Browsing by Author "Thilanka, H.R.A.C."

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    Effectiveness of Purchasing Managers' Index as an Indicator of the Economic Growth in Sri Lanka
    (Uva Wellassa University of Sri Lanka, 2018) Thilanka, H.R.A.C.
    Purchasing Managers' Index (PMI) is an indicator of the economic health of manufacturing and service sector of a country and it provides information on current business conditions to company decision makers, purchasing managers and analysts. PMI surveys have become key benchmark indicators of economic conditions in the world's largest economies and emerging markets. Under Sri Lankan context, PMI is prepared on monthly basis. As sub-indices of PMI directly connect with the factors which include in GDP, it is worthwhile to examine the representativeness of PMI for economic growth. Hence, the objective of this study is to examine the effectiveness of PMI as an indicator of economic growth in Sri Lanka. Considering the period May, 2015 - December, 2016, this study used simple linear regression and Pearson Correlation analysis to analyze data. Weighted PMI (WPMI) was used to make sure the accuracy of the results. According to the results of Pearson Correlation analysis, the correlation between WPMI and GDP is 0.60 which indicates that the positive correlation between these two variables is considerably high. Likewise, the correlation between PMI_M (manufacturing) and GDP_I (industrial) is 0.43 and, 0.58 is the correlation coefficient between the PMI_S (Services) and GDP_S (Services) indicating that service sector of GDP and PMI is slightly higher than the manufacturing sector's positive con-elation. According to the results of OLS regression analysis WPMI is significant at 1% significant level and the coefficient is 0.29 and the R-squared is 46% indicating that WPMI explains the GDP growth rate only in some extent. Hence, the overall result implies that PMI seems to be a good indicator in explaining economic growth in Sri Lanka but, it is not a perfect indicator since it doesn't cover all components of GDP suggesting that compilation of PMI should concern wider range of economic activities to become a more effective indicator of the economic growth in Sri Lanka.
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    Tax Composition and Tax Compliance: Sri Lankan Experience
    (Uva Wellassa University of Sri Lanka, 2019) Thilanka, H.R.A.C.; Sri Ranjith, J.G.
    Tax compliance has been recognized as an important topic related to governments’ tax policies. Tax non-compliance arises mainly due to tax evasion, complexity of the tax policy and weak administration of tax system. In the case of Sri Lanka, tax revenue which consists largely of indirect taxes is the major source of financing the fiscal deficit and the means of meeting needs of other public expenditures. Meanwhile, the data show that tax compliance levels are relatively unsatisfactory. With this background, our study mainly aims at examining the long-run impact of tax composition on tax compliance in Sri Lanka using annual data for the period 1985-2016. The study follows a time series econometric technique employing Vector Error Correction Model (VECM). Empirical findings of our study show that evidence for the presence of long-run impact of tax composition on tax compliance. According to the results, VAT affects positively to the tax compliance implying these two variables move towards the same direction while income tax negatively affects tax compliance. These estimation results imply that current issues and challenges of the fiscal policy in Sri Lanka are mainly stemmed from the narrow tax base and ability to evade the direct taxes imposed on income while inability of tax evasion of indirect taxes imposed on goods and services. However, import duties do not affect the tax compliance because there are proper recording and auditing on import duties. These results pave the way for proper policy directions related to fiscal policy especially improvements of level of tax compliance through adjusting tax composition and proper administration. In order to mitigate the tax evasion and improve the level of tax compliance the government can relies on indirect taxes (VAT) while, taking necessary measures to encourage tax payers to comply with the direct taxes especially through simplifying the tax system, broadening the tax base and imposing tax fines.