Sri Lanka hikes costs of cross-border e-commerce, people-to-people contact
ECONOMYNEXT – Sri Lanka has hiked transaction costs of cross-border e-ecommerce, with a 3.5 percent turnover taxes on credit card payments, which may include payments through Paypal, and raising a tax on air tickets which was already among the highest in the region.
Finance Minister Mangala Samaraweera said an ’embarkation tax’ on passengers going out of Colombo would be raised from a current 50 US dollars to 60 US dollars.
In an air ticket from Colombo to Malaysia, taxes were already at 8,994 on a ticket priced at 27,000 rupees compared to airport taxes 3,268 on the Malaysia-Colombo leg priced at 18,275 rupees, on a full service airline, making people-to-people contact excessively expensive.
Sri Lanka often speaks of East Asia successes but follows policies directly opposite to that of ASEAN. Sri Lanka also has a soft-pegged exchange rate which permanently depreciates.
Since the current administration came to power in January 2015, the Singapore dollar had moved from 1.30 to the US dollar to 1.34 to the US dollar, and the Korean Won had fallen from 1080 to 1,117 to the US dollar.
The Malaysian Ringgit, however, fell from 3.47 to 4.06 to the US dollar, and there had been some political unrest.
Air travel is no longer a luxury in East Asian nations with a strong exchange rate.
The credit card payment tax of 3.5 percent would apply to online transactions. It is not clear whether it will also apply to airline tickets purchased online, which will further raise barriers to people-to-people contact.
The Central Bank, by depreciating the currency, and inflation, had consistently destroyed real salaries and savings of the people since independence from British rule.
Sri Lanka has a developed a habit of slapping secretly hatched taxes on the people, in budgets.
Secretly hatched taxes worsened in the 1970s, when tax hikes became large enough to encourage hoarding.