Tax Pain

July 10, 2007 (LBO) – Sri Lanka’s exporters have warned that delays in tax refunds and disbursements of export cess were hurting overseas marketing efforts and driving some businesses near bankruptcy. Delays experienced by exporters in getting value added tax (VAT) refunds is a “burning question,” said Mohan Mendis, the outgoing chairman of the Exporters’ Association of Sri Lanka (EASL).

“The situation has caused disruption and dislocation to the cash flow management of a large number of individual export organizations resulting in prohibitive interest costs rendering many exporters uncompetitive and unviable,” he said.

“Some have been threatened with suspension of business and closure.”

Refunds are meant to be made in 30 days and it was a well-accepted principle that local taxes should not be incorporated into export pricing, he told the annual general meeting of the EASL.

One of the main reasons given to switch to an indirect form of taxation like VAT from turnover tax was to give relief to exporters in terms of pricing and shield them from the cascading effects of the latter.

“The impact of the unexplainable delays, which have been experienced in the last two years, howe