ECONOMYENXT – Sri Lanka’s cabinet has decided not to abolish a Special Commodity Levy Act to maintain protection to farmers, and its impact on food prices, a government statement said.
On March 25, 2024, the then cabinet had decided to abolish the SCL Act and replace the tax with value added tax.
There were 63 items listed under the SCL Act.
The cabinet decided to reverse the decision to abolish the SCL Tax as the state will not be able to give protection to farmers and the impact on food prices.
While the SCL Act has the salutary effect on avoiding tax-on-tax, where value added tax is charged on top of other import duties as Sri Lanka has a plethora of border taxes, SCL levies are also imposed at very high rates on basic foods that provide calories to the malnourished.
High taxes on maize in particular makes protein for the children of poor families expensive.
The taxes on rice and potatoes are close to 50 percent.
Sri Lanka’s protectionist taxes, imposed under a self-sufficiency ideology and promote ‘domestic production’ pits farmers against malnourished children, critics have said.
A cabinet paper by President Anura Kumara Dissanayake proposing that the tax rates to continue from 2025-01-01 was approved by the cabinet.
Under an International Monetary Fund agreement Sri Lanka pledged to abolish the SCL and replace the tax with value added tax as it gave rise to corruption and was probably against the constitution.
SCL taxes are imposed at midnight, under ‘Minister’s Prerogative’ without consulting parliament which is supposed to have full control of finances.
Before the ‘Magna Carta’ Kings also imposed taxes without consulting representatives of the people through a ‘Royal Prerogative’ eventually leading to the birth of ‘taxation by consent’. (Colombo/Dec19/2024)