Plantation companies, that just saw another increase in their wage bills, are asking the government for tax concessions, including VAT relief. "Considering the significant role played by the plantation industries in the country's economy and stability for over a century, it is important that benefits, including tax concessions, extended to other industries, be looked upon favourably in respect of the plantation industries as well," said the Chairman of the Planters' Association, Dhamitha Perera, speaking at the association's AGM last week.
"We implore from the government to restore at least the zero status on VAT and consider granting other concessions afforded to many other industries," said Mr Perera.
Until 2006 plantation companies were considered indirect exporters and 'zero rated,' enabling the RPCs (regional plantation companies) to claim input VAT. Planters are now asking that the zero rated status be reintroduced to the industry.
"This facility of zero rating has been extended to other indirect exporters in other industries who did not enjoy this benefit previously, whilst it was taken away from us. Unfortunately the status-quo has not been restored to the plantation companies and other tea producers," said Mr Perera.
Planters say input VAT claims can come to about 20 million to 25 million rupees, for each RPC. Releasing these funds to the RPC's, say the planters, will have spill over benefits on other smaller producers as well. The plantation companies say they are also yet to receive refunds on VAT. Meanwhile, the latest wage increase in the plantation sector will increase costs of each plantation company by Rs 250 million to Rs 450 million.
"This will be an additional cost for each RPC of between 250 million rupees to Rs 450 million, depending on the workforce. This, as you will agree is a drastic impact on each company's cash flow," said Mr Perera. This cost increase is expected to add to financial difficulties in some plantation companies as the sector was also impacted by the global financial crises towards the end of 2008. "I cannot stress more, the effect the current substantial wage increase will have on company cash flows, said Mr Perera. "Consequent to this increase, no doubt some companies will face financial difficulties," he said.
However, the planters noted that for the first time since private management of the plantation companies, a productivity linked component was incorporated into wages during this latest round of wage increases. |
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