SRI LANKA: Sri Lanka to raise export taxes on bulk tea, rubber exports

The Sri Lankan government plans to raise taxes on exports of bulk tea and raw rubber in penalizing producers and restricting their market access in a bid to support value added production, the budget for 2011 said.

President Mahinda Rajapaksa told parliament during his budget speech that the island has been able to diversify export products and markets but that value addition was not enough.

"I propose to impose a cess on all exports in raw and semi processed form to encourage value added exports from Sri Lanka," he said.

Only exports of finished goods will be free from the cess.

Rajapaksa said 35 percent of the raw rubber production is still exported as a primary commodity.

"To encourage value added exports, I propose to increase the cess on the export of raw rubber from four rupees a kilo to eight rupees."

Rajapaksa said most exports of tea, garments, leather, rubber, gem and jewellery products, several valuable spices as well as many raw materials are without sufficient value addition.

The export tax will restrict market access to producers of primary goods while giving access to a cheap source of goods for value added producers.
Primary raw material manufacture and final goods manufacture and retailing are different businesses requiring different skills.

The penalization of rubber and tea growers comes as rice farmers, who cannot produce rice of a quality good enough to export get massive subsidies and market support with high prices.

While producers of primary goods finds their market access restricted with new taxes, unemployable graduates get 'make work' jobs in the state financed by tax payers.

(Syed Rashid Ali, Karachi, Pakistan)