Several proposals worry trade sector
Trade-related chambers in Sri Lanka are expected to jointly oppose the implementation of a number of budget proposals, The Sunday Morning Business learns.
The joint opposition has come about as a result of the Government taking measures to implement these proposals disregarding requests from the industry to reconsider them, according to National Chamber of Exporters (NCE) Secretary General and Chief Executive Officer (CEO) Shiham Marikar.
The decision comes following a letter sent to the Ministry of Finance by the NCE expressing their concerns on several budget proposals pertaining to the export industry not receiving a response from the Ministry even after a month.
Speaking to The Sunday Morning Business, Marikar stated that the letter was sent a week after the announcement of the Budget 2021 on 17 November this year, requesting to reconsider and amend the proposals suitably.
He stated that while a response is yet to be received by the Ministry of Finance to the letter, Prime Minister Mahinda Rajapaksa, who is also the Minister of Finance, had advised the relevant authorities two weeks ago to move forward with the budget proposals and gazette them.
“As this indicates that the Ministry (of Finance) is not worried over the concerns of the exporters, all trade chambers in Sri Lanka are jointly opposing the move,” he added.
The first proposal that has concerned the exporters was increasing the retirement age for both the public and private sectors to 60 years. Marikar stated that the private sector retirement age was 55 years for males and it was a few years less than that for females.
“Increasing the retirement age to 60 years for the private sector is definitely going to bring down the private sector’s productivity and efficiency. We are worried about this proposal,” Marikar stated.
Announcing the Budget 2021, Premier Rajapaksa stated that it cannot be justified to have two different ages for compulsory retirement for men and women.
“Life expectancy for females is 76.6 years and life expectancy for males is 72 years. Therefore, based on the life expectancy, it is proposed to amend the Employees’ Provident Fund Act to expand the retirement age for both men and women up to 60 years,” Rajapaksa announced.
Marikar added that at the moment, private sector companies enter into an agreement with female employees to retire when they are 50 years and for male employees to retire at 55 years. The agreement of employees who are efficient even beyond their retirement age will be extended, whereas low-productivity employees will be replaced after their retirement age in order to increase the productivity of the company. However, this proposal is expected to increase the number of lower-productivity individuals in a company, according to him.
The second proposal that has been raised by the NCE in the letter was on charging a tax of 0.25% of the turnover of businesses and factories with more than 50 employees, which is to be accrued to the proposed insurance fund. According to the Budget 2021, this insurance fund is intended to be used for those who are employed at retail and wholesale shops with more than five employees as well as at hotels.
Furthermore, it was proposed to implement an insurance scheme through the Sri Lanka Export Credit Insurance Corporation (SLECIC) with the contribution of an insurance premium of 1% of export revenue in order to accelerate financing facilities through export receipt confirmation.
Speaking on these two proposals, Marikar stated that imposing such additional taxes when the export industry is operating with a very thin profit margin amidst disruptions caused by the pandemic puts the sustainability of the export industry at risk.
“With regard to the 1% tax for an insurance premium through Sri Lanka Insurance Corporation for those who export to risky markets, most of them do not make use of insurance schemes offered by the SLECIC already. Taxing those who export to well-established markets just to create another insurance premium is an additional burden on exporters,” Marikar stated.
