Spice industry smarting over new Inland Revenue Act

• Says imposition of 28% taxes on SME exporters was unreasonable, contrary to Govt’s export strategy
• Insists on reducing Economic Service Charge on turnover back to 0.25% in 2018 Budget proposal
• Urges removal of red tape, increase in efficiency of public servants at related institutes to support the industry

 By Charumini de Silva

The spice industry has become the latest sector to grow disgruntled over the imposition of high tax under the new Inland Revenue Act, asserting that some of its rules were contrary to the national export strategy of the Government. 

The apex industry body for spices and allied products in the country pointed out that the new act had withdrawn the tax benefit given to SME exporters and called it unreasonable.

“The new Inland Revenue Act has withdrawn the 14% income tax benefit given to the SME exporters. Exporters are only charged 14% as against normal businesses that pay 28%. However, to get this tax concession, spices industry need to export 80% of the total production, which is sometimes difficult for small-scale exporters,” Spices and Allied Products Producers’ and Traders Association (SAPPTA) Chairman Vernon Abeyratne told the Daily FT.

He said that it was unreasonable to tax SME exporters 28%, which was the same as normal businesses, and to give due emphasis for exports. “The Government is mapping out a national export strategy, which includes spice concentrates as a priority sector of focus. Thereby, if the SME exporters are not given the 14% tax concession, it is unreasonable and also contrary to the Government’s policy on economic development,” he added. Abeyratne also expressed disappointment over the Government’s decision to raise the Economic Service Charge (ESC) on turnover from 0.25% to 0.50%, a 100% increase which was imposed from the 2017 Budget. He urged the Government to reconsider ESC and reduce it to 0.25% in the upcoming Budget 2018.

Despite limited land area and quantities of spices in the country, he said the products however are appealing in niche markets given the high quality. “We have to increase our yield to meet the increasing world demand and promote plantation companies to utilise their unproductive lands for cultivation of spices, cocoa, garcinia, lemongrass, ginger, turmeric and cashew.” 

Further, he insisted that the Government remove the red tape and increase the efficiency of public servants at related institutes to support the industry.

Abeyratne said they were confident of achieving $ 1.5 billion in foreign exchange from spices and allied products by 2020 as the Government has outlined, despite the world commodity market crashing down. Last year the industry posted $ 350 million in foreign exchange and is expecting to achieve $ 400 million by the end of this year. 

It was pointed out that the revenue earned in 2016 was mainly generated from pepper exports which accounted for around $ 185 million, while this year they are banking on about $ 175-$ 200 million from cinnamon exports, that are performing well in the global marketplace.