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‘2019 tax cut saved jobs in pandemic'

07 Sep 2022

 
  • SLPP’s Sanjeewa Edirimanne says tax relief enabled businesses to continue operations
  • Says if VAT hadn’t been reduced, Covid-19 job losses could have been higher
  By Imesh Ranasinghe   The reduction of the Value-Added Tax (VAT) in 2019 by former President Gotabaya Rajapaksa’s Government saved jobs of the people in the country as the tax relief provided enabled businesses to continue to operate during the Covid-19 pandemic, stated Sri Lanka Podujana Peramuna (SLPP) MP Sanjeewa Edirimanne. Speaking to the media on Monday (9), he said that the reduction of the VAT to 8% from 15% in 2019 provided relief to the middle-class business community in Sri Lanka, which was able to operate without shutting down from the impact of the pandemic, thus saving the jobs of the people of the country. “This is not a benefit that could openly be seen, but if we hadn’t reduced the VAT during the Covid period, there could have been more job losses than today in the country,” he said.  The Government of former President Gotabaya Rajapaksa reduced VAT to 8% from 15% and raised the monthly VAT threshold from Rs. 1 million to Rs. 25 million. These other tax cuts by the Government resulted in the loss of Rs. 600 billion in Government tax revenue, as a result of which the Central Bank of Sri Lanka (CBSL) had to finance the shortfall through money printing, which contributed to high inflation levels. Moreover, in 2021, the tax revenue-to-GDP ratio was 7.7%, the lowest recorded since its independence and the Government had lost about 55% of taxpayers by the end of 2021. Further, Edirimanne said that any government in power, regardless of the political party, would reduce taxes with the intention of providing relief to the general public, but that the “trade mafia” in the country does not pass the final benefit to consumers. Also, he said that in 2019, when the SLPP Government came into power, they believed increasing direct taxes would ease the pressure on the general public, as indirect taxes such as VAT have an immediate, direct impact on the general public. “That’s why when we presented the Budget, we introduced a surcharge tax and decided to earn Rs. 100 billion from a few big companies. I personally feel that at this point it would be more suitable to implement more direct taxes, and it is important for the Government to focus its attention on that,” he added.


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