June 12, 2007 (LBO) – Sri Lanka should widen its tax base and practice fiscal discipline instead of heavily taxing a few sectors like the financial sector, and have a formal taxation commission to devise a medium-term tax policy, a top bank has said. While Sri Lanka’s tax collections as a percentage of gross domestic product has improved in the last two years, due to unrestrained current spending in particular, the budget deficit has not improved.
DFCC Bank chairman J M S Brito said combating corruption and reducing losses in state enterprises was needed to free funds for infrastructure development.
“Maintaining fiscal discipline and equitable financial policies will also be essential,” DFCC Bank chairman J M S Brito told shareholders in the annual report.
“In particular, the widening of the overall tax base as opposed to excessively taxing some sectors, will be a necessary step towards placing the economy on a sounder footing and freeing the financial sector to perform its intermediary development role.”
Chief Executive Nihal Fonseka said a finance ministry effort to start a dialog with the tax payer community was “commendable” but a more formal forum such as a taxation commission was needed to devise a medium-term tax policy.