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.
Finally someone made a sensible comment. I believe tax on hybrid cars should also be reduced to encourage more hybrid car purchase. This will reduce oil consumption causing a reduction in oil import
come battery change time all those saved foreign exchange will be gone again
I would say its high time we slap vehicle imports with taxes back again, otherwise will end up in a BOP crisis any time soon.
Correct thinking.Foreign currency either has to be earned or borrowed or needs to come as grants since another country cannot print,USD ,RMB ect ect.For decades what happend with borrwings until limits are near(borrowing seems to be the main business in SL rather earning it)& with the fact that yields on investments done with these being not that grate it boils to earnings with solid efforts.The issue has become more relevent & critical within the context of the present situation(plight) within EM’s.
If it’s to encourage value addition what is wrong with it? A value added export will be worth 10 times the raw export
Finally, we are hearing something ‘intelligent’ being spoken by a politician, than all nonsense we hear everyday.People should elect intellectuals like this to steer our country forward; irrespective of party politics..
the issue is not about taxing exports but making sure the imports for export (value addition) is kept in check. the main reason for taxing exports has always been that people import materials tax free with the intention of exporting processed products but end up unscrupulously dumping in the local market. there were many instances in the past where the customs found stuff bought under that umbrella for selling in local market. what people shud realize is that though we are one of the most popular and famos exporters of garments we hardly provide the raw materials for them. do we even make a pin used in packaging? NO!!! first of all we have to look at supplying at least some of the materials for export. that is why the VW project is a good idea , irrespective of the numbers that will be exported. we shud look at INDIA and learn. when late great Upali Wijewardena started assembling cars and electronic goods India had nothing. Noone would even look at an Indian product. now look at us and them all becoz of stupid politicians and revolutionaries who screwed up the economic agenda. we dont have seed capital to create brands like china korea malaysia BUT we have labor that can do very good jobs assembling brands, if only we get them down. our workers in the garments industry have shown we have the skills. otherwise NIKE wont share research facility with us. if UNP say they are west freindly, then get the west to come here and set up shop. our survival will depend on value addition. we are just too small to build a formidable brand for anything. even our tea is nothing – people think LIPTON is sri lankan tea. RUBBISH!!!