VAT could have delivered double whammy: top retailer

Implementation of the currently overturned Value Added Tax (VAT) bill would have had a double impact on retailers with dampened demand as well as the creation of a grey market, a leading diversified group in the country said.

“We can anticipate a resurgence of grey markets across the country, which will result in a double blow to the formal retail sector of the country,” Abans PLC Managing Director Behman Pestonjee said.

Welcoming the change in direction for the VAT bill, he noted that implementing it would have led to a decrease in revenue for the Treasury through informal markets and decreased demand.

“The cascading impact of the VAT, through multiple types of consumer transactions, will have a multiplier effect on cost of living and the consumer psyche, significantly dampening retail household demand,” he went on to say.

Further, he noted that retail tax increases will also affect tourism into Sri Lanka, a view mirrored by the competing Softlogic Group as well.

“The retail sector entered the new financial year overshadowed by an increased tax landscape of VAT, PAL and NBT, topped off by a plethora of import taxes. This tax structure does not reflect the government’s vision to position Sri Lanka as a retail destination in the region,” Pestonjee said.
The VAT Bill was suspended by the Supreme Court, saying that the creation of the legislation did not follow proper procedures.

Prime Minister Ranil Wickremesinghe had said that a properly drafted VAT bill will be presented to Parliament soon.