The Hon. Wijesiri Basnayake

¶ 01 Hon. Deputy Chairperson, we debate amendments to Act No. 14 of 2002 on VAT. Two main themes have dominated today: the U.S. President’s retaliatory tariffs, and claims that Sri Lanka was targeted because this Government wears a “socialist face.” The Leader of the Opposition often seeks 30 seconds here, yet their camp governed much of the last 48 years since 1977 and still failed to craft an export strategy or diversify beyond apparel and primary agriculture.

¶ 02 Exports remain concentrated in apparel, with limited value addition, and tea, coconut, and rubber. When burdens arise, some search for scapegoats rather than admit they never thought globally about integrating into value chains or scaling strategies.

¶ 03 Why taxes? A Government must fund recurrent and capital expenditures—highways, water, electricity, education, health. Revenue must be raised, principally through taxes and non‑tax channels. VAT is an indirect tax; the Opposition urges stopping it, but then how do we fund public services?

¶ 04 Our tax policy had been distorted for years; tax‑to‑GDP fell. In 2022 tax revenue was 8.2% of GDP; 9.8% in 2023; projected 13.9% in 2025—still low versus peers.

¶ 05 To raise revenue, we can: increase rates where necessary, broaden the tax base, and improve collection efficiency. We had failed at these. The National People’s Power Government must deliver its promises; thus, these VAT amendments correct weaknesses since 1 January 2024, align with development priorities, and address incidental charges.

¶ 06 Key points: - Employer‑provided meals and transport to workers: VAT set to zero. - Reinsurance commissions paid by local insurers to foreign reinsurers through banks in foreign exchange: VAT set to zero. - VAT zero‑rated on the face value of revenue stamps and similar instruments. - Clarifies definitions around unprocessed agricultural products to prevent misinformation that led some to believe VAT applied to egg producers generally; VAT applies only to businesses exceeding Rs. 60 million annual turnover. - Amend schedule items on aircraft engines and parts; exempt chemical naphtha supplied by the Ceylon Petroleum Corporation to the CEB for power generation; exempt locally produced liquid milk and yoghurt.

¶ 07 We are establishing a transparent tax policy to fund development and ensure every rupee collected is productively used. Thank you.