Thursday, 8 August 2013 00:27
Replacing the dipping non-tax income with new levies, especially those imposed on consumer items, will not help the Government to manage the economy but only aggravate internal problems, Opposition lawmakers warned yesterday.
Referring to the recent tax increase on gold when he joined the debate on the Resolution under Section 10 of the Customs Ordinance relating to import duties, UNP National List MP Eran Wickremaratne told Parliament yesterday that gold did not have a tax until the recent addition and surcharge, which took the total tax to 10%.
He said that although the Minister cited the increase as a measure taken to surge income and control exports, the markets are down and getting reduced day after day.
Wickremaratne said that the Government had misled the public by enforcing a 5% levy and a 5% surcharge on top of it. “The gold price was hovering around Rs. 57,000 before it came down to the Rs. 40,000 level. The benefit of the reduced price should have been passed to the ordinary people who dream of getting hold of a piece of gold jewellery,” he said.
The UNP MP said that although the Central Bank Governor regularly takes on the independent rating agencies, it was S&P which was recently brave enough to provide an honest opinion.
“Our GDP has come down along with the ratings. We should appointment qualified people to hold such positions. Milk powder is another big issue. On 15 May the imported milk powder was tested by ITI to find DCD. But the Ministry of Health found fault with these tests and tried to prove our local scientists wrong. Ultimately on 4 August Russia and China banned imports of Fonterra milk. Our scientists found the issue well before the foreigners did. But an official in the Ministry justifies this identifying of levels of DCD and other bacteria as tolerable,” Wickremaratne revealed.
He said that the senior officials of these companies and the Government were collaborating to cover up the scam. “Fonterra yesterday accepted that such milk powder was exported to several other countries other than Russia and China,” he added.
Minister of Telecommunication and Information Technology Ranjith Siyambalapitiya moving the resolution stated that newly-imposed laws would prevent gold being illegally exported to India and related financial scams.
“Gold is also used as exchange medium today rather using money or the banking system. So gold has some impact on the debt. By May 2013 commercial banks have Rs. 590 billion worth gold pawned. The finance companies have around Rs. 32 billion and the other finance houses Rs. 11 billion. This Government has taken the correct decisions at the right time which enabled us to meet the development targets,” said Minister Siyambalapitiya.
In response, Opposition legislator Ravi Karunanayake joining the debate said: “The Government is overspending public money, especially on useless projects. Magampura Harbour received 25 ships during a period of 24 months and Mattala Airport handles less than three airlines apart from visits by the few wild elephants in the area. Is this development? We warned the Government when Mihin Lanka was inaugurated and we were called traitors. Yesterday, Minister D.E.W. Gunasekara himself said that Mihin Lanka shouldn’t have been started. I appreciate his stance. With the Indian Rupee coming down we will see a difficult period for exports. If you wanted to secure the local producers, why did you increase cigarette tax? Is it to protect the cannabis growers? Still you give tax exemptions to casinos. Shangri-La construction has stopped abruptly and Regency has terminated the agreement.”
According to Dr. Harsha de Silva, gold is a highly liquidatable collateral preferred by all financial establishments but the Central Bank should not proceed buying precious metals trying to take advantage of the current prices, which are expected to come down further.
“If CBSL continues, it will be another crisis similar to Greek bonds or the hedging agreement. Goldman Sachs expects the prices to settle around US$ 1,300 per ounce. Our banking and finance system has Rs. 700 billion worth of gold taken as collateral. With the prices going down, the customers can afford to forget these pawned items where the losses are borne by the respective companies and continue to buy fresh jewellery for much lesser prices from the open market.”
According to Minister of Disaster Management Mahinda Amaraweera, declining gold prices actually enabled people to afford some jewellery. “Low gold prices may not put people in trouble but when the prices are reduced, all levels in the society can afford it. When taxes are imposed, it affects all Sri Lankans in general,” he said.
UPFA MP Thilanga Sumathipala joining the debate encouraged people to take advantage of the gold price fluctuations, especially the Tamil community. “When the gold prices go down, India takes advantage of it. Secondly, this gold money doesn’t end in Sri Lanka but is channelled out of the island illegally. So the taxes help to control imports and exports as well as sustain the gold industry while securing national gold reserves.”
DNA MP Sunil Handunnetti said the custom tax on gold was identified as a necessary and practical way but the Government was actually overburdening the public and this was their main source of income.
“Both our exports as well as imports have gone down. This shrinks the economy and the market. But taxes keep on increasing. The special takes have gone up by 38.8% and have been imposed on seven occasions during the past six months,” he said.