From left: Joint Apparel Association Forum Chairman Noel Priyatilleke, British High Commissioner in Sri Lanka James Dauris, SLAEA Incoming Chairman Felix Fernando, Foreign Affairs Deputy Minister Dr. Harsha de Silva, SLAEA Outgoing Chairman Saifuddin Jafferjee, SLAEA Deputy Chairman Rohan Lakhani
Pic by Damith Wickramasinghe
By Chandeepa Wettasinghe
The apparel sector, the country’s leading export industry, praised the 2017 budget for being progressive, but came down strongly against the decision to remove the Simplified Value Added Tax (SVAT) programme. “The recent budget presented by the Finance Minister is based on an inclusive growth model, and the budget is aimed on a path to fiscal consolidation, which is commendable,” Sri Lanka Apparel Exporters Association (SLAEA) Outgoing Chairman Saifuddin Jafferjee said. The apparel sector’s praise comes at a time when many industries and academics are now starting to criticize the 2017 budget.
Jafferjee said that many wishes of the apparel industry were fulfilled in the 2017 budget, compared to the 2016 budget, which contained some challenging proposals for the industry.
“We also wish to thank, the government, the Finance Minister and officials for taking positively all our budget submissions,” he said.
He said that several of the ease of doing business concerns of the apparel industry were addressed, while also praising the 75 percent Ports and Airports Levy waiver on importing high-tech machinery, and the removal of cess on prefabricated buildings.
Jafferjee also welcomed the proposals to increase the skilled labour pool and to improve investments into lagging regions in the North, East and Uva.
“Encouragement given to the lagging regions in North and East and Uva, I’m sure will be taken very positively. Our industry is the most visible industry in these regions, and we will continue to play the role in expanding it further,” he said.
He further noted that bringing predictable and accountable processing time for government agencies facilitating trade would make them more responsible, but advised that such moves should go hand-in-hand with fully implementing current laws on e-documentation.
SLAEA Incoming Chairman Felix Fernando was also pleased with the government’s decision to continue to tax exporters at subsidized rates, and said that he hoped the government will continue these policies for an extensive period of time to ensure consistency.
However, both Jafferjee and Fernando criticized the abolition of the SVAT scheme.
“We are disturbed by the proposal to abolish the SVAT scheme. It is currently functioning smoothly. Prior to the SVAT scheme, the VAT refunds were the number one pain point for an exporter, and we have encountered numerous delays in processing refunds, which is unproductive,” Jafferjee said.
He said that this might affect Sri Lanka’s Ease of Doing Business rankings, measured annually by the World Bank.
“Furthermore, at a time the government is trying to encourage small entrepreneurs to export, the removal of the SVAT scheme would place an additional burden for exporters, as most are unable to provide bank guarantees. Therefore, I request the Finance Minister to reconsider it, as it is revenue neutral,” he added.
Finance Minister Ravi Karunanayake had removed SVAT saying that the scheme could “hardly be called simple”, and in post budget discussions had noted that it had also increased corruption.
Jafferjee called on Karunanayake to improve any shortcomings in the scheme.
Karunanayake had also said that the SVAT scheme would be redundant for faster VAT refunds, since the web-based Revenue Administration Management Information System (RAMIS) could handle all tax related issues faster and in a smooth manner in the future.
However, Fernando pondered whether both RAMIS and SVAT could exist simultaneously, and also requested to continue SVAT until RAMIS is in operation without any hiccups.
“We are of the view that until RAMIS is fully tested and implemented, that the SVAT system needs to be continued,” he said.