Taxes cannot be brought down at present as distortionary expenditure available is very limited, said Ceylon Chamber of Commerce (CCC) Chairman and Ernst & Young Country Managing Partner, Duminda Hulangamuwa (PICTURED) said.
He was speaking at the Third Economic and Tax Symposium organised by CA Sri Lanka yesterday.
“We all know that there’s a public service that is much larger than what is needed. There is also the interest we are paying on our past debts. But all of those are stationary in terms of our ability to it cut down. So, we will have to keep the tax rates at the present levels for some time for us to make sure that the economy grows.
“Only if the economy grows will people become rich and that is the only path available. And for that to happen it will take a long time,” he said.
Speaking about attracting Foreign Direct Investments (FDI), Hulangamuwa said that Sri Lanka has to be competitive in international trade. The country has to offer something better than the other countries.
“We should focus more on competition, productivity, efficiency than tax incentives. But I am inclined to think that we should get away from incentives. Because worldwide people are getting away from incentives. Even India is getting out of tax incentives. Most countries are shying away from holidays and concessions and working more towards a reasonable tax rate for everyone which is a normal concept,” he said.
Hulangamuwa’s thoughts on FDIs was supported by Advocata Institute Senior Research fellow Dr. Roshan Perera who pointed out that there should be very strict criteria guidelines when tax concessions are given. “There has to be reciprocality in the sense that there needs to be some contribution or some benefits to the country by giving concessions.”
She emphasised the need for a proper monitoring system when tax incentives are given.
By Thushan Jayasuriya