The Hon. Namal Rajapaksa, Attorney-at-Law

¶ 01 Hon. Chairman, during this Committee Stage for the 2025 Budget, we are debating the Expenditure Head of the Ministry of Finance and Mass Media. Good concepts have been presented today. However, Hon. Chathuranga Abeysinghe, Deputy Minister, practically what does the Government expect: an import-dependent economy or a services-and-exports-based economy? The current tax policy and overall policy mix clearly indicate your Government is following a model of generating state revenue off imports. You cite many reasons: sometimes the IMF; sometimes debt taken by past governments. Yes, any government must face realities. When you took office, you were given power to correct past missteps. But if you say, “We presented the IMF’s plan; our own Budget will come in five or ten years,” then we cannot reach the targets you have tabled today.

¶ 02 Your policy statement says Sri Lanka will be a middle-income country by 2030. Even if we sustain 5 per cent growth, it would take about 27 more years to reach that status. President Ranil Wickremesinghe said he would make Sri Lanka a developed country by 2048; at this pace, you would need to add more years. According to the growth path you sketch to become like Singapore, it would take centuries.

¶ 03 How do we get 6, 7 or 8 per cent growth? We need a jump, a shift. The Government must take radical decisions. Some of those will not be in the IMF framework. But if the Government had a clear plan to generate revenue and a spending plan, it could do this. You say you cut expenses of former Presidents and so on; but how much did you save? It is not clear in this Budget what the net impact on the economy is. If the public expects a major transformation, even within the IMF framework, the Government must make radical shifts.

¶ 04 Today, almost all state revenue is expected from taxes, and 60 per cent of it—roughly Rs. 2.9 trillion—is to be paid as interest. If revenue is Rs. 5 trillion, interest is Rs. 3 trillion. Another Rs. 2 trillion is left to run the Government and develop the country. To say we will continue like this for the next five years is not fair. People voted expecting a plan. Also, under the current tax policy, will investors come? The Government must pay greater attention to this.

¶ 05 Deputy Minister, you spoke of digital transformation and improving citizen services. Where is the basic investment coming from? How is it provisioned in this Budget? You also spoke of sustainable energy; good. We must shift to renewables and generate to the grid. But in the past six months, not a single project has obtained even the first provincial approval from the Sri Lanka Sustainable Energy Authority process. If institutions are not efficient even for initial approvals, what is the issue? In the meantime, internationally reputed investors have turned back for various reasons. You propose to spend on agriculture while borrowing at high interest—up to 13 times more than before. From where will that money come? What is the investment path? Which sectors will you attract? You say we will build a US$ 5 billion IT/services economy. Yet you raised a tax that was at zero to 15 per cent. The excuse is that 30 per cent was reduced to 15 per cent. But what was at zero is now 15 per cent; nothing that was 30 is now 15.

¶ 06 Our State Minister of Finance is here. Hon. State Minister, on cross‑border transactions and digital payments, you anticipate tax revenue as a percentage. How will you collect it? What is the mechanism? Hon. Minister, once your phone call ends, please answer: What is the plan to collect from this sector? Have you discussed with the sector? Will we ask Google to collect 18 per cent VAT? Or tell Facebook? I saw talk of taxing Booking.com because they make profits. They do business; but we need a mechanism—registration and a process. Today, in our e‑commerce sector, who will be taxed—seller, service provider, buyer, or based on turnover? The Government seems unclear, yet it starts on 1 April. From 1 April, you will tax incomes earned in dollars by those working online from Sri Lanka—freelancers, tourism operators, YouTubers, bloggers, the broader digital/creator economy—at 15 per cent. Meanwhile, how will you collect VAT from international businesses operating here without local registration? If you say “they earn limitless profits so tax them,” they will not come to pay; they will pass the tax on to Sri Lankan buyers as vendors, increasing domestic costs without reducing their profits. Also, our local producers selling via international platforms will face higher VAT-driven prices and lose competitiveness; and then again face a 15 per cent tax on re‑entry. Will there be double taxation? Will you stop at one point? Will you register these firms locally and allow them to operate, or ban non‑payers? We seek clarity from the Finance Ministry.

¶ 07 On SVAT: you say we must encourage exports. Those who earn dollars need facilitation. Removing SVAT has created difficulties for exporters and businesses. Reinstating relief helps business without being a net loss to Government if refunds are managed timely. Decide whether you will push facilitation or keep cash‑flow pressure on exporters.

¶ 08 On investment: the world is competitive. Our SMEs face a severe market crisis and access‑to‑finance constraints. How many investors came in recent months? How many jobs created? If your fiscal survival relies on taxes alone and you keep pushing interest burdens to 60–80 per cent of Budget, you will crowd out growth. Instead, attract investors, create jobs and expand the economy. You cannot do this by claiming the IMF alone will fix things, or by assuming big corporates’ relief is bad for the country. No investor will come if they can go elsewhere with fewer obstacles.

¶ 09 We can rationalize the state service, but you must also show how you will generate funds beyond taxation. What is the long‑term solution?

¶ 10 Specifically, on the Digital Services Tax and cross‑border transactions: how will you transact with global companies? This is a big challenge. Also, consider the future of professionals in the public service. On the current BOAH/BOAD doctors’ issue, please listen compassionately. They are not asking for money now; they ask to preserve the long‑standing 1/80 pension formula, not to convert it to 1/120, and to keep the 1/20 holiday allowance, not reduce to 1/30. Nurses raise similar concerns, not to change to 1/160 or 1/200 unfairly. If you lack funds, pay two‑thirds now and adjust later when you can, but do not change long‑standing fair formulas arbitrarily, or treat two cadres in one sector unequally.

¶ 11 There is also concern regarding police and armed forces: do not generalize that all who left service are linked to crime. Punish offenders, but create a lawful path for those absent to regularize exit and monitor thereafter, rather than hunting broad groups and stigmatizing the forces. Proceed with a clear, fair plan.

¶ 12 Finally, you have spoken well on expenditure; but on revenue generation, major questions remain. Thank you.