Free Trade Zone manufacturers up in arms over 30 percent income tax move
The Free Trade Zone Manufacturers Association (FTZMA) has written to President Ranil Wickremesinghe expressing its opposition to the proposed 30percent tax on profit earned, warning it will have a serious impact on their survival and in luring much needed FDIs to Sri Lanka.
In their letter to the President, FTZMA Chairman Jatinder Biala and Secretary Dhammika Fernando said the proposed 30% is an “intolerable rate” and not the concessionary rate to exporters who have to compete with regional countries such as Bangladesh, Vietnam, Indonesia and Thailand.
Sri Lanka exporters have to fight for foreign markets, buyers etc. It said the corporate tax for exporters in both India and Bangladesh is half of the standard tax rate.
“We view this decision as a serious impact on our existing exporters and Foreign Direct Investments to sustain their operation in the country as well as halting reinvestments and discouraging new FDIs,” FTZMA said.
It emphasised that peer countries are offering concessionary tax on exports and continuing the export promotion tax rate at minimum level in order to retain their export industry in the prevalent depressed world market.
It said that as the largest chamber represents both apparel and none apparel industry sectors and the sole trade chamber representing BOI investor companies in all the Free Trade Zones.
FTZMA recognises the country’s new IMF -supported program that would restore macroeconomic stability and prosperity through creation of competitive export-oriented market economy to unlock Sri Lanka’s growth potential.
FTZMA requested the President to review this proposed move and restore the current concessionary tax rate 15% as export promotion tax to protect Sri Lanka’s export industry including both existing and potential FDIs.
In the letter, President Wickremesinghe has been requested to consider the numerous challenges that the export industry is facing at present due to impending global recession thus resulting in impacting their entire supply chain process for sustenance of both export earnings and employment.
“The social and political crisis in the country has also been compelling foreign buyers to shift their orders to other countries resulting in detrimental effects in meeting cash flow requirements to finance their working capital for industry continuity,” FTZMA said, urging for Presidential intervention into the matter on an urgent basis with the respective stakeholders.
Sri Lanka’s export earnings in August rose by 11 percent year on year to US$ 1.22 billion whilst in the first eight months the figure rose by 12.6 percent to $ 8.9 billion.
This growth was entirely driven by the improvements observed in industrial exports but indications from the apparel sector are that prospects from September onwards do not look very promising given recessionary conditions, rising inflation and impact of the on-going Russia-Ukraine war.