Tea crisis brewing
View(s):Sri Lanka’s tea sector is aghast over a sudden decision to increase the tea export cess (which in modern terms is described as a ‘tax on a tax’) by 100 per cent from January 23.
Exporters say, according to several statements issued by sector bodies, that there was no discussion with the Plantations Minister or the trade before this week’s announcement in enforcing the new rate with retrospective effect.
Like a ‘bolt from the blue’ was how the Colombo Tea Traders’ Association (CTTA) described the increased levy, saying, “This has been implemented without consultation with the line ministry, the regulatory authority of the tea industry and the apex body of the industry, the CTTA, where all were kept in the dark with regard to this decision.”
This is not the first time that the Treasury bigwigs have enforced taxes and levies without proper consultation. Thus, this is not new and is, somewhat, a common feature when it comes to an exchequer that is scraping the barrel for funds and looks at the most lucrative, money-spinning sectors to increase state revenue. Makes life easy for the Treasury mandarins!
Tea is the country’s biggest commodity export and highest foreign earner after migrant worker remittances and garments.
More than a million people are dependent on this sector in the plantations and outside. It is the oldest export commodity, started more than 130 years ago, and apart from the crucial role it has played in the country’s economy in the pre and post- independence periods, the sprawling tea gardens across the upper, mid and lower mountain ranges is a thing of beauty which has enticed and attracted many visitors from across the world. The lush green gardens have also helped to protect the environment and preserve nature.
It is in this context that the authorities must heed the words of the CTTA that the latest decision, and other previous decisions, would result in the “progressive decimation of the tea industry”.
Among the concerns raised by the industry was the earlier increase in the tea cess in 2010 to Rs 10 per kg from Rs 4 in November 2010 and a month before that, a Sri Lanka Tea Board Promotion and Marketing Levy of Rs.3.50 per kg.
Together with the latest hike in the cess levy, tea prices would automatically rise and impact on company plantations and smallholders. “With wide swings in weather patterns, from excessive rains and floods to blistering droughts, production volumes have been adversely affected, leading to escalation in the cost of production,” the CTTA added.
Furthermore the industry has been adversely affected by the sanctions, for several months, on trade with Iran and the chaos in Syria, both key markets for Ceylon Tea.
Thus, the CTTA says, “… it’s, therefore, inexplicable that the Government should, in this manner, add to the woes of the tea industry at this critical point.”
This is a classic case of killing the goose that laid the golden egg; Greed is taking over rationality in the decision-making process of the Government. Faced with empty coffers, the Treasury looks at sectors that contribute the most to taxes and then dip into these sectors for more money. It’s a one-way street.
There is another serious worry; that funds collected through the cess which should be for the development of the industry is being used by the state for other purposes.
The CTTA, in its statement said, it has constantly expressed concern that the funds so collected are not being put to the best use, in the context of the needs and the benefit of the industry, and that it should be consulted prior to the adoption/implementation of enhancements “in such levies, not the least of which being the proper allocation and disbursement of the considerable funds that are collected each year”.This, it said, has been seriously violated by a decision taken by Parliament to consolidate at the Treasury all cess funds collected on exports of tea, which provides for their disbursement in accordance with priorities to be determined by this ‘State Fiscal Authority’, instead of being utilized exclusively for the benefit of the industry. “This could mean that the industry may not necessarily be the beneficiary, in any form, of funds that have been speciously extracted from its stakeholders, which, originally, were directly assigned to and regulated by the line ministry,” it said.
This was a similar lament by the tourism sector when the cess on tourism, which was collected by Sri Lankan Tourism (SLT), was ‘hijacked’ by the Treasury and being used for other purposes. As a result, tourism promotion came to the standstill and SLT officials were constrained by the lack of funds for promotion, particularly in MICE (Meetings, Incentives, Conferences and Events) programmes overseas. That crisis continues.
Once again the government has bungled the decision-making process which, among other things, lacks governance, accountability and transparency and most of all; common sense.
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