Sri Lanka protectionism, license raj up; tinned fish tax to be hiked
ECONOMYNEXT – Sri Lanka will re-impose taxes on tinned mackerel and a tax free privilege will also be given to four domestic factories to import mackerel tax free, minister Rajitha Senaratne said.
The tax free privilege will be given by a licence where the benefit will be given to four manufacturers, he said under a proposal brought to cabinet by Fisheries Minister Mahinda Amaraweera.
The state has also slapped price controls of 140 rupees per 425 gram tine can (280 grams of fish without fluid), and 70 rupees per for a 155 gram tin with 105 gram of fish without fluid. One of the reasons for the tax changes was that a tin of fish is sold above the controlled price.
Asked whether prices will now to go up even further, Minister Senarathne said prices did not fall after the tax cut. If the price did not fall however it is not clear how the overpriced domestic producers lost market share.
The import tax on tinned fish may be hiked by gazette later the minister said.
However the cabinet had been told that aftertaxes on a kilogram of imported mackerel was cut from 100 rupees to 50 rupees imports have gone up from 20,000 kilograms to 40,000 kilograms, with more tinned fish being eaten by people.
Poor people, construction workers and people without refrigerators and also some road restaurants catering to bottom of the pyramid’ use tinned fish. Critics have warned that high import taxes are regressive and ‘self-sufficiency’ is achieved at the expense of food security, malnutrition and hunger.
Another reason given for raising the tax is that the quality of imported tins are low, a standard ‘crocodile tears’ excuse put forward by all protectionists.
A third reason is that ‘foreign exchange’ is being lost.
Sri Lanka’s rupee is falling due to money printing and analysts have called for reform of the central bank to reduce its discretion or to abolish it in favour of a currency board which will keep the exchange rate steady.
Better monetary policy will eliminate the excuse given for import protection, allowing trade freedoms to be restored to the poor. (Colombo/Jan28/2016)