Gem industry urges removal of taxes
The Ministry of Finance is ‘killing the goose that laid the golden egg’ by taxing the gem and jewellery industry, an action which would destroy the export of gems and jewellery from Sri Lanka amidst fears that the underground market will prevail to avoid taxes. These comments were made by A.H.M. Imtizam, Chairman, Sri Lanka Gem and Jewellery Association (SLGJA) on the sidelines of the launch of the ‘FACETS – International Gem and Jewellery Exhibition 2018’ held last week at Ozo Hotel in Colombo.
He told the Business Times that since 1979 there was no tax imposed on the gem industry but through this year’s budget income tax was imposed on the industry. He said that strong representations have been made to all officials and also President Maithripala Sirisena, subject minister for this industry, to return to the earlier, no-tax status.
Mr. Imtizam said that though the President is of the view that the gem and jewellery industry should not be taxed, Finance Ministry officials are adamant that the industry should also fall in line with other industries and should likewise be taxed and are not willing to remove the tax imposition.
He said that the industry is surviving because they are importing rough gem stones from some African countries and they add value by cutting and polishing and 60 per cent of gem exports from Sri Lanka consists of these imported and value added rough stones. The effective tax slab for exports by corporate limited liability companies is 14 per cent while those which are exported by individual companies is at 28 per cent. But they are now allowed at 14 per cent.
“Why this industry should not be taxed is because, if taxed, it can very easily go underground as the size of the product is very small. They could be transported without any declaration. We want the formal sector to prevail. By introducing a tax it will lead to a huge reduction in the formal exports,” he added.
He said that if the imports are reduced Sri Lankans would be deprived of adding value for re-export. Further this tax imposition would have a tremendous chain impact and the trade would lose business and there would then be a big loss of employment. He said: “Dr. N.M. Perera who was a socialist and once the Finance Minister was the one who liberated this industry to a greater extent by withdrawing taxes because he understood the industry on how it should be facilitated and regulated.”
The exhibition is to be held from August 30 to September 2 at the BMICH, Colombo. While President Sirisena is to be the Chief Guest, the striking feature in this year’s exhibition is Vladyslav Yavorskyy, a renowned gemologist and the author of three books on gemology, will be presenting one of the books written on “Sri Lanka Gems” at the FACETS exhibition.
Asked by the media as to how important the signing of the China Sri Lanka Free Trade Agreement to the gem and jewellery industry in Sri Lanka would be, Indira Malwatta, Chairperson, Export Development Board preferred not to answer the question, but said that the signing of FTA can be very important for this sector as China has been the middle market for a few years now.
She said: “If we can get into that market without duty that means less procedures; if the import duties are removed. That is the short answer I could give.” With regard to the export figures of gem and jewellery, she said that a large portion of direct exports as foreign exchange is done locally as they are not going through the Customs. Ms. Malwatta said “In fact some of the concessions are given not only for direct exporters but also to those who are earning foreign exchange.”
She said that cutting and polishing and value addition to those rough stones that are imported could be done in Sri Lanka as there is gem cutting skills here and large quantities coming to the country is an asset to the country. But she also cautioned the gem export industry here that before long those countries which are mining the rough stones, may also want to have the value additions in their countries.