Sri Lanka govt mulls tax hike on milk powder imports

Jan 02, 2009 (LBO) – The Sri Lankan government is considering increasing customs duties on milk powder imports to take advantage of plunging global prices without raising domestic prices and raise revenue.

World prices have plummeted by over 50 percent from a November 2007 high of 4,550 dollars a metric ton of milk powder.

“The treasury is reviewing prices now and will come to a decision when the forward contracts signed by the milk importers expire by mid-February this year,” said a senior government official.

“The government wants to maintain the domestic price of a 400 gramme pack of milk powder around 225-230 rupees to protect the local dairy farmers.”

However, the exact tax increases still has not been finalized, he said.

Earlier this week consumer affairs minister Bandula Gunawardane said further reductions in milk powder prices would be balanced with a need to protect domestic dairy farmers.

This week the government declared a 16 billion rupee ‘stimulus’ package to boost economic growth to an optimistic 6.0 – 6.5 percent in 2009.

Sources say the government plans to hike taxes in a falling market to maintain domestic prices at current levels for revenue purpose