The International Chamber of Commerce Sri Lanka (ICCSL) warned that the proposal from the Budget 2022 to levy a 2.5% Social Security Contribution on turnover would have an adverse impact on low-margin businesses, particularly small and medium-scale enterprises (SMEs).
“As such, we recommend considering sourcing this contribution through established measures. SMEs for example will not be able to absorb a 2.5% levy in their gross profit margin. Contribution on turnover will also keep away potential FDI from big trading agencies potentially setting-up in the Port City” ICCSL Chairman Dinesh Weerakkody stated.
SMEs account for more than 75% of the total number of enterprises, provides 45% of the employment and contributes to 52% of the Gross Domestic Production (GDP).
He added that the ICCSL looks forward to an ongoing dialogue with the Government as well as for the opportunity to play a catalytic role given that ICCSL has business connections in over 130 countries.
Issuing a statement, the ICCSL explained that considering those who are subject to price controls and financial intermediaries, they need to be considered sourcing the aforesaid contribution through established measures.
The CCCSL elaborated that It is certainly in the best interests of Sri Lanka to follow the Technical Barriers to Trade (TBT) Agreement with the World Trade Organisation (WTO), ratified by Sri Lanka. A one-off surcharge tax of 25% on persons and companies with taxable income exceeding Rs. 2 billion could place a heavy burden on firms that are looking to expand, and the Value-Added Tax (VAT) charged on the supply of the financial services sector, which has provided moratoriums for the post-pandemic recovery of most sectors, and more importantly, given that the moratoriums have been further extended, this could potentially lead to a weakening of the financial system in the country.
While pointing out the Budget 2022 presented by Minister of Finance Basil Rajapaksa has several positive proposals that are critical for Sri Lanka’s future, as in terms of proposals to minimising the disparities in income levels between provinces, export development initiatives and strategies to increase in FDIs and relatively consistent tax policies are critical for pandemic recovery, the ICC statement highlighted that the absence of emphasis on management of external debt and the related implications for dollar liquidity in the banking system is a notable challenge to the business community in Sri Lanka.
The move to consolidate charges, which are currently being exacted by the Board of Investment (BOI), Export Development Board (EDB), as well as the Special Goods and Services Tax (Special GST), will be of great value for business development. The incentives extended for start-ups by doing away with the business registration fee and the creation of agro parks, three additional techno parks, and mini supermarket networks at local level are welcomed. The targeted Rs. 1.6 trillion fiscal deficit for 2022 is an improvement from the Rs. 1.8 trillion deficit for 2021.
ICCSL warns Social Security levy could hit SMEs hard
24 Nov 2021
ICCSL warns Social Security levy could hit SMEs hard
24 Nov 2021
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