April 02, 2020
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    Tax reductions to have positive impact on economy - EU Featured

    February 07, 2020

    The decision by the government to reduce tax rates will have major positive impact to the economy, Ambassador of the European Union to Sri Lanka and the Maldives, Tung-Lai Margue told a forum held at Hotel Galadari yesterday.He said that this decision by the government will encourage the SME sector to invest more and it is a step taken in the right direction.Margue said the tax relief will also help to create new breed of investors and it will also lead to increase of exports. “A healthy tax regime is always welcomed by local and foreign investors and this will also lead up towards the increase of FDI to Sri Lanka.”

    He said that by lowering taxes the government will lose tax revenue. “However this will be compensated by more economic activity and creation of new job ensuring that money flow would increase.”He said that the Moody’s investor services too have highlighted some high potential growth areas for Sri Lanka and these include tourism sector. “Hence the government must look at improving tourism skills of youth and gear them up for future demand of leisure sector based employment.”
    Former Chairman Securities and Exchange Commission and Sri Lanka Tourism and Economist Dr Nalaka Godahewa who also addressed this forum said that one of the biggest issues Sri Lanka has was the change of polices from one political regime to another. “However President Gotabaya Rajapaksa has stated that the current policies and taxes would not be changed for the next five years.
    He also said the violence forced upon by the JVP and LTTE was also another major issue that slowed down the economic development of Sri Lanka and forced the country to fall behind other countries.He explained that it was to ‘catch up’ under the former President Mahinda Rajapaksa government which ‘borrowed money’ and invested the funds in key infrastructure which was lacking at the time.He said that this system worked and the economy which grew at around 2% increased to over 6% despite the country fighting a separatist war. Dr Godahewa said that when the government changed after the defeat of Mahinda Rajapaksa the then government would have built on the good work and completed what they stated but it was not so.
    “The previous government went on a political suppression process and due to this today the economic growth rate is lower than 2% when there is no conflict at all.”Commenting on the future he said that the local think tanks under ‘Viyath Maga’ planned the future of Sri Lanka for the past four years under the theme ’what do Sri Lankans want in their future to be’ and this is now being implemented.“We identified that one of the biggest issues Sri Lanka is facing is poverty and this is created due to the lack of skills, capital, land and non availability of opportunities. “We are addressing this now by proving them to youth.”


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