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Sri Lanka President orders 15-pct import tax on gold removed

ECONOMYNEXT – Sri Lanka President Gotabaya Rajapaksa has ordered a 15 percent tax on gold to be removed to reduce the costs of the jewellery industry, during a meeting of industry stakeholders, his office said.

“This has resulted in jewelry prices going up,” the President’s office said in a statement.

“President pointed out the necessity of removing relevant taxes immediately and to take steps to uplift the gem and jewelry industry.”

The 15 percent tax was slapped in 2018 after the rupee came under pressure from liquidity injections in March/April and July 2018.

In Sri Lanka there is a strong Mercantilist belief that imports – especially gold, oil and cars – rather than money and credit is the cause of monetary instability in the form of either inflation, currency depreciation or both.

Sri Lanka’s legal gold imports surged after the Reserve Bank of India, which also has as strong Mercantilist streak, slapped a gold tax after printing money.

Gold then started to be smuggled from Sri Lanka with both sellers in the island and ‘mules’ arbitraging the tax difference.

Authorities in Sri Lanka, instead of correcting monetary policy, then taxed gold and put control on car imports.

The tax made Sri Lanka’s jewellery noncompetitive in export markets and also for tourists.

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Minister Wimal Weerawansa, State Minister Lohan Ratwatte, Head of the Presidential Task Force on Economic Revival, Basil Rajapaksa, Secretary to the President P B Jayasundera, ministry officials and gem and jewelry industrialists had been at the meeting.

President Rajapaksa had also decided to remove a 14 percent income tax on gem and jewelry manufacturers.

“The income tax concession given to the gem and jewelry industry since 1971 was done away with under the income tax policy introduced in 2017,” the statement claimed.

“This created a situation where the actual income earned from the export of gem and jewelry could not be disclosed.” (Colombo/Sept08/2020)