Sri Lanka export industry threatened by tax refund delays

May 28, 2007 (LBO) – Delays in making value added tax (VAT) refunds are forcing Sri Lankan exporters to borrow at high cost and threatening export growth, a senior industry official has warned. “The VAT refund is one of the major crises that Sri Lanka’s import-export industry is currently facing,” says Rohan Masakorala, a former head of the Sri Lanka Shippers’ Council.

“Major delays in obtaining refunds are cited by the industry and as a result most of the smaller companies are facing difficulties in their day-to-day working capital requirements.”

With interest rates rising owing to a tighter credit policy adopted by the Central Bank to fight inflation, VAT delays are forcing exporters to borrow at high cost to finance production and maintain sufficient cash flow.

“Under these circumstances, export growth targets would not be met if legitimate charges that are due to exporters are not given on time,” Masakorala, now a director of the Academy for International Trade and Transport (AITT), a new trade and transport training academy, said in a statement.

VAT refund delays are “virtually an indirect barrier for export growth” with Sri Lankan exporters facing up to 15%-20% tran