Will the tax cuts increase the fiscal defecit?

Will the tax cuts increase the fiscal defecit?

Will the tax cuts increase the fiscal defecit?

Written by Staff Writer

27 Jan, 2020 | 8:43 pm

Colombo  (News 1st) – Sri Lanka’s New Government recently announced tax cuts which will likely shave off 560 billion rupees from government income in 2020. Will this put pressure on the Inflation and monitory policies and result in a wider fiscal deficit?

According to an equity report from Asia Securities, the tax cuts foresees a pick up in consumer activity and higher collections compared to 2019  but also a widening fiscal deficit to 6.9% in 2020

Member of the taxation committee of the ceylon chamber of commerce, and Chairman of the International fiscal association (Srilanka branch), N.R. Gajendran speaking to News1st, highlighted that the new tax system introduced will reduce the revenue in short term

“.. Revenue income there will be gaps and we already have a twin deficit, a current account and budget deficit and a widening huge budget deficit can add into imported inflation and put pressure on the rupee. In the short term, it is not going to generate that revenue, in the long term business activity grows, consumption grows, exports, production, and services grow then there is a possibility of recouping the revenue loss if you want to have a manageable budget deficit you have look at expenditure side you have to look wasteful expenditure, corruption malpractice, it’s one way to execute the budget deficit ..” – N. R Gajendran

Would say these particular tax cuts to be implemented by the cabinet will benefit the lower-earning individuals?

“.. Income tax benefit will go to individuals who are liable to income, employees who are earning more than 100000 and employees who are earning less than 100000 will not benefit from this income tax reduction. Businesses and companies will benefit from the income tax reduction. The segment of the people who will benefit because of the income tax reduction is the businesses and the employees who earn 1.2 million a year and the self-employed people who earn more than 500000 a month ..” – N. R Gajendran

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