earning over Rs 600,000 per year. The maximum tax rate under PAYE will
be 25 percent. The new PAYE system will be introduced to the public
sector as well. Terminal benefits from EPF will be exempted from tax.
A new employees’ pension fund will be set up to provide post
retirement pension benefits to employees in the private and corporate
sectors. For this purpose employees and employers will have to
contribute two percent each to this fund. Employers will also be
required to transfer the entire gratuity to his fund.
It was also proposed to set up an Overseas’ Employees Pension Fund (OPEF).
Each employee is required to contribute at least Rs 12,000 to this fund
per annum.
The Government will contribute Rs 1,000 million as initial capital to
this fund.
Also envisaged is a Citizens’ Pension and Insurance Fund. The subsidy
given to small holder tea growers will be increased by Rs 50,000 per ha.
Rs 500 million has been allocated to provide subsidies for replanting,
new planting, inter cropping and productivity improvements in the
coconut sector. In addition Rs 200 million has been set apart to combat
the disease affecting coconut plantations in the Weligama area. Subsidy
for rubber replantation and new plantation will also be increased. In
addition a 50 percent subsidy will be given to popularize the use of
rain guards. A five-year tax exemption has been proposed for investments
in seed farming. A three-year accelerated seed farm development
initiative will be started from 2011 at a cost of Rs 700 million.
Fish production in the North and East will be increased to get 50
percent of the total production. Farm gate price for liquid milk will be
increased to Rs 50 per litre.
Electricity tariff will be reduced by 25 percent to religious places,
state hospitals, schools, vocational training institutions and
universities.
The Nation Building Tax will be reduced from three to two percent.
The applicable threshold will be fixed at Rs 500,000. The Social
Responsibility Levy, Rural Infrastructure Levy and Debit Tax will be
abolished.
Rs 3,000 million will be allocated a period of three years to address
economic difficulties of service men and women who have suffered during
the war. It is proposed to grant an allowance of Rs 100,000 per family
for a live birth of a third child of families of Armed Forces’
personnel.
Minimum floor rates of local telephone calls will be reduced from Rs
2 to Rs 1.50 per minute from July 2011 while a levy of Rs 2 per minute
is proposed for an outgoing foreign call.
Concessions have also been given to gems and jewellery manufacturers
by increasing their foreign exchange allowances.
Tax on profits of businesses engaged in the manufacture and
distribution of liquor, cigarettes and also casinos has also been
increased by five percent. Large amounts have been allocated for human
resource development, ICT, health and education. The President also
proposed to extend concessionary duty to import motor vehicles for
professional and managerial categories of public servants working in the
Government and public enterprises. |