The withdrawal of concessionary income tax rate applicable to direct- indirect exports is a major negative factor for exporters and it will discouraging exporters in a big way, said Tissa Seneviratna, Chairman of the Ceylon National Chamber of Industries.
“Successive governments have made a concerted effort to promote Sri Lankan exports. In their endeavor to promote exports a concessionary tax rate was granted to profits attributable to export related turnover.
It’s known that even a small price differential can result in securing an export order or losing it altogether to a competitor from another country.
The concessionary income tax rate offered to exporters was an incentive for companies to enter into the export market. Under the new inland revenue Act only a business with exports of at least 80 % of their turnover will qualify for a concessionary tax rate.”
An existing business cannot enter an export market to export 80 % of their production initially. Most exporters entered the export market with small orders & gradually increased export volumes.
It is therefore important to incentivize every individual export if the intention of the Government is to encourage newcomers to enter the export market.
“This was achieved hitherto by granting a concessionary tax rate to the profit attributable to export turnover, irrespective of its value to total turnover.
Our Chamber represents many indirect exporters who have immensely benefited from such tax concessions.
They were able to price their products to exporters lower than what they would offer to the local market considering the benefit of taxation” he said.
Only established exporters stand to gain from tax concessions offered to companies achieving a 80 % export target. Some of the large exporters today too would have had a low % of their turnover as exports in their initial years of operations.
Would they have pursued an export strategy if tax incentives were not available even with a lower % of export turnover?
“We recognize the importance of additional revenue by removal of tax concessions. However, we are mindful that the government also considers the growth of exports as an integral component of economic development of the country. What would be the overall impact when a concession enjoyed by many businesses up to now is withdrawn overnight? We appeal to you to maintain the concessionary tax rates granted to exporters and indirect exporters irrespective of the volume of their exports,” he added.
The Government launched a National Programme this year to nurture 2000 new entrepreneurs to become exporters.
The proposes increase of taxation will adversely impact on the entrepreneurs coming under this programme which certainly is not the intention of the Government. These entrepreneurs would have prepared their business plans considering the concessionary tax rate applicable to exporters.
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