Key insights at EY’s 21st Annual Post Budget Conference

Central Bank of Sri Lanka Governor Ajith Nivard Cabraal (centre) speaks at the E&Y post-Budget forum. Others from left Ernst & Young, Sri Lanka and Maldives Partner and Consulting Leader Arjuna Herath, Ernst & Young, Sri Lanka and Maldives Partner and Head of Tax Services Duminda Hulangamuwa, Ceylon Chamber of Commerce Chairman Vish Govindasamy, Finance Ministry Secretary S.R. Attygalle, Ernst & Young Country Managing Partner Manil Jayesinghe and Ernst & Young Sri Lanka Partner – Tax Services Sulaiman Nishtar 

• Ambitious plans vs. Complex challenges: Efforts to bridge the Budget deficit
• Realising need for the country to revive for Now, Next, and Beyond
• Various revenue proposal options presented would hopefully reap envisaged revenue outcomes leading Sri Lanka to greater stability: Governor Ajith Nivard Cabraal
• As the country gradually opens up, we have to turn our ambitions into action through collaborative efforts between Government, businesses and civil society: EY Country Managing Partner Manil Jayesinghe

The 21st Annual Post Budget Conference of Ernst & Young, Sri Lanka (EY) was held on 13 November. The hybrid event was casted at the Hilton Colombo and livestreamed via its virtual platforms. The tax leadership of EY presented its National Budget Review under the patronage of guest speakers Central Bank of Sri Lanka Governor Ajith Nivard Cabraal, Ministry of Finance Secretary to the Treasury S.R. Attygalle and Ceylon Chamber of Commerce Chairman Vish Govindasamy.  

EY Sri Lanka and Maldives Country Managing Partner (CMP) Manil Jayesinghe welcomed the guest speakers and  the participants. Commenting on the event, he said: “As the country gradually opens up, we have to turn our ambitions into action through collaborative efforts of the Government, businesses and civil society. Only then can our national efforts be achieved.” 

Jayesinghe further stated: “The Budget was presented coping with significant macro-economic challenges aggravated by the COVID-19 pandemic. When governments around the world are rallying to support the shift from brown to green through incentives and disincentives to meet COP26 deliverables, and progress we make in achieving those goals as a nation is going to impact our ability to attract Foreign Direct Investments (FDIs). 

“Potential investors, lending agencies and ratings agencies are recognising us based on our efforts towards global decarbonisation through investment, taxation, subsidy and behaviour change. It is important to realise the huge opportunities for businesses and entrepreneurs.”

The opening remarks on the National Budget review was delivered by EY Sri Lanka and Maldives Partner and Head of Tax Services Duminda Hulangamuwa. Commenting on the event, Hulangamuwa stated: “Businesses, specifically of those players within the key focus sectors and private investors – foreign or local, must carefully analyse the new provisions and the impact of these new provisions on business verticals.” 

He further highlighted that Sri Lanka’s ability to attract sizable FDIs as well as achieve its sustainability goals would depend on how well all stakeholders fall in line to achieve the national goals. Hulangamuwa said: “With the right directions within the national policy frameworks ‘Vistas of Prosperity and Splendour’, the enforcement and discipline to meet the national objectives, Sri Lanka could better project our strategic focus as a nation on reviving our financial stature.”

Speaking at the conference, Central Bank Governor Ajith Nivard Cabraal emphasised the commitment of the current regime towards upholding its commitment on policy stability and clarity in direction towards a stable economy. He said: “Since my appointment, the main thrust that was intended to be established, was to give clarity in terms of exchange rate policy and  what the Regulator and the Government hopes to do, in relation to the challenge the country is faced with. 

“For this purpose, we came out with a six-month plan in which we articulated clearly, what we are hoping to do from where we were, and where we are going to source  the funds from, which is now at an implementation stage. In so doing, another plan is expected to be unfolded in January which will be for the year. We believe the foreign exchange and debts issue is thereby addressed to a greater extent.”  

Cabraal reiterated that the Finance Minister is faced with a challenging task, where revenues have to be generated while debts are to be retired and  at the same time the people and businesses are not overburdened. He concluded by stating: “Towards this, there are various revenue proposal options that have been presented and hopefully, they would reap the envisaged revenue outcomes leading Sri Lanka to a stable zone swiftly.”

Ministry of Finance Secretary to the Treasury S.R. Attygalle anticipated that the fiscal consolidation is expected through growth in ensuing periods. From a fiscal perspective this has been clearly mentioned and demonstrated. 

Responding to the question presented by EY Sri Lanka and Maldives Partner and Consulting Leader Arjuna Herath on whether the introduction of the Special Goods and Services Tax (“SGST”) result in VAT being abolished for the identified industries and would that result in price escalation, Attygalle indicated that SGST is a composite tax and by definition itself multiple taxes would be combined into one. SGST is applicable only in respect of select items: Alcohol, Cigarettes, Telecom, Betting and Gaming and Motor Vehicles, and would in turn result in being reflected in the prices.   

Guest speaker Ceylon Chamber of Commerce Chairman Vish Govindasamy explained the position of the Chamber – a lobbyist with the Government and with regulators. Govindasamy expressed: “Both local as well as our partners overseas has repeatedly asked that they require serious levels of business confidence being maintained at the country level to help achieve growth.” 

For which, the six-month roadmap has demonstrated some level of confidence amongst the chamber community to improve the foreign exchange inflows which, as promised, is expected to help in improving the foreign exchange situation. 

Govindasamy added: “We as a chamber would be interested to see how it would come into fruition. As a chamber, we must appreciate the efforts of the Minister and Government, that there have not been major changes in the policy direction which is in line with our advocacy campaign to maintain policy consistency.”

The salient fiscal changes and proposals of Budget 2022 was presented by EY Sri Lanka Partner – Tax Sulaiman Nishtar and was followed by a panel discussion, which was moderated by EY Sri Lanka and Maldives Partner and Consulting Leader Arjuna Herath. 

During the panel discussion, Sulaiman commented: “The Government’s non-traditional focus on showcasing consistency in maintaining the existing taxes without any change, also commented on insights into the possible implications the new tax proposal could have on various industries as well as issues surrounding collection of such taxes.”  

Concluding the event, EY also released its e-copy of its comprehensive Budget Review which is now available on its official LinkedIn channel and at go.ey.com/EYSL_BudgetReview2022.