Sri Lanka raise sin taxes, unveils deficit budget amid opposition boycott

Sri Lanka Tuesday announced higher taxes on gambling, smoking and liquor but slashed other levies in a budget speech boycotted by the opposition which dubbed it a ploy to bribe voters before a key election. Sri Lanka Tuesday announced higher taxes on gambling, smoking and liquor but slashed other levies in a budget speech boycotted by the opposition which dubbed it a ploy to bribe voters before a key election. Finance Minister Sarath Amunugama unveiled the 2006 budget granting salary increases to public servants and duty-free cars to professionals who earn foreign exchange.

The government also reduced corporate taxes but brought back a stamp duty on all financial transactions to increase government revenue by about 37 million dollars.

The budget deficit for 2006 was estimated at 194 billion rupees (1.94 billion dollars), up from 168 billion rupees (1.68 billion dollars) this year.

The deficit was equivalent to 7.1 precent of GDP both this year and in the next, he said.

However, Amunugama scrapped taxes on mobile phones, computers and motorcycles.

Amunugama began reading his budget speech for the fiscal year starting January 1 in the 225-member assembly, where the opposition United National Party (UNP) benches remained empty.

“This (budget) is just the reading of a piece of paper,” said UNP spokesman Rajitha Senaratne. “There is no debate or a vote on the budget before the presidential election on the 17th so what is the point of this budget?”

He accused the government of unveiling new tax cuts aimed at wooing voters in favour of the ruling party candidate, Prime Minister Mahinda Rajapakse.

Rajapakse said he was also unaware of the contents of the budget until it was read out on the floor of the House.

“I am as clueless as you are,” Rajapakse told AFP. “I think the UNP boycotted the budget because they wanted to put on a bit of a drama because that is the done thing at election time.”

Amunugama said Monday he would go ahead with the budget despite opposition protests led by former premier Ranil Wickremesinghe, who is Rajapakse’s main challenger in the presidential election.

“I am happy to go on record that we can be proud that the year 2005 will go down in history as the best year of economic risk management, growth and achievement for Sri Lanka,” Amunugama said.

He said the thrust of government spending next year would be to boost the health, education, information technology and infrastructure sectors, but he declined to discuss details of his revenue measures.

Documents presented to parliament last month showed that the government was planning to spend 23 percent more on defence next year at 700 million dollars.

The government has not said why it was boosting the defence allocation during a ceasefire with Tiger rebels. The conflict had claimed more than 60,000 lives since 1972.

However, tension has risen since the August assassination of foreign minister Lakshman Kadirgamar which the government blamed on the rebels, a charge they deny.

Rajapakse is in an electoral pact with the Marxist People’s Liberation Front and wants a revamp of the peace process while Wickremesinghe has vowed to push ahead with the accord as it is. – AFP

-Amal Jayasinghe: win98win@gmail.com