Rash Taxes

Sri Lanka’s main opposition warns that the current round of pre-election value-added-tax cuts would lead to more inflation in the future. Sri Lanka’s main opposition warns that the current round of pre-election value-added-tax cuts would lead to more inflation in the future. The United National Party charged that the VAT removal of diesel, LP gas and milk powder, plaster-like (palastherer) solutions aimed at deceiving people in the short term.

“It is like a rash (hori)”, Former Deputy Minister and UNP Parliamentarian Bandula Gunewardene told a media conference.

“When you scratch a rash, it feels good; but you feel the pain later.”

He said the underlying disease would get worse because government revenue would fall and the budget deficit would widen.

“When the government runs out of money, it will print money,” Gunewardene warned.

“The more money you print and put into circulation, the more overall price levels will increase.

In 2004, the government financed about a third of the deficit or 3.2 percent of GDP with printed money, or central bank credit, creating massive demand pressure in the economy and drivin