Former President Mahinda Rajapaksa says that there is still time for the Government to amend the oppressive Value Added Tax (VAT) proposals.

“We can in no way agree to the increase in the VAT rate, its unconscionable imposition on the sick and the elderly, and its imposition on the small and medium wholesale and retail trade without any concern for the all round price increases that it will cause,” he said issuing a statement today.

Full statement:

“A Bill to increase the currently applicable VAT rate by thirty six percent has been gazetted. Accordingly, the VAT on goods and services will increase from 11% to 15% and cause hardship to the consumer. This increased VAT is to be imposed even on private medical care which had always been exempt from VAT. 

This imposition will cause an immediate 15% increase in private medical costs. For example, a by-pass heart operation that presently costs about Rs.700,000 would in future cost Rs.805,000. Many ordinary people make use of private medical services today. This tax attempts to raise revenue through sickness and suffering. The more serious the illness, the more money the government would be squeezing from the hapless patient. 

The increased VAT is to be imposed on the small and medium wholesale and retail trade as well. My government charged VAT only on wholesale and retail establishments with a turnover of around Rs. 2,800,000 per day which ensured that the tax applied only to the largest upmarket retail businesses enjoying economies of scale. 

However, by slashing the threshold to just Rs. 138,000 a day, the Yahapalana government has brought all wholesale establishments, and a good number of retail establishments within the ambit of VAT. 

This will cause a rapid escalation in prices throughout the country and in a short time bring about a reduction in consumer demand. Previous governments never imposed VAT on the small and medium wholesale and retail trade because of the negative impact it will inevitably have on the economy.

Commodity prices have been declining all over the world but in Sri Lanka the prices of goods and services will be going up because of these tax hikes imposed to finance the various concessions that the yahapalana government gave out to win elections. 

Thus the people themselves are being forced to bear the cost of the deception that was practiced on them. We can in no way agree to the increase in the VAT rate, its unconscionable imposition on the sick and the elderly, and its imposition on the small and medium wholesale and retail trade without any concern for the all round price increases that it will cause. There is still time for the government to amend these oppressive VAT proposals.”