Tourism sector continues to lobby for interest waiver on moratorium period

• Says interest waiver could come as tax credit to banks from the govt. 
• Calls for non-discriminatory electricity tariff system as industry charged higher 
• Demands for level playing field in Provincial Council taxing 
• Requests to bring tourism under SVAT scheme to simplify tax computations 

Sri Lanka’s tourism sector, which is harshly battered by pandemic-induced travel restrictions and border closures, has renewed its calls to authorities to write off the interest component accrued during the period of the loan moratorium, which was extended through June 2022 last week. 

The Central Bank last week extended the payment holidays on both capital and interest on the outstanding loans of the sector by nine more months effective from October 1, 2021, with provisions for loan restructuring, making it the longest such relief afforded to any sector in effect since April 2019 when the tourism sector suffered a brief setback caused by the Easter Sunday attacks before the pandemic dealt a crippling blow the following year.  
However, the sector was expecting the most recent round of loan moratorium to be extended through November 2022 when the peak season kicks in.

Besides, the sector doubled down its repeated call for an interest waiver for which the authorities are yet to respond.  According to Shiromal Cooray, Chairman and Managing Director at Jetwing Travels (Pvt) Limited, without the interest write off, it would be daunting if not impossible for the industry to make a comeback.  

“The biggest wish however is asking the government to write off the interest that has accrued during the moratorium period,” Cooray told an online forum organised by the Institute of Chartered Professional Managers of Sri Lanka last week.

“If we have to add the interest to the capital, that’s going to be a huge task. I would not be wrong in saying that a lot of people are going to find it difficult to pay that because two years in arrears is quite large whether you are a small company or a big company,” Cooray added.

In the same vein she said she doesn’t expect banks to bear the cost of such an exercise because she is aware that banks have an interest towards their depositors. Instead she proposed that concession to come as a tax write-off or a tax credit to banks from the government. 

Few months ago, Hiran Cooray Chairman of Jetwing Symphony PLC made the same call to the authorities citing the immense competition they would have to face in the future when tourism re-opens after travel normalises with the dissipation of the pandemic. 

“Although the current relief gives us a chance of survival, private sector tourism bodies are lobbying the government to receive a waiver of interest for the period of the moratorium in order to combat the immense global competition that we will face in the near future,” he said in his letter to the shareholders in May.

Sri Lanka lost nearly US$ 9 billion in foreign exchange income from tourism trade in both 2020 and 2021 as the pandemic decimated the industry and chances of subsequent recovery eyed for this year is delayed due to virus flare-ups by way of new variants. 

However, with the ongoing fast vaccination drive taking places across the world including  Sri Lanka, the industry can pin its hopes on a recovery from 2022 onwards. 

Highlighting some of the key concerns plaguing the industry for sometime, Shiromal Cooray also urged the authorities to do away with the discriminatory policy of charging the tourism industry with a higher electricity tariff which weighs heavily on the sector.

“We have constantly been asking why tourism is targeted for a higher tariff for electricity because we are also similar to any other industry and we should be given the tariff similar other industries,” she insisted. 

Highlighting another issue, she said the tourism industry is required to pay a tax to Provincial Councils, whereas other industries are excluded from this tax and they are required to pay only a trade licence fee. Therefore she asked to create a level playing field in this respect.  

Spelling out another issue expecting to be resolved from the forthcoming budget, she said although the destination management companies which generate foreign exchange and the hotels which make 60 percent of procurement from local produce are free from Value Added Tax (VAT), they face complications in calculations as contracts and pricing are contracted at least a year in advance. 

She therefore asked to bring a Simplified Value Added Tax (SVAT) scheme into the tourism sector where the suppliers to the industry can register and make the tax computation in arrears.