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Sri Lanka protectionist firm demands more controls on consumers

ECONOMYNEXT – Sri Lanka’s D Samson Industries (Pvt) Ltd, a footwear maker already enjoying protection, has demanded further controls to prevent consumers from buying cheaper shoes despite taxes of up to 285 percent.

Sri Lanka’s shoemakers have already lobbied politicians for high tariffs and controls to keep prices of shoes high, abetted to eliminate foreign competition and corner poorer consumers.

D Samson Industries told an ‘Ease of Doing Business’ forum at the finance ministry that even if the cost of an imported shoe was 50 rupees, import-related taxes imposed to give profits to local businessmen should push the cost to 800 rupees without a profit margin.

An imported shoe with an import cost of 350 rupees should cost up to 1350 rupees with taxes and without a profit margin, the firm said.

At that price, consumers would be paying at least 285 percent of the value of the good in taxes.

Critics have said high tariffs have particularly hurt school children of poor parents, who sometimes go to school without shoes due to high tariffs and rent enjoyed by domestic manufacturers.

Deputy Treasury Secretary S R Attygalle said that already a per pair fixed charge of 500 rupees was imposed on shoes to prevent undervaluation.

But importers were putting shoes in containers bringing other goods and selling them at lower prices to consumers.

Smuggling is a natural consequences of excessively unreasonable import tariffs, economic analysts say. Unreasonably high taxes also lead to corruption.

Finance Minister Ravi Karunanayake said scanners will be installed at Sri Lanka Customs to identify such undeclared imports.

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Alexander Hamilton, a former US president, brought the concept of import duties to help start ‘infant industries’ domestically, and it was adopted by European nationalists.  

But critics say businesses that are now ‘geriatric’ are permanently enjoying protection at the expense of the poor, giving them excess profits or ‘rents’. (Colombo/Apr07/2017)

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