Sri Lanka’s private sector will be made more dynamic and forward-looking by providing necessary incentives (not tax exemptions) while motivating employees in the sector with the introduction of a new pension scheme along with existing superannuation fund reforms.
Finance Minister Mangala Samaraweera’s upcoming 2018 ‘Designer’ budget is to unveil several proposals aimed at creating an economy firmly based on foreign and domestic investment harnessing maximum private sector contribution towards this end, reliable sources closed to the minister revealed.
A proposal will be made to devise a private sector contributory pension scheme bringing the Employees Provident Fund (EPF) and Employees Trust Fund (ETF) under the Treasury to prevent the abuse of funds such as pumping and dumping in the stock market and bond deals by the former regime.
EPF is the largest social security scheme in Sri Lanka, with a current asset base of Rs.1.35 trillion and 2.5 million active accounts. But it cannot be considered a pension scheme as it is not an annuity.
A comprehensive secondary market trading platform and a liability management fund will also be introduced.
The minister recently convened a top level meeting with senior ministry and state officials to complete the finishing touches to the 2018 budget to make it error free and people friendly.
Cutting down expenditure is extremely limited as most of such outlays are already committed or cannot be curtailed for social and economic implications, officials informed the minister noting that almost all the state revenue will have to be spend on interest payments and public debt installment and interest in 2018.
The government is compelled to borrow to meet other recurrent and capital expenditure even in the 2018 budget, they pointed out.
The budget will provide incentives for young entrepreneurs and university leavers willing to take up to business and start-ups providing seed capital without collaterals.
A Small and Medium Enterprise development loan scheme is to be introduced to promote entrepreneurship.
The loan scheme comes into effect with an allocation of Rs.4.4 billion. It is aimed at encouraging young entrepreneurs to develop their enterprises and get on to exports that will support the economy, they disclosed.
Import levies of several essential items including imported rice and fresh have been reduced while removing all taxes on maize imports and instead imposed a special commodity levy of Rs. 10 on each kilo of maize as a pre-budget measure to provide relief to consumers.
The Treasury is also contemplating reducing taxes on all cars with an engine capacity of less than 1,500 cc. The duty reduction will apply to small cars with an engine capacity under 1,000 cc and electric cars with a motor of 80 kilo watts or less.