• PAL and CESS no more

Sri Lanka will phase out para-tariffs within the next 5 years following the directions of the International Monetary Fund (IMF) and the World Bank paving the way for trade liberalisation, an official of the Treasury said.

Speaking at the Committee on Public Finance(COPF) last Thursday (7),  Deputy Secretary to the Ministry of Finance A. K. Seneviratne said that Sri Lanka will completely phase out the Ports and Airport Development Levy (PAL) within the next 5 years while CESS will be phased out in the next 3 years.

He said that the Government will be removing para-tariffs from 20% of the items at a time until all items are free from para-tariffs.

However, Seneviratne said that during the phasing out, the Government had the power to increase and decrease the para-tariff rates to manage the government revenue.

According to IMF’s Extended Fund Facility (EFF), to liberalise Sri Lanka’s highly protective trade regime, the authorities should develop a concrete medium-term plan to rationalise para-tariffs while the implementation of the plan will be carefully phased with due consideration given to its revenue implications and be complemented with measures to support local businesses.

Open trade policies are expected to be bolstered by Sri Lanka’s planned phasing out of para tariffs and entry into bilateral and multilateral trade agreements.

In the letter of Intent to IMF at the first review completed in December last year, Sri Lanka said that throughout the IMF programme, it will refrain from any tax policy and administrative measures that may erode tax revenue notwithstanding its commitments under the World Bank Development Policy Operations (DPO) to phase out para tariffs in a budget-neutral manner and consult with the IMF on any new tax proposals including on providing new tax incentives.

“We are fully committed to trade liberalisation, which is critical for attracting investment and boosting productivity growth. We have adopted regulations to rationalise the para-tariffs and will carefully implement the plan with due consideration given to its revenue implications and be complemented with measures to support local businesses in enhancing their competitiveness. We will pursue further trade reforms with technical assistance from development partners,” the Sri Lankan Government said.