ECONOMYNEXT – Sri Lanka has slashed an import tax on lentils, tinned fish and sugar to 25 cents from an earlier 50 to 100 rupees a kilogram from midnight on October 14.
The Special Commodity Levy, an all-inclusive simple para-tariff on tinned fish (mackerel, tuna, sardines, anchovies, salmon) has been brought down from an existing 100 rupees per kilogram.
Tinned fish taxes are kept high to give tax arbitrage super profits to crony-mercantilist, import substitution businesses, critics say.
Crony businesses have strengthened their claims claiming to ‘save foreign exchange’ after a soft-pegged central bank was set up in 1950 started creating monetary instability with liquidity injections. Analysts have called for central bank reform to stop monetary instability.
Amid a Coroanvirus crisis many imports have been banned.
The SCL on sugar has been brought down from 50 rupees a kilogram to 25 cents. Sugar taxes give profits to a loss making expropriated sugar company.
The SCL on Mysore dhal (red lentils) had been brought down from 5 rupee a kilo (whole) and 10 rupees (split) to 25 cents a kilogram. Yellow lentils tax had also been brought down from an earlier 5 rupees (whole) and 10 rupees (split) a kilogram.
Taxes on onions have been brought down from an earlier 50 rupees a kilogram.
In Sri Lanka taxes are brought down by midnight gazette without prior notice, bringing large losses to importers who cleared the goods shortly before.
The mid-night gazette is one of the key sources of regime uncertainty (a fluid operating regime for businesses), that raises business risks and undermines the economy.
Sri Lanka has in the past cut taxes by midnight gazette and imposed price controls on retailers who had bought stocks at earlier prices, imposing sweeping losses on small businesses. (Colombo/Oct14/2020)