New budget to balance growth, fiscal restraint for disaster hit economy

Work on budget 2018 has got underway on the directions of Finance Minister Mangala Samaraweera to make it people’s friendly, providing modest economic support for low-income households and would be generally supportive of business while cutting government expenditure, Finance Ministry sources divulged.

Treasury officials are considering the possibility of lowering tax rates for micro and small-and medium –sized enterprises and granting short term relief for drought and flood hit rural areas while revising taxes imposed on small car imports.

Budget 2018 will be based on performance-based budgeting according to mid-term budget framework 2018-2020 and budget limits for line ministries considering priority programmes.

Under this Macro- Public finance Framework 20182020, the government aims to increase public income from 16.5 per cent of GDP in 2020, recurrent expenditure to 14.8 per cent of GDP and public investment to 5.3 per cent of GDP.

Unlike in previous budgets, the 2018 budget’s key revenue proposals have a greater chance of being implemented, such as the corporate tax revisions and the revisions of withholding tax and income tax, a senior Treasury official who wished to remain anonymous told the Business Times.

The Department of Trade and Investment Policy is now evaluating proposals put forward by trade, investment, industry and public sectors after the deadline given to them ended on September 14.

The contribution from direct taxes will increase, shifting to a more progressive and fairer tax system. The National Budget Department has been directed to ensure that it does not exceed its expenditure targets.

State expenditure in 2018 is estimated at Rs. 3.9 trillion while revenue including foreign grants is estimated at Rs.2.1 trillion.

Provision has also been made under special laws to service public debt and payment for widows and orphans pensions amounting to Rs. 2 trillion. Total borrowing requirement from both foreign and domestic sources has been estimated at Rs. 1.8 trillion.