‘VAT hike not good for business’


Value Added Tax (VAT) increased to 15 percent, was operative from May 2, Finance Minister Ravi Karunanayake said.

“Education and pharmaceutical drugs have been exempted from the increase, Karunanayake said at a press conference Sunday.

“Medical care services provided by private hospitals will be liable for VAT. The same goes for telecommunication services, he said.

“Phone call charges will increase because of the removal of the exemption of Value Added Tax (VAT) from the telecommunication services. Areas that could have an adverse effect on day-to-day lives of the public have been avoided wherever possible, he explained.

Former Banker and top corporate personality Nihal Fonseka told The Island Financial Review that the government has no option but to generate revenue other than by increasing direct taxes.

“Sri Lanka’s overall tax revenue as a percentage to the GDP is lowest in the world. However, any tax increase is not good for business and we have to accept it as the government has to collect revenue to run the country, Fonseka said.

He said that the government has to reduce the number of indirect taxes to enhance the business confidence among foreign and local investors.

Immediate past president National Agribusiness Council Aruna Weerakoon said that VAT increases will not have a major impact on the agribusiness sector.

Toss Lanka company executive, Director Merrick Gooneratne said the VAT increase would adversely affect the export sector because most of inputs and raw material are imported from other countries for the export manufacturing sector.

“With the increase of import items, along with the VAT increase, the cost of production would automatically go up. As a result, our exports will not be able compete with countries like China,Gooneratne told The Island Financial Review.

“The Sri Lankan rupee’s deprecaition against the dollar and the additional VAT increase will impact prices of all import items many fold. Further, on top of that, the mandatory Rs 2500 salary increase is adding insult to injury, he said.

Minister of Digital Technology Harin Fernando said Phone call charges will increase because of the removal of the exemption on VAT from telecommunication services.

He said concessionary packages, including data packages and new technology, will be introduced in the future so that the burden the people will have to bear will be reduced.

“We will introduce concessionary data packages through which call charges could be reduced, he said.

(Source: The Island – By Hiran H.Senewiratne)