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VAT on wholesale, retail trade may raise prices
The extension of VAT on all wholesale and retail sectors from July 2003 could result in an increase in prices of all goods, excluding essential items and pharmaceuticals, Finance Ministry officials said.

According to the budget proposals the wholesale and retail sectors with a threshold income level of Rs. 1.8 million a year (an income of Rs. 5,000 a day) would come under VAT.

Ministry officials said how such a plan is to be implemented has not been discussed yet, but it may involve a lot of administrative difficulties. "The Inland Revenue department may have to maintain more files, and there will be difficulties in calculating and collecting such taxes," said an official who did not wish to be named.

The official said that if the government was to be successful in increasing its revenue through VAT, it was essential to broad base its framework to the whole chain, from production to sales of goods. "This proposal is in line with what was announced in the previous budget, and will bring in an additional revenue of Rs. 800 million to the government."

The official said wholesale and retailers could claim the benefits of VAT by charging the additional percentage of either 10 percent or 20 percent on the consumer. "Only those that are registered can claim such benefits."

Each wholesale and retail outlet that would come under this category would be required to issue consumers with receipts, with the VAT registration number printed on it.

"Considering the amount of retailers in the country it would be interesting to see how many retailers would adopt such practices," the official said. When asked as to whether Finance Minister K.N. Choksy had made any provisions in the budget to address his concern over the fact that traders had not passed on the benefits of VAT, the official said there were no such provisions to give the consumer such relief.
(SG)

Goya flower power boosts Hemas image
The Goya brand of fragrance products won the challenging title of "Turnaround Brand of the Year" at the recent Sri Lanka Institute of Marketing Brand Excellence Awards.
Goya is a success story for Hemas Marketing, one of Sri Lanka's most aggressive FMCG (Fast Moving Consumer Goods) marketers, who have increasingly given the multinationals a run for their money.

Hemas acquired the brand from multinational Reckitt and Colman when Reckitts decided to divest what had become for them a marginal brand. Hemas then revamped the brand enlisting the skills of their agency Bates Strategic Alliance to repackage and reposition the brand.

In the years prior to the acquisition Goya had lost ground and lost its way in the marketplace with advertising that had veered away from its core values.
The packaging was designed to bring out the flower power and positioned to appeal to the young Sri Lankan woman, who while dreaming of first love remained relatively unsophisticated and innocent, a joint statement from Hemas and Bates said.

Hemas used its strong distribution strengths to make the brand available widely in the urban and rural markets. Encouraged by the success of Goya, Hemas used its new product development expertise and skin care know-how to launch an additional product, Goya Body Lotion, in the same fragrances.

Budget falls short of expectations
Last week's budget, except for a few isolated proposals, has not focused sufficiently enough to bring about a major change in the economic front to accelerate production, says Rohan Fernando, patron of the Sri Lanka Foundation for the Development of Small and Medium Industries.

Increasing production should have been a very important prerequisite for such acceleration in economic growth, which in turn would have resulted in creation of more employment opportunities, he added in a statement.

The continuation of the 20 percent surcharge on import duty for a further one-year would act as a deterrent to cheap imports flooding the local market which is a step in the right direction.

The reduction of corporate taxes to 30 percent from 35 percent is a welcome move, helping to make more funds available to local entrepreneurs for investment.
But, he said, there were several proposals, which would hinder the local industry on a long-term basis.

"Industrial raw material, earlier duty free, is now subject to an import duty of 2 percent to 10 percent. Although this would generate some income for the state, it would act as a serious deterrent to the local industry since the bulk of the raw materials are imported.

Instead of taxing the raw materials, the government should have increased duty on imported finished goods so that the ailing local industrial sector would have got some breathing space. Taxing raw material while retaining duty on finished goods could ruin an already ailing local industry," the statement added.

Fernando also discussed the 10 percent VAT on banks which would raise finance costs while the proposal to reconsider the Depreciation Allowances hitherto allowed as a deduction from assessable income for income tax purposes too was a move in the wrong direction.

This would retard expansion and development of business in all sectors of the economy at a time when such expansion and development is most needed, he said.
He said the government had failed to prune excessive holidays while electricity charges - high by any global standard - remained uncharged even at least for the local industrial sector.

"What was expected of the budget was a clearly defined programme of work to achieve a higher rate of growth in every sector of the economy. In our view the budget has fallen well short of such expectations except in a few isolated areas," he said in the statement.

SriLankan Airlines' duty free sales take off
SriLankan Airlines has made its highest ever revenue from in-flight duty free sales of Rs. 190.03 million for the financial year 2001/2002, up from Rs. 167.83 million in duty-free sales revenue in the previous financial year, an airline statement said.

"Our in-flight duty free sales items are changed frequently, thus presenting the greatest possible variety to SriLankan Airlines' passengers," SriLankan's Head of Service Delivery Walter Riggans said. "As space is an obvious constraint we constantly monitor sales to ensure loading patterns meet passenger demands on each individual route. Many of the duty free items on board are in fact common to Emirates which allows both airlines to benefit from bulk purchasing and incentives provided by suppliers."

The latest SriLankan Airlines' duty free sales brochure comes in an attractive design, with large, colourful visuals and a well-laid out presentation to motivate passengers to buy the items displayed. Added to this are several other novel incentive schemes, which reward passengers for their purchases on board.

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