Sri Lanka’s Central Bank allows foreign investors full control: CIFL

(LBO) – Sri Lanka’s troubled Central Investment and Finance Company says the Monetary Board has assured that investors would get 100 percent control once the proposed investment materializes.

Clarifying a newspaper report, CIFL said that such intervention would be subject to other circumstances of the mechanism of proposed investment.

The investors have already expressed their requirement of acquiring 100 percent ownership of the company.

“We sought advice from the Central Bank by our letter dated 20 September,” CIFL said.

“The CB has responded indicating that the Monetary Board is empowered under Finance Business Act to ensure that investors would get 100% control in the event of the proposed investment is materialized satisfactorily.”

Central Investment and Finance Company earlier said they are awaiting a response from a prospective German investor indicating their future plan of action to revive CIFL.

The company said they submitted all clarifications to the investor delegation who visited the island recently.

A high level delegation from Vandell Financial Services arrived in Sri Lanka recently to discuss opportunities of investing in the troubled finance company.

Govt. expects to raise Rs.100bn through revised VAT this year

By Chandeepa Wettasinghe

The government expects to raise as much as Rs.100 billion through the revised Value Added Tax (VAT) law this year, Finance Minister Ravi Karunanayake said yesterday, while shooting down allegations the Joint Opposition made against him for circumventing the due process again in his attempt to legislate the VAT Bill’s latest iteration.

“We’re expecting to collect even more,” Karunanayake said in response to a question by Mirror Business whether the Rs.100 billion revenue target from the revised VAT rates is still realistic given the time restriction for the year.

The claim could have some merit, given the large reductions of the VAT liability threshold, even though VAT will only be collected from VAT liable goods, compared to a blanket charge on the revenue in the past on all goods and services sold by a supplier liable for VAT. Karunanayake had this May set a Rs. 100 billion revenue target to be collected from raising the VAT rates from 11 percent to 15 percent.

However, against the then hopes of having the VAT in effect for 8 months of 2016, the Supreme Court in July had halted the rate hike due to a petition made by the Joint Opposition which claimed that the revised Bill had not followed the parliamentary standing orders of gaining parliamentary and Cabinet approval.

In August, the Supreme Court ruled that the process pursued by the government raising the tax rate was unconstitutional and was against the parliamentary standing orders.

When the next draft of the revised VAT Bill was gazetted last week, the Joint Opposition said that the document was gazetted on September 9, even though Cabinet approval was given on September 13, and that it would go to courts again to stop it from being legislated.

However, Karunanayake refuted the allegation by providing a letter written by the Government Printer Gangani Liyanage, where she had stated the revised VAT Bill was published on the September 13 Extraordinary Gazette, which was a part of the September 9 Gazette.

The increased rates of the VAT Bill, if implemented, is likely to come into effect retrospectively for the two months from May to July as most suppliers had already collected increased rates from consumers.

Meanwhile, Karunanayake said that other forms of revenue had surpassed expectations this year, helping to reach the budget targets.

Cabinet decides to impose 15% VAT on cigarettes

The government has decided to impose the proposed 15 percent VAT on cigarettes and increase the current production tax by Rs.5 for any size cigarette, it was revealed during the Cabinet media briefing yesterday.

The Cabinet of Ministers also has agreed to increase the cess on the import of beedi leaves by Rs.1000 to Rs.3000.

The revised VAT Bill is likely to be presented to parliament for approval in October.

The moves come in the wake of a survey finding that shows 15 percent of people between 18-69 years are engaged in smoking and about 30,000 die annually due to tobacco related diseases.

It has been calculated that government spends about Rs.72 billion annually to treat such patients.

VAT was relegated into excise duty in 2014 on tobacco, liquor and several other products in an attempt to cut back on the plethora of taxes levied on these products.

A re-imposition of VAT on cigarettes could thus create a scenario of ‘VAT on VAT’, as a VAT component is already present in excise duties.

The current effective tax rate on cigarettes is around 81 percent. Additional taxes means the cigarette monopoly in the country, Ceylon Tobacco PLC (CTC) will have to raise the cigarette prices.

CTC in 2015 paid over Rs.90 billion taxes to the government, and this year the tax payment is estimated at Rs.100 billion.

www.dailymirror.lk

Sri Lanka heading for ‘significant’ tea production shortfall

ECONOMYNEXT – Sri Lanka is heading for a ‘significant’ shortfall in tea production this year with the crop down 12% up to August while reduced offerings at the Colombo auctions have pushed up prices, brokers said.

Tea production in August 2016 was down 13% or 3.4 million kilos to 23.01 million kilos from a year ago with all elevations affected, they said.

“If the current extreme weather pattern continues, Sri Lanka’s tea crop is poised to show a significant negative variance by the end of the year,” Forbes & Walker Tea Brokers said.

At this week’s auction, only 5.4 million kilos were offered in contrast to the corresponding sale of last year which had on offer a quantity of 6.8 million kilos.

The August 2016 crop was the lowest in 10 years, the brokers said.

Sri Lanka’s tea production in the first eight months of this year was down 12% to 198.6 million kilos, with low grown teas which make up the bulk of the crop showing the biggest deficit, brokers John Keells Ltd. said.

Prices perked up at this week’s auction owing to the limited quantity on offer, they said.

Sri Lanka IOC unit erodes Chevron dominance in lube market

ECONOMYNEXT – Indian Oil Corporation’s Sri Lanka subsidiary has gained market share from the dominant Chevron unit and state-owned Ceylon Petroleum Corporation in the lubricant market, a new study by the regulator shows.

The Public Utilities Commission of Sri Lanka (PUCSL) said in its lubricant market report 2015 that competition was increasing in island’s lubricant industry.

Sri Lanka's lube market grew at 6.8 percent to 23.4 billion rupees in 2015, with 10.1 percent growth in automotive lube and 7.7 percent increase in industrial lube, the report said.

Currently, 13 operators compete in Sri Lanka's lubricant market and are authorized to import, export and sell lubricants, with only three authorized to blend lubricants.

Chevron Ceylon’s lubricant market share narrowed to 47.58 percent in 2015 from 49.30% in 2014 with its nearest competitor, Lanka Indian Oil Corporation seizing 14.86 percent of market share, up from 12.59 percent in 2014, the report said.

The PUCSL said the market share of Ceylon Petroleum Corporation also decreased to 9.19 percent in 2015 from 10.54 percent in 2014.