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Sunday December 10th, 2023

Sri Lanka chamber suggests French alternative to scrapping SVAT

ECONOMYNEXT – Sri Lanka’s Ceylon Chamber of Commerce is suggesting moving to a value added system tax used in France, as an alternative to SVAT, a simplified value added tax credit system for exporters which avoided delays in tax refunds.

Sri Lanka is scrapping SVAT as part of streamlining the VAT system under an International Monetary Fund backed program.

Delays in refunds could further hurt cashflows of exporters, who are already seeing sales fall due to slowing export markets.

“This comes at a critical time when Sri Lanka has seen a significant dip in exports of over 10% in 2023 so far, along with a staggering 19% decrease in apparel exports with expectation for weak external demand to continue,” the Chamber said in a statement.

“Eliminating SVAT would affect exporters and disrupt cash flow in various downstream industries and suppliers, leading to a ripple effect of financial challenges.

A backlog of outstanding refunds under the SVAT system itself still remains unaddressed, the Chamber said.

“This raises questions about the Government’s capacity to efficiently handle new refund claims in the absence of the SVAT system, thereby casting doubts over the operational feasibility of the planned move,” the statement said.

“The abolition of SVAT is unlikely to enhance revenue and plug leakages. It would be more prudent to improve the existing inefficiency in the RAMIS system particularly regarding VAT returns and invoice matching.

“The administrative impact of such a move could create more inefficiencies and stretch the IRD with a new wave of refund claims, leading to administrative gridlock and significant delays in VAT refunds.

“We urge the Government to consider alternatives such as reverting to the Suspended VAT system that was operational from 2005 to 2011, serving as a transitional arrangement.

Adequate resourcing for the IRD — both human and technological — was necessary for efficient high-volume refund transactions, the chamber said.

“Given the current economic climate and the potential ramifications on the export industry, we strongly recommend that the Government engage in … a consultative approach that includes all stakeholders before making such a significant change.” (Colombo/September11/2023)

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ADB USD200mn loan for Sri Lanka economic stabilization efforts

ECONOMYNEXT – The Asian Development Bank (ADB) has approved a US 200 million dollar concessional loan to Sri Lanka to help stabilize the country’s finance sector.

The Financial Sector Stability and Reforms Program comprises two subprograms of IS 200 million dollars each, according to a statement by the ADB.

“The program’s overarching development objective is fully aligned with the country’s strategy of maintaining finance sector stability, while ensuring that banks are well-positioned for eventual recovery,” ADB Country Director for Sri Lanka Takafumi Kadono was quoted as saying in the statement.

“The expected development outcome is a stable financial system providing access to affordable finance for businesses in various sectors of the economy.”

The ADB statement continues:

“Subprogram 1 targets short-term stabilization and crisis management measures that were implemented in 2023, while subprogram 2 is planned to be implemented in 2024 and focuses on structural reforms and long-term actions to restore growth in the banking sector.

The program will help strengthen the stability and governance of the country’s banking sector; improve the banking sector’s asset quality; and deepen sustainable and inclusive finance, particularly for women-led micro, small, and medium-sized enterprises.

According to the International Monetary Fund’s (IMF) latest review, Sri Lanka’s economy is showing tentative signs of stabilization, although a full economic recovery is not yet assured.

The program is a follow-on assistance from ADB’s crisis response under the special policy-based loan that was approved for Sri Lanka in May 2023.

It is aligned with the fourth pillar of the IMF’s Extended Fund Facility provided to Sri Lanka to help the country regain financial stability.

It is also in line with the government’s reform agenda, including strengthening the operational independence of the Central Bank of Sri Lanka (CBSL) and its designation as the country’s macroprudential authority.

In designing this subprogram 1 loan, ADB has maintained close coordination and collaboration with the IMF to design targeted regulatory reforms for the banking sector—including the asset quality review—and with the World Bank on strengthening the deposit insurance scheme.

“The loan is accompanied by a $1 million grant from ADB’s Technical Assistance Special Fund to provide advisory, knowledge, and institutional capacity building for Sri Lanka’s Ministry of Finance and CBSL.”

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Sri Lank in blackout as power grid hit by cascading failure

ECONOMYNEXT – Sri Lanka suffered a blackout as Saturday evening as the state-run Ceylon Electricity Board grid was hit by a cascading power failure.

The cascading failure is believed to have been triggered by the failure of the Kothmale-Biyagama transmission line.

“The Ceylon Electricity Board wishes to inform our customers that due to the failure of Kotmale – Biyagama main transmission line, an island wide power failure has occurred,” CEB Spokesman Noel Priyantha said.

“Step by step restorations are underway and it may take few hours to completely restore the power supply.”

With hydro plants running flat out, a outage of the line tends to create a big imbalance in the demand and supply, leading to tripping of more lines and generators.

Lines can trip due to lightening strikes, or equipment failures.

Sri Lanka last suffered a cascading failure in December 2021, due to the failure of the same transmission line.

RelatedSri Lanka power blackout as grid hit by cascading failure

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Sri Lanka to host regional Food and Agriculture Organization conference

ECONOMYNEXT – Sri Lanka will host the 37th session of the Asia Pacific Regional Conference (APRC) of the United Nations Food and Agriculture Organization (FAO), from February 19-22, 2024 in Colombo.

The Conference will bring together agriculture ministers and officials from 46 countries across the region to discuss challenges in food and agriculture.

“The 37th APRC will provide a vital platform for regional collaboration, benefitting the agricultural landscape, fisheries sector and environment of Sri Lanka,” Minister Mahinda Amaraweera said at a press briefing on Friday (8) to announce the conference.

FAO has had an active presence in Sri Lanka for over 40 years. “FAO has supported the country in the implementation of Good Agricultural Practices (GAP), and the development of the fisheries sector for growth and climate resilience,” Vimlendra Sharan, FAO Representative for Sri Lanka and the Maldives said.

“The APRC conference will be an opportunity to highlight the innovative approaches introduced in partnership with the government.”

By hosting APRC, Sri Lanka hopes to demonstrate the country’s dedication to the growth of sustainable agriculture, and showcase its commitment to sustainable agricultural development.

The APRC agenda will include a forum on agritourism, especially requested by the Sri Lankan government.

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