People should decide whether to borrow more or increase revenue to ease debt burden: Ravi K

It is up to the people to decide whether to obtain more foreign loans as the previous regime did or to increase Government revenue in order to reduce the tax burden currently being put on them, said Minister of Finance Ravi Karunanayake. 

The Minister stressed that the Government was not prepared to further increase the tax burden on the people. He also pointed out that what should be done under the existing situation is to trap non-taxpayers in the net. The Minister, who pointed out that no advice from international organisations was necessary to strengthen the country’s economy, stated that the current administration had been maintaining the necessary financial discipline. 

The Minister expressed these views at the 22nd annual conference of the Inland Revenue Service Association. The conference was held under the patronage of President Maithripala Sirisena on 19 May at the Sri Lanka Foundation.

“First and foremost, I should say that there is rapid progress taking place at the Inland Revenue Department. Such progress had never ever been reported in the past. We have been able to achieve this status through a creative program supported by your views and being enhanced by modernisation.  At the time we took over power of the Government on 8 January 2015, state revenue was 10.2% from Gross Domestic Product. With the contribution by Sri Lanka Customs, Excise Department and Inland Revenue Department, the 10.2% revenue has been increased up to 15.3%. The advantage is that such revenue will help reduce the tax burden,” Karunanayake stated.

“Views were expressed yesterday about the new Inland Revenue Draft Bill. Foreigners do not need to come here and explain to us their experiences. We are able to prepare our own system depending on your knowledge and our confidence. The new Draft Bill will be created accordingly. Experiences from all countries will be utilised to create this Draft Bill. Otherwise, this is not created on the guidance of a particular person or entity. 

“There is nothing included in this new Bill that could harm the sovereignty of the country. No foreign country can dictate to us what sectors should be taxed and what should not be taxed. It will be decided by the Government. I will say with responsibility that the International Monetary Fund is not an entity that takes people hostage but an organisation constantly prepared to assist needy countries. Therefore, I assure that the Good Governance administration led by His Excellency President Maithripala Sirisena and the Honourable Prime Minister Ranil Wickremesinghe would never allow a harmful thing to happen to the country.

“Our tax revenue in 2012 was Rs. 305 billion. It was Rs. 355 billion in 2013, Rs. 366 billion in 2014, Rs. 421 billion in 2015 and Rs. 466 billion in 2016. Our target in 2017 is Rs. 609 billion. Had we collected this revenue in the past, do we need to impose VAT? Our revenue was not sufficient to repay the loan instalments at least. Then how did we go forward as a country?

“What we want is not to increase tax but to get the current tax evaders into the tax system. The current population in our country is 23 million. Out of this 23 million, 48,000 are direct taxpayers. When we assumed office in 2015, the total number of tax files including Nation Building Tax and VAT were 609,000. With your commitment, this has risen up 1.5 million today.

“When VAT percentage was increased to 15%, I saw it as a crime. We imposed it with discontent. If we continue to increase tax revenue in this manner, by end of this year or possibly at the beginning of next year, we will be able to reduce VAT to 9% or 10%. I would like to remind you that it is the best commitment that we can do for the people. We are ready to do that. But what we should think again and again whether to do this by obtaining more foreign loans or increasing our revenue. How did we increase our income by 50% during the past two years? Did we tax everything? No! What we did is to make a group of non-taxpayers pay tax.

“Our VAT revenue in 2012 was Rs. 230 billion. It was Rs. 251 billion in 2013, Rs. 275 billion in 2014, Rs. 220 billion in 2015 and Rs. 283 billion in 2016. We anticipate Rs. 380 billion VAT revenue in 2017. However, I would like to state proudly that we were able to collect the revenue that we projected for the first five months within the first three months.

“The IMF does not need to dictate that we do this and do that. Let’s show the entire world through modernisation that the best Inland Revenue Department is functioning in Sri Lanka. If we need to take the country forward, what we should do is not put hurdles in the way or conduct protests but to extend us some strength such as building a house for a needy family or provide a job to an unemployed individual at least. By doing such services only can we be happy one day as contented public servants,” Karunanayake added.

State Finance Minister Lakshman Yapa Abeywardena and the Director General of the Inland Revenue Department Kalyani Dahanayake were also present at the event.