December is that time of the year when Christians ready the carols and the turkey and every other religious group, in time-honored tradition, does whatever they can to get invited to Christmas dinner. It’s usually a very happy time for everyone.
Except this time someone seems to have thrown a monkey wrench in this jolly process: the Budget. Now that people have some free time on their hands to try and understand what exactly Ravi K was babbling about, it’s turned into an interesting topic of discussion. I’m not an economist, and my approach has been to try figure out how much money I’m going to lose and try to save some extra. Nevertheless, here are a few things that seem to come up quite often, plus a few thoughts:
- Tax for Venture Capital firms to be reduced by 50% for five years, starting from 1 April, 2016
I guess the Lankan Angel Network and its outliers are going to have very large grins plastered on their faces. Good. This way people have more of an incentive to invest in new companies and use some of that money to drive some portion of the economy. Let’s just hope it’s not Ravi’s idea of an April Fools’ joke…
- Mini-industrial parks which will be incubators in Moneragala, Puttalam, Jaffna/Vanni, and Ampara
Again, good! It’s time development occurred somewhere other than Colombo and Hambantota. Jaffna / Vanni in particular has decent roads and land available for such things. Ideally this will eventually expand into a series of hub cities, while Colombo remains the capital in all but name (Jayawardenapura, what exactly do you do for a living?).
- Private sector to reduce work week to 5 days instead of 6
Somewhere out there, legions of software engineers are laughing. That said, a lot of people in secondary industries, like trade and manufacturing, seem to be quite happy about this.
- Spending Rs 500 million on a land bank – an electronic database to keep track of state-owned lands
Holy mother of spending, have you guys heard of Microsoft Excel?
- Tax electric vehicles. Every other country in the world is trying really, really hard to get people to switch to electric vehicles, mostly because of these little thing called pollution and the greenhouse effect. Sri Lanka? Burn petrol, motherfucker. No emissions for you.
- Import duties on caravan carriages, yachts, jet skis, surf boards and mini cruise boats to be reduced
The travel industry would like to thank whoever went down on their knees for this one.
- Businesses to pay Rs 250,000 to register and incur an annual fee of Rs 60,000 to maintain registration
You need to pay a quarter of a million rupees to start a company and then keep paying year on year. Wait, what? What happened to all this talk of entrepreneurship and driving startups in the country?
The implications of this are obvious. This isn’t Silicon Valley. This cuts the legs out from the countless little service and product companies that are going to come up – businesses that are lucky to see a 100K a month in revenue, let alone have a quarter million to blow on registration. We’re talking the little family businesses which actually drive a sizeable chunk of this country’s sales.
The current excuse floating around is that this is to make it harder for wealthy folks to avoid taxes by setting up shell companies. The way I see it, people wealthy enough to need to do that can just fly out to Singapore or wherever and get registered there. It’s the people on the ground trying to register their kadey or rental business that’s going to get hurt. RIP small business.
- Increase public sector salaries by Rs 10,000
How sustainable is this blanket increase? Sri Lanka has a massive public sector – roughly 1.5 million people in the public sector. To quote Karu Jayasuriya, that’s 1 public servant for every 15 people.
At most, this would be excusable if Sri Lanka’s public sector and services functioned well. They don’t. Our state enterprises run at a loss and dealing with anything related to the state is a waste of so much time and energy that you really wonder what in the hell those people are doing. Especially since they do draw pensions and can’t be fired for bad performance. This approach of upping the ante by 10,000 every time a government changes isn’t scalable; honestly, I’d rather this money be spent on sorting out this massive HR problem.
I’d like to point out some little-discussed context: as investment guru Mark Mobius wrote, the new administration inherited debt of more than US$25 billion to offshore creditors, amounting to around a third of our GDP. Rajapakse was building an empire of debt that we’re going to have to pay off.
Nevertheless, this Yahapalanaya budget seems a bit of an odd kettle. On one hand, there’s the clear incentives for investment, the push for a Megapolis, and increased spending on health and education. Why, then, would you so actively inhibit entrepreneurship? Why would anyone tax electric vehicles? You might as well tax the future.