A pragmatic decision

President Mahinda Rajapaksa, who is also the Finance Minister, and the Government should be commended for announcing a drastic reduction in import duties and taxes on a number of items. The 15 percent surcharge on Customs Duty has also been removed. The Government also announced a new four band duty structure which will streamline revenue collection.

These measures will no doubt lead to a rise in revenue for the State coffers. It is apparent that a good economic climate, healthy foreign exchange reserves and reduction of certain types of expenditure could make this move possible.

There will be a considerable reduction in the prices of motor vehicles when the 50 percent excise duty cut and the surcharge removal are applied. Motor vehicle taxes were so high until now (almost 300 percent for petrol and 500 percent for diesel for engine capacities over 1.6 litre), that sales of brand new vehicles suffered a major decline.

A brand new family car priced at US$ 14,000 CIF (Rs 1.59 million) cost almost Rs 7 million under the old duty and tax structure. Even a 800 CC Indian-made car cost as much as Rs 1.7 million, putting a new vehicle way out of reach of most families. We could thus expect a considerable reduction in the final ‘on the road’ price of all vehicles, which will be a boon to all those aspiring to own a vehicle. In addition, the price reduction will be a boost for tourism, business and industry. Better sales will also translate into higher revenue for the Exchequer.

The 2.5 percent nominal import duty on most raw materials, plant and machinery has also been abolished to provide a boost to the rapidly recovering post conflict economy. This is good news for the business and industrial sector which is making more investments with the dawn of peace.

Sri Lankans already own around 10 million mobile phones. With the slashing of duty on mobiles, the telephone penetration will increase rapidly. Furthermore, a very low tax/duty rate will apply to items such as wrist watches, cameras and electronics. These items will be liable only for Port Levy and Nation Building Tax and have been exempted from VAT and Cess. While benefitting local consumers, this move is likely to attract tourists shopping for name-brand goods, just like in Singapore and Dubai. We hope that these are only the first steps in the effort to streamline the complex tax and duty system.

IIFA boon to Lanka

Today marks a red letter for Sri Lanka when it will host one of the most prestigious events in the Indian Film Calendar. The International Indian Film Academy (IIFA) awards is certainly a mega event by any stretch of the imagination where the Bollywood razzle dazzle will be showcased in all its glitz and glamour for three full days in Sri Lanka’s capital city.The Hindi film world’s Who’s Who have already arrived in the country together with other functionaries in the Bollywood movie industry. One cannot recall such an upmarket event of international appeal being held in Sri Lanka in living memory that will be beamed to millions over the world bringing invaluable exposure to the country. The world will now come to know of a different Sri Lanka in contrast to the tiny island nation which was riven by bloodshed. Many opportunities will be opened up for Sri Lanka by this positive image of the country.

The event certainly has stirred the city of Colombo. City hotels are agog with activity with elaborate arrangements made to receive the glamorous superstars. A special luxury train service was commissioned to transport the thousands of visitors who are expected to converge here for the ritzy happening. The city has been given a facelift and there is an air of anticipation and high excitement all round.

Hosting of an event of this magnitude is not lightly conferred to any country unless it has what it takes to stage such an event, most notably peace and tranquillity. That Sri Lanka has passed the test is testimony that it has emerged from the past and is ready to be counted with the best of them. Who would have thought that staging of such an international event would have been possible a couple of years ago? That was a time when even international cricket teams cancelled tours to the country .It was a time when investors packed up and left the country where tourism was a dead industry with travel warnings issued by countries to their nationals against visiting Sri Lanka.

The staging of such an upmarket event as the IIFA in Sri Lanka is therefore a clear endorsement that the country is a safe venue for international showbiz and sports events and it is up to handling all modalities and logistics that go with such events.Sri Lanka is certainly going to be on the world radar after today with the staging of what is billed as the mini Oscars.