Exporters displeased with the conditions laid out for tax concessions under the New Inland Revenue Act (IRA) called for a revision of the eligibility criteria to be reasonable and export oriented.
For an exporter to be eligible for the 14 percent tax concession he or she must ensure that 80 percent of the gross income of the company comes from exports.
Exporters attending a forum organised by the Export Development Board last week said there was no such provision in the former tax law, which discourages exporters.
Company representatives said an exporter who was just starting the trade cannot reach this target. Such entrepreneurs need assistance.
National Chamber of Exporters (NCE) President Ramal Jasinghe said in regard to the regulations under the new Inland Revenue Act which came into effect from April 1, 2018, the profits arising out of exports of goods and services are taxable at 14% subject to the stipulation that 80% of the Gross income from exports of an enterprise exceeds 80%.
“Otherwise the taxable income was subject to a tax rate of 28%. It was further explained that the ‘Exporter’ has a very wide definition and includes Freight Forwarders, Service providers to exporters, Transshipment services, Logistic service providers, Front end services to overseas clients, Manufacture and Supply of Non-Traditional goods to an exporter.
“Many of our members are not happy with the changes and we are still in the process of gathering their comments to formulate our response to the relevant stakeholders. The Chamber is unable to comment on details until we get a complete view from our members,” he said.
Chevron Lubricants Lanka PLC Managing Director/CEO Kishu Gomes said this will tremendously discourage the local companies trying to export to expand their business offshore and bring in foreign currency.
To compete globally, pricing is critical especially to make a wining start. Given that any revenue coming from a foreign country is revenue for the country, if we are to expand our economy we should make exports theoretically tax free until such time we grow exports to a sizable extent.
If the government is serious about encouraging more and more companies to cross borders and try multiple products and services not limiting to traditional exports, as expressed in various business forums reverting back to the old tax system of lower tax on exports regardless of the ratio as the bear minimum from the government side in terms of support. Needless to say that only way out of this economic crisis the country is faced with is to expand the pie with exports. Most companies that have been successful in building a wining export business have done so without any significant help from the government and more companies.
CEO Shippers’ Academy - Colombo, Rohan Masakorala said it is not the best mix, as it discourages certain segments of exporters who are traders or those who bring in partial value addition to the product or to the customer and component suppliers. “They may not achieve this level as they supply to the domestic market and international exporters depending on reverse demand from exporters.
“We need to keep the deemed exporters in the frame work to encourage people to make Sri Lanka a trading hub going beyond manufacturing and exports due to its location.
“They should be given the lowest tax rate, in my opinion over 50-55% is more reasonable, as then they will look at more exports as they see the benefit of crossing beyond 50% through exports, where as new products and new exporters will find it difficult to achieve 80% at the outset as they will have a gradual market and customer penetration. I hope if these condition are not there they will amend it as needed,” he said. - LF