South Asia Sri Lanka hikes tax to fund war

Published: Wednesday 31 October 2007

Sri Lanka has raised taxes on a range of goods and services to meet its war expenses. Coming ahead the country's budget due in early November, the move is a stopgap measure to raise around Sri Lankan Rs 10 billion (US $88 million) to finance the country's renewed war against the Liberation Tigers of Tamil Elam (LTTE) and to stabilise its economy.

The new imposts include an increase in the tax on mobile phones (from 2.5 per cent to 10 per cent), the levy on larger motor vehicles (from 2.5 per cent to 5 per cent), the excise duty on imported goods (from 10 per cent to 15 per cent) and the production tax on domestically manufactured goods (from 10 per cent to 15 per cent).

Speaking during the parliamentary debate, Deputy Finance Minister Ranjith Siyambalapitiya said "The imposition of such taxes is necessary in view of other obligations of the government, including ensuring national security and providing subsidies to the people."

Sri Lanka's defence expenses have increased following a series of military offensives against LTTE in July 2006. In its 2007 finance bill, the government raised its defence expenditure by 45 per cent to Sri Lankan Rs 139 billion. But military expenses are still rising.

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