High food taxes drives cost of living - Advocata Institute

Advocata Institute, a Colombo-based independent policy think tank, is launching a project to monitor import tariffs on food, with weekly updated figures available on the institute’s website as a “Food Tax Tracker”.

In a media release issued on Wednesday, the organisation said that Sri Lanka has high food costs. Consumer prices are 25.22 per cent higher (and grocery prices 34.4 per cent higher) than in India according to data gathered for August 2017 by Numbeo, a crowd-sourced database.

One reason for high food prices is the high import taxes on food items. The government intervenes heavily in the trade regime for food items through para-tariffs such as a Cess and Special Commodity levy.

“The public is unaware of the extent to which food is taxed, so we have compiled a table showing the tax on basic food stuffs, items that would be on table of many families. Import taxes add Rs.130 to a bottle of cooking oil, Rs.880 to a kg of butter, Rs. 625 to a kilo of yogurt and around 141 per cent to a kilo of cheese. The list and the charts give details of the taxes,” it said.

Gathering accurate data on food taxes is a slow and painful process due to frequent changes in the tax structure. The initial exercise is limited to a few basic food items but Advocata hopes to expand this scope to eventually include all major food items.

According to available data only 4.3 per cent of government revenue is raised through the special commodity levy imposed on food items, which ironically is almost exactly equivalent to the losses incurred by the major state enterprises, Advocate said.

Given that Sri Lankans as a whole are food consumers rather than producers, Advocata has urged the government to remove para tariffs such as the Special Commodity Levy and CESS and return to a regime of low and uniform duties for all items including food.