SLFP defends GR’s pledges on tax cuts

• Contends that tax reductions are practical 
• Says reducing State expenditure will narrow Budget deficit, create space for tax cuts

By Nuwan Senarathna 

Backing Sri Lanka Podujana Peramuna (SLPP) presidential candidate Gotabaya Rajapaksa’s economic policies, the Sri Lanka Freedom Party (SLFP) yesterday said his proposed tax reductions, which include reducing VAT to just 8% from the current 15%, can be achieved by reducing public expenditure. 

Gotabaya Rajapaksa, outlining his plans for developing the economy, had stated several times during campaign rallies that he will reduce Value Added Tax (VAT) to 8% to increase the purchasing power of citizens. However, the United National Party (UNP) has questioned how this would be possible as reducing VAT would result in the loss of billions in public revenue that would impact other Government programs and payment of public sector salaries. 

Defending Rajapaksa’s stance, the SLFP stressed that tax reductions could be implemented by slashing Government expenditure but did not specify in which areas. He argued that reducing ceremonies and other “wasteful” expenditure would be sufficient.   

Speaking to media at the SLFP head office, General Secretary MP Dayasiri Jayasekara, defending Rajapaksa’s tax plans, said the reduction of VAT would increase the purchasing power of the citizen, which will in turn boost local businesses. 

“We are backing tax policies that will bring down indirect taxes and increase direct taxes. This would increase the purchasing power of middle income households. When they purchase more that will drive demand and will create more economic activities,” Jayasekara said. 

He argued Rajapaksa’s economic policies aligned with SLFP’s economic stance. He pointed out that the SLFP believes in increasing direct taxes so that the impact of indirect taxes on the poor is less.  

Referring to financing the Budget deficit, Jayasekara argued that a mechanism to collect taxes from higher income earners would increase the Government’s income. “We should look to collect taxes through direct channels. Once we set up a mechanism we will be able to increase Government income.”

Jayasekara argued the Budget deficit could be narrowed if the Government manages to cut down ‘unnecessary expenses’ such as opening ceremonies of development projects. 

“This Government has spent considerable amounts of money on foreign consultants. That is expenditure that does not add to the economy, it is a waste of public funds. If we are elected we would cut down all expenses and that will help to narrow down the Budget deficit.”

Referring to Government’s decision to import eggs and chicken, Jayasekara claimed the country has the capacity to produce sufficient eggs and chicken. He argued the Government should take measures to cut down production costs to increase production, while pledging to protect local producers if they form a government.