ECONOMYNEXT – Sri Lanka’s process of charging a ‘CESS’ tax on international trade and using it for general expenditure is illegal and is part of a series of questionable practices seen in the country, Trade Minister Bandula Gunawardane said.
Under Sri Lanka’s Export Development Board, a CESS tax charged on international trade has to be credited to an export development fund to develop exports, he told parliament.
Sri Lanka has been using the EDB CESS as an import duty or para tariff for some time, to get revenue and also practice protectionism.
“According to the Act all that CESS tax should go to the Export Development Fund,” Gunawardane told parliament.
“Also CESS revenues should be credit to the fund monthly by the tax office.”
“Now, I am the one who signed for this tax as the Minister. But the income from the CESS tax doesn’t come to the fund monthly according to the Act.
The EDB cess is also now used to tax imports and also tax exports to transfer profits to more savvy ‘value added exporters’ from primary producers like farmers who have less knowledge of economics by taxing bulk or raw exports, and keeping their after-CESS price below the world price.
Despite not lifting a finger to product anything, Mercantilists try to demonize and penalize through export taxes, primary producers for shipping their output in the raw form ‘without adding value’, though value addition is a specialist area which has nothing to do with them.
Gunawardane said CESS income was 20.1 million rupees in 1980s. In 1993 the income was 471.8 million and 823 million rupees was credited to the fund.
In 2006, CESS income was 742 million rupees and 761.69 million was credited to the fund.
“In 2009, 49 billion rupee was the CESS income,” Gunawardane said.”But I only get 277 million rupees. How can that be?”
“This is illegal. This is illegal no matter who governs the country. An oligopoly of officials is misleading the Parliament and ministers.”
“These are the problems that we should discuss in the parliament, instead of using bad language to blame each other.”
Minister Gunawardane was speaking amid a brewing controversy over the 2019 and 2020 budget deficit numbers.
Opposition legislator Harsha de Silva agreed that Minister Gunawardane was raising valid points.
Already the Public Accounts Committee had initiated action to look at some of the numbers, he said.
Gunawardane said when Ravi Karunanayake was Finance Minister, education spending had been inflated and he had complained to speaker Karu Jayasuriya.
At the time ‘imputed’ rents were used to bloat the education allocation number.
“At that moment Karu Jayasuriya called us, Ravi Karunanayake and his treasury officer,” Gunawardane said
“They said this is a new method and we couldn’t understand it. And they misled and protected that false expense.” (Colombo/Dec08/2020)