The Free Trade Zone Manufacturers Association (FTZMA) has written to President Ranil Wickremesinghe expressing its opposition to the proposed 30% tax on profits made, warning that it will have a serious impact on their survival and attract much needed FDI to Sri Lanka .
In their letter to the President, FTZMA President Jatinder Biala and Secretary Dhammika Fernando said the proposed 30% rate is an “intolerable rate” and not the concession rate given to exporters who have to compete with countries in the region such as Bangladesh, Vietnam, Indonesia and Thailand with which Sri Lankan exporters have to compete for overseas markets, buyers etc. He said the corporate tax for exporters in India and Bangladesh is half the standard tax rate.
“We view this decision as a serious impact on our existing exporters and foreign direct investment to maintain operations in the country, as well as stopping reinvestments and discouraging new FDI,” the FTZMA said. He pointed out that the peer countries offer favorable taxes on exports and keep the rate of export promotion tax at the minimum level in order to retain their export industry in the prevailing depressed global market.
He said that as the largest chamber representing both apparel and non-apparel industry sectors and the only commercial chamber representing BOI corporate investors in all free trade zones, The FTZMA recognizes the country’s new IMF-supported program that would restore macroeconomic stability and prosperity through the creation of a competitive export-oriented market economy to unlock Sri Lanka’s growth potential.
The FTZMA has requested the President to review this proposed measure and reinstate the current tax rate of 15% as an export promotion tax to protect Sri Lanka’s export industry, including existing FDI and potentials.
In the letter, President Wickremesinghe was asked to consider the many challenges the export industry is currently facing due to the impending global recession, which is impacting its entire supply chain process. supply for subsistence export income and employment.
“The social and political crisis in the country has also forced foreign buyers to transfer their orders to other countries, which has had adverse effects on meeting cash requirements to finance their working capital for business continuity. ‘industry,” FTZMA said, calling for presidential intervention in the matter urgently with respective stakeholders.
Sri Lanka’s export earnings in August rose 11% year-on-year to $1.22 billion, while in the first eight months the figure rose 12.6% to 8, $9 billion. This growth was entirely driven by improvements in industrial exports, but indications from the apparel sector indicate that the outlook from September does not look very promising given recessionary conditions, rising inflation and the impact of the ongoing Russian-Ukrainian war.