According to Mahinda Siriwardana, Secretary to the Treasury, approving the wage increase that striking public employees are demanding would require increasing the current 18% VAT to a range of 20% to 21%. but restated that the people cannot be subjected to such a burden by the government. During a discussion about the demands of public service trade unions, which was chaired by President Ranil Wickremesinghe and held yesterday (08), Siriwardana made these statements.
The conversation covered the strikes that a number of public sector unions had taken, as well as possible constructive ways to meet their demands. Although a pay increase is not possible this year, it was mentioned that the budget for 2025 will alter public service salaries in accordance with suggestions made by a committee of experts looking into pay differences.
“Secretary to the Treasury: A VAT increase is required to pay for the salary increase that striking government workers have demanded.”
The Treasury Secretary pointed out that an increase in government employee pay of Rs. 10,000 would cost an extra Rs. 140 billion a year, and an increase in pay of Rs. 20,000 would cost an additional Rs. 280 billion.
Even with optimal management of current revenues, more tax increases will be required to generate the required income. The Treasury Secretary noted that a 2% increase in VAT would be required in order to raise salaries by Rs. 10,000. Moreover, the VAT would have to be increased by more than 3% in order to cover the wage demands made by the trade unions. He underlined that since the VAT is already at a maximum rate of 18%, this is not currently possible.
The Treasury Secretary added that the Central Bank is no longer able to print money as it once could because of government efforts to stabilise the nation’s economy. The International Monetary Fund programme would be in danger if this were done.
Senior Advisor to the President on Economic Affairs, Dr. R.H.S. Samaratunga, noted that although it is difficult to raise public servant salaries this year again, the President has promised to set aside money for it in the budget for the following year. A different expert committee has been appointed to investigate and report on salary disparities, he further stated.
