Defence levy increased in Sri Lanka

By Nirupama Subramanian

COLOMBO, MARCH 9. Sri Lanka's budget for 2001 has been dictated by the war against the Liberation Tigers of Tamil Eelam, with the Government raising its defence levy by one per cent and placing a 20 per cent surcharge on corporate income tax in an effort to balance its increasing defence expenditure.

The allocation for defence in this year's budget is Rs. 75 billion, approximately $882 million, and Rs. 12 billion more than the projected estimate.

Presenting the budget before Parliament on Thursday, the Deputy Finance Minister, Mr. G. L. Peiris, asked the people to tighten their belts and promised relief after six months, but the opposition United National Party criticised the budget for not containing any concessions for the middle and poor classes who were already hard hit by the high cost of living.

The Government hopes to mop up Rs. 6,100 million from the increase in the national defence levy from 6.5 per cent to 7.5 per cent. This is the second increase in the levy in less than a year. Last year, it was increased by one per cent from 5.5 per cent during the escalation of the war against the LTTE, during which the Government made emergency purchases of arms.

An additional revenue of Rs. 2,600 million is envisaged from the corporate tax surcharge, but Sri Lanka's tiny corporate sector predicted that this would put a dampner on growth. The Government also hiked the annual levy on casinos from Rs. 1 million to Rs. 25 million, and from Rs. 100,000 to Rs. 1 million on betting centres where punters flock to place their money on races abroad. There are no races in Sri Lanka.

Resident visa charges and the airport embarkation tax have also been hiked steeply in the desperate search for additional revenue.

Austerity measures to save valuable foreign exchange have finally forced the Government to freeze the duty-free vehicle import perk for parliamentarians, members of local Government and public servants.

The Tamil United Liberation Front (TULF) said the budget proved that the war had to be brought to an end quickly. ``I think the majority community has to realise that a negotiated settlement is essential to end the problem,'' said Mr. Joseph Pararajasingham, TULF parliamentarian.

The lone MP of the right-wing Sihala Urumaya, Mr. Thilak Karunaratne, said his party stood for a military solution to the conflict and would therefore not oppose the high allocation for defence but would bring attention to the corruption and wastage in the military.

With the Government hard hit by the military spending, the budget was along expected lines and contained no surprises. Mr. Peiris said the Government's aim was to bring down last year's 9.8 per cent deficit to 8.5 per cent this year.

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