Leading apparel industry stakeholder and Brandix Lanka CEO Ashroff Omar seems to be stressing a point to Development Strategies and International Trade Minister Malik Samarawickrama during the Apparel Exporters’ Association AGM held at Jaic Hilton Tuesday evening 
Pic by Pradeep Pathirana



By Chandeepa Wettasinghe
The tax revisions in the 2016 Budget are likely to have negative impacts on the apparel exports of Sri Lanka, while locals may not be able to afford locally-made garments, an apex industry body said. 

“The revision of Ports and Airports levy from 5 percent to 7 percent and Nation Building Tax (NBT) from 2 percent to 4 percent will have serious impacts on our capital investment programme,” Sri Lanka Apparel Exporters’ Association Chairman Saif Jafferjee said at the organisation’s Annual General Meeting (AGM). 
Around 40 percent of apparel exports consist of material imported for value addition and re-export to markets in the US and European Union (EU0. The NBT is imposed on imports utilized by businesses. 

Apparel is the second largest foreign exchange earner for the country after foreign remittances, and is the leading export, accounting for 44 percent of Sri Lanka’s exports, or US $ 4.9 billion in 2014. 

Finance Minister Ravi Karunanayake had raised such peripheral taxes, but had reduced corporate taxes from 28.5 percent to 15 percent, saying that reduced corporate taxes would allow private companies to invest more of its earnings into capital, boosting the country’s economic growth. 

However, Jafferjee pointed out that the apparel sector was subjected to just 12.5 percent of taxes due to its status as a value-added exporter, and the overall tax increase will only result in less capital investments in an industry which has continuously invested in cutting-edge technology. 

“We do understand the reasons for the revision of the tax rate in the interest of revenue collection and fiscal consolidation. However, we do see this increase in export income tax as a negative sentiment to exporters,” he further added. 

He also disapproved of the duty on sale of garments, which was increased 800 percent to Rs.200 per piece. 

“The industry manufactures a wide product portfolio, from socks to jackets, which have a range of economic values. Therefore, under this revised rate structure, a major part of our product portfolio in the industry will no longer be economically viable in the domestic market and will be a loss to the consumers of this country,” he said. 

However, Jafferjee also praised some measures proposed in the Budget, including the revision of the land lease tax, fast-tracking imports and exports using electronic documentation, liberalizing shipping and logistics and abolition of the Exchange Control Act, which will make business easier. 

He said that the apparel sector had lobbied strongly for such progressive measures. 

Jafferjee said that the expansion of capacity building in economically lagging regions and the proposal to set up a wholesale and retail marketplace utilizing Rs.2.5 billion of public and private funds to showcase products made in Sri Lanka are also commendable. 

However, he said that some Board of Investment and Customs regulations should be revisited to make them more business friendly, less bureaucratic and support value chains.