Mixed reactions to Budget 2022 from International Chamber of Commerce Sri Lanka

ICCSL Chairman Dinesh Weerakkody

The International Chamber of Commerce Sri Lanka in a statement said that the Budget 2022 presented by Finance Minister Basil Rohana Rajapaksa had several positive proposals that were critical for Sri Lanka’s future. 

It noted that proposals to minimise the disparities in income levels between provinces, export development initiatives and strategies to increase in FDIs and relatively consistent tax policies were critical for pandemic recovery.

However, it said the proposal to levy a 2.5% Social Security Contribution on turnover would have an adverse impact on low margin businesses, including those subject to price controls and financial intermediaries. 

“As such, we recommend considering sourcing this contribution through established measures. SMEs, for example, will not be able to absorb a 2.5% levy in their gross profit margin. Contribution on turnover will also keep away potential FDI from big trading agencies potentially setting up in the Port City.” To attract FDI to Sri Lanka, it said the adoption of international/regional standards and regulations across industries would increase the efficiency for export and local sales and would also reduce the cost of imports. “It is certainly in the best interests of Sri Lanka to follow the Technical Barriers to Trade (TBT) Agreement with the WTO, ratified by Sri Lanka,” it added.

The chamber noted that a one-off Surcharge Tax of 25% on persons and companies with taxable income exceeding Rs. 2 billion could place a heavy burden on firms that were looking to expand, and the VAT charged on the supply of Financial Services sector, which had provided moratoriums for the post-pandemic recovery of most sectors and importantly given that the moratoriums had been further extended, could potentially lead to a weakening of the financial system in the country. 

It asserted that the move to consolidate charges currently being exacted by the Board of Investment (BOI) and Export Development Board (EDB), as well as the Special Goods and Services Tax (Special GST), would be of great value for business development.

It also welcomed the incentives extended for start-ups by doing away with the business registration fee and the creation of agro parks and three additional techno parks and mini supermarket networks at the local level. The targeted Rs. 1.6 trillion fiscal deficit for 2022 is an improvement from the Rs. 1.8 trillion deficit for 2021, it noted.

The chamber pointed out that the absence of emphasis on the management of external debt and the related implications for dollar liquidity in the banking system were notable challenges to the business community in Sri Lanka

“The International Chamber of Commerce Sri Lanka looks forward to an ongoing dialogue with the Government and for the opportunity to play a catalytic role, given ICCSL’s business connections in over 130 countries. However, the proof of the Budget proposals will be in their implementation and realisation,” ICCSL Chairman Dinesh Weerakkody said.