Sri Lanka needs to remove taxes from exports: Harsha de Silva

Aug 22, 2015 (LBO) – Sri Lanka needs to remove taxes for exporters in order to increase exports which brings foreign earning to the country, Harsha de Silva, member of parliament and former deputy minister of policy planning and Economic affairs said.

“I don’t understand why exports must be taxed,” de Silva said at the annual general meeting of the Spices and Allied Products Producers and Traders Association (SAPPTA).

“Why are there cesses on exports? I think we should completely get rid of export cesses. Because it does not help but blocks exports.”

The cess is an indirect tax on exporters impose by the government of Sri Lanka, which described by analysts as a bid to ‘increase value addition’ by force.

At economic summit 2015 held recently Razeen Sally, a professor of National University of Singapore, said “One of the most idiotic policies that I can come across in Sri Lanka is the cess on tea and rubber, where you have export taxes in order to promote value addition at home. Some of that revenue is supposed to go to promoting exports abroad.”

“The answer is that this kind of policy did not work anywhere it has been tried.”

In June, Sri Lanka’s exports earnings recorded a decline of 4.2 per cent, year-on-year, to 944 million US dollars due to lower earnings from tea, textiles and garments, rubber products and seafood exports, while total imports rose 13.5 percent to 1.33 billion dollars due to imports of vehicles for personal usage and business purposes, data showed.

De Silva said Sri Lanka’s export competitiveness shows a weakening in past few years with share of gross domestic product taken by exports dropping to about 15 percent from 35 percent 10 years ago.

“Exports cannot increase 20 or 30 percent. It should increase 2 to 300 fold,” De Silva said.

“Exports have really suffered. What went wrong? Where were our priorities?”

De Silva said the funds raised from cesses have been used for political purposes without funding for export promotion purposes.

“What does this cess do, what it is used for?” de Silva said. “Is this used to market Sri Lanka’s Ceylon logo or is it used for some politician’s egoistic project?”

“The latter is the truth.”

He said, the new government elected would act to bring back export competitiveness to Sri Lanka through removing constraints and putting policies in right places.