December, 13, 2019
Speaking on the recent tax cuts introduced by the new Government, emerging markets investor, Dr. Mark Mobius quipped that the Administration should cut taxes even more.
“I think they should cut the taxes more,” Dr. Mobius said while addressing a forum in Colombo on Tuesday (10) organized by Cinnamon life.
“I’m not necessarily a fan of Mr.Laffer. But I do believe that the Laffer curve is absolutely relevant. At the end of the day, you need growth. The only way the government can raise more taxes is if the economy grows, and you cannot grow an economy if people are burdened with high taxes in the beginning.”
“So it is very important to do two things at this stage, and that is to lower taxes and make them easier to pay,” he added.
The Laffer curve illustrates a theoretical relationship between rates of taxation and the resulting levels of government revenue. The Laffer curve assumes that no tax revenue is raised at the extreme tax rates of 0% and 100%
Speaking further Dr. Mobius noted that Sri Lanka needs to reduce interest rates, in order to boost economic growth.
“You have to look at the global situation. Interest rates globally are going down and low already. So rates should go down,” he stressed.
The Fed lowered the interest rate in July, September, and October in an effort to calm recession fears on Wall Street and counter the negative impact of Trump’s trade war. The benchmark U.S. interest rate is just shy of 1.75 percent, down from nearly 2.5 percent a year ago.
Speaking further Dr. Mobius stressed that Sri Lanka can re-achieve 8% growth if the right policies are adopted.
Sri Lanka grew 8% for three years consecutively (2010, 2011 and 2012) then there was a decline, Dr. Mobius said.
“I believe Sri Lanka can re-achieve that high 8% growth going forward if the right policies are adopted and the economy is given the freedom to move forward and grow,” He added.
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