SL will fall into bottomless economic abyss if not for tax hikes: Cabinet spokesman

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Unless the government increases state revenue through tax hikes, imports control and expenditure cuts, Sri Lanka would fall into a bottomless economic, social and political abyss and the global community and financial agencies like the IMF, the World Bank and the ADB will distance us like a pest, Minister Bandula Gunawardena said yesterday.

In that case, the government is not in a position to give any relief to public servants who have staged protests against the proposed tax increase, he added.

As the things stand right now, odds are against Sri Lanka and as such there was no any other option than agreeing to the conditions laid down by the IMF at the staff level discussions to obtain the extended fund facility of US$ 6.9 billion, he added.

The government would bring down the tax ratio to a satisfactory level soon after the economic recovery aided by the credit restructuring and financial assistance programme are in place from the Imf,the World BANK,ADB and donor countries, he added.“the government side had to go for hard negotiations to get the consent of the IMF to bring down the income tax threshold to Rs. 100,000 from Rs. 45,000 a month as the IMF officials were adamant that all Sri Lankans earning an income of Rs 45,000 or more must be taxed,” Minister Gunawardana said.

The debt trap is our own creation over the years by successive governments. We spend much more than our income. For example, in January 2023, the total government revenue was Rs.

158.7 billion collected through the Inland Revenue Department, Excise Department, Sri Lanka Customs and non-tax revenue. But the expenditure in January 2023 stood at Rs. 367.8 billion, more than double the income.the main recurrent expenditure was salaries to public officers at Rs. 87.8 billion, for pensions – Rs. 29.5 billion, capital expenditure – Rs. 21 billion and other expenses – Rs. 10.8 billion, he noted.

“The government bridged the gap and footed the bill by way of loans, Treasury Bills, Bonds and Bank Drafts.