SMEs appeal for fee revamp to boost business

•  Requests President to reconsider licensing fee and winding up fee proposed by Budget

Small and Medium-sized businesses that make up 70% of Sri Lanka’s GDP have appealed to President Maithripala Sirisena to reconsider a Budget proposal to impose a Rs. 60,000 annual licensing fee and a Rs. 50,000 winding-up fee that could hamper entrepreneurship. 

Small and Medium Enterprises (SMEs) form the backbone of Sri Lanka’s economy with an estimated 75% of employment being sourced from thousands of businesses countrywide. Many of them are also engaged in exports that earn foreign currency. 

The Small and Medium Scale Private Company Grouping (SMSPCG) has written to President Maithripala Sirisena calling to revise the Budget proposal to charge SMEs an annual licensing fee of Rs. 60,000. 

“If these levies are enforced, people will have second thoughts as to forming of companies in the future and the viability of continuing their businesses, which may end up with severe blows to our Gross Domestic Production (GDP), imports and exports, and the economy,” the missal warned. 

The letter observes that most of its members are small companies that are established as private limited companies because it is the international norm but do not make significant profits to warrant an additional expense of a licensing fee. 

“Private limited companies are not entitled for any statutory tax free allowances as in the case of partnerships and individual businesses (currently proposed as 1.2 million for individuals}. Already the fees charged by Registrar of Companies are deemed to be high when compared to other south Asian countries. In this country more than 50,000 small companies are there with dependent people of at least 400,000,” the letter noted.  

The proposed fee is also applied unchanged to companies of any size, which the organization points out is unfair as it creates an advantage to larger SMEs. Instead the group has proposed a staggered system of payment with any SME making a profit below Rs. 2 million being exempt and for the rest to have their license fee charged on par with their annual profits. 

Under this scheme companies will be charged between Rs. 20,000 to Rs. 120,000 with companies that make more than Rs. 10 million in profit having to pay Rs. 200,000. Collecting the fee should be handed over to the Inland Revenue Department (IRD) rather than the present system of allowing the Registrar of Companies to enforce it, the letter added.  

A Budget proposal to charge Rs. 50,000 for any company declaring bankruptcy has also been asked to be reconsidered as such companies do not have the capacity to make additional payments. 

“The duty of the Registrar of Companies is to provide a service to the public by supporting for the legal requirements of businesses and supporting them to grow, while charging a reasonable fee to recover the costs. If the directors of some companies cannot be traced or if there issues on documentation with the Registrar of Companies, it must be deemed as an administrative issue which should be sorted out separately by the relevant authorities,” the organisation said.