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Tuesday February 7th, 2023

Sri Lanka’s dollar earnings from exports services underestimated – official

ECONOMYNEXT: Sri Lanka’s dollar earnings from service exports is hard to track and such inflows are not recorded as they are kept outside the country, an Export Development Board official said.

“We face a huge challenge as we can’t get the statistics for services sector export,” an Export Development Board (EDB) Official told EconomyNext asking not to be named.

Since Sri Lanka hit economic crisis and declared sovereign debt default in April, the authorities including the central bank and finance ministry are exploring all the options to force exporters to bring down most of their export earnings.

The official said there are seven services exports under EDB such as IT-IBM, electronics and electrical, education, marine and offshore, logistics, printing and packaging, and constructions.

There are some services which are not included under the EDB such as legal services where the export earnings are not tracked, the official said.

When exporting products, the commodities go through Customs Declaration (CUSDEC) process, but there is none to track services export earning, since the companies provide their services online and there is no way the data is entered and recorded.

The Central Bank of Sri Lanka (CBSL) could capture the data on dollar inflows into the country, but no data is available on dollars deposited in foreign banks.

“For the IT-BPM services, the central bank report has the censors and the statistics. They are being gathered by doing sample survey from some IT companies whereas considering a few IT companies, that doesn’t mean it captures the data of all the exporting IT services” the EDB official said

The official said despite requests from the central bank, it has not taken action to capture export service warning data in scientific Mannar.

The EDB has estimated services exports at 1,456 million dollars in the first nine months of this year, with a 3.8 percent gain from the same period last year.

“Out of the 1,450 million dollars, 1,199 million dollars is from the goods and 251 million dollars is from the services. The conversion in the goods side is 326, so about 23% out of repatriation is converted and we have no not received data for the service sector,” Deputy Governor CBSL, Mrs. T.M.J.Y.P. Fernando told in Thursday

According to the IT experts, the increment of taxes is one major reason they face. The other taxes like VAT, Social Security Contribution Levy (SSCL) have impacted on the IT sector since they are not removing the exemption.

“They have removed only the IT enabling services but if the IT companies are exporting services, they are exempted from the income taxes. But the local companies are being affected by the exemptions,” Accountant at IFS, Bhanuka said.

“If the local companies getting foreign remittances like USD or other currencies, they can apply for the exemptions but the other IT companies are not able to do so,”

Moreover, the EDB has noticed that as a trend the export revenue that is earned is not brought into the country. Since they have to again give it out for imports, for the raw materials, when there are restrictions within the country they try to keep it somewhere else and maybe use that for import.

“Hence the currency coming in is a little bit low but based on the trend it is like one billion a month during these last ten months and up to October, we have received over 10 billion of export revenue and first being the apparel,” the EDB official said

The exporters are reaching out for alternative ways to establish their sales and profit rather than being stuck in the huge burdens of taxes on them where the country might get a lesser amount of foreign exchange.

“The exporters begin transfer pricing and setting out partnerships in other countries, where the tax rates are between 12% to 15%. They can do their expansions in third countries,”Rohan Masakorala, an exporter in shipping industry said. (Colombo/Nov25/2022)

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  1. Alpha says:

    There is serious dissonance between the objectives of the Government and the business community. This should not be so and has to be corrected very quickly. Unfortunately, the Government does not have the capability to understand and appreciate the problems of the business community.

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  1. Alpha says:

    There is serious dissonance between the objectives of the Government and the business community. This should not be so and has to be corrected very quickly. Unfortunately, the Government does not have the capability to understand and appreciate the problems of the business community.

Sri Lanka Railways to seek PPPs to boost revenue streams

CURFEW RUSH: Commuters scrambling to get home after curfew was declared in Sri Lanka on March 20, 2020.

ECONOMYNEXT – Sri Lanka Railway department hopes to expand Public Private Partnerships and earn more non-passenger revenues to offset recurring operational costs, an official said.

“For the past 10 years, except the last few years, the Railway operational income only covers around 50 percent of the operational expense of the Department,” the General Manager of the Railway, D.S. Gunasinghe told EconomyNext.

“Our plan is to increase the non-passenger revenue of the Railway department.

“And we cannot expect and do not hope for money from the government.”

Sri Lanka Railways already has agreements with Prima, a food firm, and Insee Cement, which is bringing in additional income, Gunasinghe said.

“We had agreements for material transportation such as sand in the past, however it was canceled but we hope to start it again” he said.

The department will rent out its storage facilities and circuit bungalows for the tourism sector to create additional revenue streams.

Sri Lanka Railways recorded an operating loss of 10.3 billion rupees during 2021, compared to a loss of 10.1 billion rupees in 2020, the Central Bank 2021 annual report showed.

The total revenue of the SLR stood at 2.7 billion rupees, a 41.3 percent drop from a year ago.

(Colombo/ Feb 06/2023)

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Sri Lanka’s doctors distribute anti-tax hike leaflets to train commuters

ECONOMYNEXT – Doctors representing Sri Lanka’s Government Medical Officers Association (GMOA) distributed leaflets outside the Colombo Fort railway station against a progressive tax hike, threatening to address the government in a “language it speaks”.

GMOA Secretary Haritha Aluthge told reporters outside the busy Fort railway station Monday February 06 afternoon that all professional associations have collectively agreed to oppose the personal income tax hike.

“The government is taking a lethargic approach. They cannot keep doing this. They have a responsibility towards the citizens, the country and society,” said Aluthge.

The medical officer claimed that the government was acting arbitrarily (අත්තනෝමතික).

“If it cannot understand the language they’ve been speaking, if the government’s plan is to put all professionals out on the street, if it doesn’t present a solution, all professional unions have decided unanimously to address the government in a language it speaks, ,” he said.

Aluthge and other GMOA members were seen distributing leaflets to commuters leaving the railway station. Doctors in Sri Lanka in general are likely to earn higher salaries than the average train commuter, and a vast majority of Sri Lanka’s population, most of whom take public transport, don’t fall into the government’s new tax bracket. Many doctors, though certainly not all, collect substantial sums of money at the end of every month as doctor’s fees in private consultations.

About two miles away from the doctors, the Ceylon Blank Employees’ Union, too, engaged in a similar distribution leaflet campaign on Monday at the Maradana railway station. A spokesman promised “tough trade union” action if there was no solution offered by next week.

Sri Lanka’s cash-strapped government has imposed a Pay As You Earn (PAYE) tax on all Sri Lankans who earn an income above 100,000 rupees monthly, with the tax rate progressively increasing for higher earners, from 6 percent to 36 percent.

A person who paid a tax of 9,000 rupees on a 400,000 rupee monthly income will now have to pay 70,500 rupees as income tax, the latest data showed. This has triggered a growing wave of anti-government protests mostly organised by public sector trade unions and professional associations.

Even employees of Sri Lanka’s Central Bank recently joined a week-long “black protest” campaign organised by state sector unions against the sharp hike in personal income tax, even as Central Bank Governor Nandalal Weerasinghe said painful measures were needed for the country to recover from its worst currency crisis in decades.

The government, however, defends the tax hike arguing that it is starved for cash as Sri Lanka, still far from a complete recovery, is struggling to make even the most basic payments, to say nothing of the billions needed for public sector salaries.

Economists say Sri Lanka’s bloated public service is a burden for taxpayers in the best of times, and under the present circumstances, it is getting harder and harder to pay salaries and benefits.

Sri Lanka’s new tax regime has both its defenders and detractors. Critics who are opposed to progressive taxation say it serves as a disincentive to industry and capital which can otherwise be invested in growth and employment-generating business ventures. Instead, they call for a flat rate of taxation where everyone is taxed at the same rate, irrespective of income.

Others, however, contend that the new taxes only affect some 10-12 percent of the population and, given the country’s economic situation, is necessary, if not vital, at least for a year or two.

Critics of the protesting workers argue that most of the workers earn high salaries that most ordinary people can only dream of, and, they argue, though there may be some cases where breadwinners could be taxed more equitably, overall, Sri Lanka’s tax rates remain low and are not unfair.  (Colombo/Feb06/2023)

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Sri Lanka bond Yields end steady

ECONOMYNEXT – Sri Lanka’s bond yields closed steady on Monday, dealers said while a guidance peg for interbank transactions remained unchanged.

A bond maturing on 01.07.2025 closed at 32.15/30 percent, steady from Friday’s 32.05/10 percent.

A bond maturing on 01.05.2027 closed at 28.90/29.10, steady from Friday’s 28.90/20.05 percent.

The Central Bank’s guidance peg for interbank US dollar transactions appreciated by one cent to 361.96 rupees against the US dollar.

Commercial banks offered dollars for telegraphic transfers at 370.35 rupees on Monday, data showed. (Colombo/Feb 06/2023)

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