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Sat, 01 November 2014 09:18:22
Sri Lanka ups protectionism in autarkist budget
09 Nov, 2012 06:39:31
Nov 09, 2012 (LBO) - Sri Lanka has upped protectionist taxes in foods and building materials allowing more profits for producers allowing producers as citizens try to eat and build homes for themselves.
Raising import duties allows producers to engage in tax arbitrage, the act of collecting as profits the equivalent of amount of tax by turning out an item within a national border without actually engaging in competitively priced production.

A budget for 2013 said import taxes or cesses would be raised on dairy products, edible products of animal origin, fresh, preserved, dried vegetable and fruits, edible oils, margarine, sausages or preserved meat products, honey and jiggery, confectionary, bakery products, mineral water, vinegar and salt.

On September 18 Sri Lanka raised import cesses on potatoes were raised to 50 rupees a kilogram and to sprats (dried herring) to 75 rupees.

Import cess taxes were also raised on steel, a vital material for building new homes by citizens.

Earlier in the year, Sri Lanka had raised taxes for ceramic articles and steel rods.

Sri Lanka has been on a path to autarky for several years with targets for 'self-sufficiency' and placing an emphasis on an ideology of 'saving foreign exchange'.

Raising taxes on steel in particular would increase the costs of homebuilding.

A day before the budget, science minister Tissa Vitharana said high taxes on foods seem to be contributing to persistent malnutrition among children.

President Mahinda Rajapaksa said in his budget speech that he would give a free pair of shoes to school children in difficult areas as well as milk and cereal.

He said he met many children with broken shoes. Shoes are highly protected with import duties.

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