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In a previous tweet, we gave an explanation of what the increase in someone’s electricity bill would look like in rupee terms, instead of focusing only on the % increase.
#DefaultLK #EconomicCrisisLK
#DefaultLK #EconomicCrisisLK
1/ Although the bills go up, a less focused fact is that the subsidy for lower-end users actually increases substantially (details below). Looking at the whole evidence implies that there is little to suggest the tariff hike is as regressive as a first glance might suggest.
2/ The main reason for the increase in tariffs is the rise in generation costs for the CEB, stemming from the rising price of oil and higher foreign exchange costs. In a recent PUCSL conference, the following was provided
How do the proposed electricity tariff revisions affect you? #defaultlk
1/There are ~1.1 million users consuming between 0-30 kWh and ~1.5 million users consuming between 31-60 kWh per month. A user in these categories will experience a maximum of Rs 255 and Rs 500 increase per month on their electricity bill, respectively. 
2/There are ~1.4 million users consuming between 61-90 kWh, 693,000 users consuming between 91-120 kWh and 461,000 users consuming between 121-180 kWh per month. Users in these categories will experience a maximum of Rs 939, Rs 1,817 and Rs 2,897 increase per month, respectively.
Ministry of Finance removed license requirements for imports and replaced it with a surcharge on the duties - as Sri Lanka struggles with both a rupee and dollar deficit. (1/5)
#EconomicCrisisLK #DefaultLK
#EconomicCrisisLK #DefaultLK
The surcharge on import tax (customs duty) helps manage import demand while increasing revenue for the government - an attempt to hit 2 birds with 1 stone. (2/5)
However, there seems to be some misunderstanding of the tax increase. What has happened is that tax rate has been increased by say 100% (that is times two), not a new tax of 100% of value of import. (3/5)
A host of new tax proposals have come in from the Prime Minister's office - not limited to VAT and TelecomLevy.
Other tax rates (including income tax) have been raised, thresholds are brought down, withholding taxes are reinstated too. (1/5)
#EconomicCrisisLK #DefaultLK
Other tax rates (including income tax) have been raised, thresholds are brought down, withholding taxes are reinstated too. (1/5)
#EconomicCrisisLK #DefaultLK
Tax hikes are important for a few key reasons
1) Reduces need to borrow to finance budget deficit
2) Reduces excess demand in the economy to reduce imports and support the LKR
3) Allows the financing of strong social spending programs (especially safety nets in a crisis) (2/5)
1) Reduces need to borrow to finance budget deficit
2) Reduces excess demand in the economy to reduce imports and support the LKR
3) Allows the financing of strong social spending programs (especially safety nets in a crisis) (2/5)
Sri Lanka has had falling tax revenue and low tax collection for a while now, and this was worsened by the 2019 tax cuts. These charts show how this compares with other countries and over time. (3/5)
Cabraal suggests a 'do-over' of one of the same catastrophic mistakes that led to #DefaultLK
What happened the last time and should we let this happen again?
#EconomicCrisisLK
What happened the last time and should we let this happen again?
#EconomicCrisisLK
1/ Remittances dried up as foreign earners moved money to a grey market, massively undermining confidence in the local banking system. (2/4)
2/ Our dollar inflows from remittances are finally starting to recover, and with a critical period ahead, forcing further forex shortages will lead to massive shortages on the ground as well. (3/4)
