General
Sri Lanka state finmin reiterates “no intention” for domestic debt haircut
ECONOMYNEXT: Sri Lanka’s dollar earnings from service exports is hard to track and such inflows are not recorded as they are kept outside the country, an Export Development Board official said.
“We face a huge challenge as we can’t get the statistics for services sector export,” an Export Development Board (EDB) Official told EconomyNext asking not to be named.
Since Sri Lanka hit economic crisis and declared sovereign debt default in April, the authorities including the central bank and finance ministry are exploring all the options to force exporters to bring down most of their export earnings.
The official said there are seven services exports under EDB such as IT-IBM, electronics and electrical, education, marine and offshore, logistics, printing and packaging, and constructions.
There are some services which are not included under the EDB such as legal services where the export earnings are not tracked, the official said.
When exporting products, the commodities go through Customs Declaration (CUSDEC) process, but there is none to track services export earning, since the companies provide their services online and there is no way the data is entered and recorded.
The Central Bank of Sri Lanka (CBSL) could capture the data on dollar inflows into the country, but no data is available on dollars deposited in foreign banks.
“For the IT-BPM services, the central bank report has the censors and the statistics. They are being gathered by doing sample survey from some IT companies whereas considering a few IT companies, that doesn’t mean it captures the data of all the exporting IT services” the EDB official said
The official said despite requests from the central bank, it has not taken action to capture export service warning data in scientific Mannar.
The EDB has estimated services exports at 1,456 million dollars in the first nine months of this year, with a 3.8 percent gain from the same period last year.
“Out of the 1,450 million dollars, 1,199 million dollars is from the goods and 251 million dollars is from the services. The conversion in the goods side is 326, so about 23% out of repatriation is converted and we have no not received data for the service sector,” Deputy Governor CBSL, Mrs. T.M.J.Y.P. Fernando told in Thursday
According to the IT experts, the increment of taxes is one major reason they face. The other taxes like VAT, Social Security Contribution Levy (SSCL) have impacted on the IT sector since they are not removing the exemption.
“They have removed only the IT enabling services but if the IT companies are exporting services, they are exempted from the income taxes. But the local companies are being affected by the exemptions,” Accountant at IFS, Bhanuka said.
“If the local companies getting foreign remittances like USD or other currencies, they can apply for the exemptions but the other IT companies are not able to do so,”
Moreover, the EDB has noticed that as a trend the export revenue that is earned is not brought into the country. Since they have to again give it out for imports, for the raw materials, when there are restrictions within the country they try to keep it somewhere else and maybe use that for import.
“Hence the currency coming in is a little bit low but based on the trend it is like one billion a month during these last ten months and up to October, we have received over 10 billion of export revenue and first being the apparel,” the EDB official said
The exporters are reaching out for alternative ways to establish their sales and profit rather than being stuck in the huge burdens of taxes on them where the country might get a lesser amount of foreign exchange.
“The exporters begin transfer pricing and setting out partnerships in other countries, where the tax rates are between 12% to 15%. They can do their expansions in third countries,”Rohan Masakorala, an exporter in shipping industry said. (Colombo/Nov25/2022)
