Sri Lanka exporters say budget tax hikes a disincentive

ECONOMYNEXT – The Exporters Association of Sri Lanka (EASL) said it welcomed measures in the government’s 2017 budget to correct economic imbalances but warned tax hikes could negate efforts to increase export earnings.

It said that it finds the budget is “more of a corrective nature” given the current state of the economy but does not address the need to improve the export industry.

The EASL welcomes initiatives to attract foreign investment and improve standards of education, encourage the growth of competitiveness of small business and a monitoring mechanism to monitor implementation of the budget.

“However, the fact that taxes for exporters has been increased from 12% to 14% and withdrawal of SVAT (Simplified Value Added Tax) which hugely minimized transaction costs will in our view be a disincentive to increasing export values,” it said in a statement.

“Furthermore the imposition of the Trade in Services tax of 14%, which has negated the zero tax on entrepot trade, could have a negative impact on this activity.”

The increase in the cess on rubber from Rs.4 to Rs.15 a kilo is a “non- competitive measure and we would appeal that an even playing field between manufacturers and producers of rubber sheets be considered,” the EASL said.

The EASL welcomed the introduction of the electronic Revenue Administration Management Information System, known as RAMIS, but urged the finance ministry to withhold the suspension of SVAT (refund system) until such time as RAMIS is fully operational.

It said the Economic Service Charge will have an impact on high value – small margin exporters, and relief should be given to ease the burden of cash flows.
“The rationale for extending  incentives for  branding,  which has selectively  been extended to  only tea, should be extended  for other  agricultural exports like spices, fruits and vegetables and floriculture.”

The EASL said the 75% rebate on tax for exporters who achieve a 15% increase in foreign exchange between 2015/2016 and 2016/17 is “slightly unrealistic, but encouraging.”

 However, it said, to create an impetus for growth, the rebate needs to be effective for a longer period of perhaps 5 years.
(COLOMBO, Nov 23, 2016)
 

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