A range of taxes announced in Thursday’s budget proposals will lead to price increases on a variety of essential items, an investigation by The Sunday Times has revealed.
The tax increase, which will see a further escalation in the cost of living, will lead to price hikes on milk powder, dhal, onions, potatoes, sugar, wheat flour, clothing, fans, television sets and school stationery.
Three different measures will lead to the price hikes. They are a cess of five to 50 per cent, the newly-imposed nation building tax and the increased port and airports levy.
Pettah Traders’ Association president P. Sundaram said price increases of consumer items would come in the next two weeks after the prevailing stocks were sold.
Mr. Sundaram said though the government was hoping to promote local products by imposing a tax on imported agriculture-based products serious consideration should be given to minimize the drastic increase in the prices of imported products.
“Imported fresh fruits like oranges and apples will soon be luxury products with the proposals to increase the cess,” he warned.
Milk food importers said they were making their calculations about the impact of the taxes before deciding on any price increase.
Fonterra Corporate Director Roshan Kulasuriya said his company would have to reconsider its position and calculate how the new taxation policies would affect the prices. “Other factors such as exchange rate and the Nation Building levy have also come into the frame and we are doing some calculations before deciding on how to act,” he said.
Lanka Milk Foods Marketing Director Lal Sarnapala said it was too early to make assumptions as to how these taxes would affect the industry or the domestic supply. “We foresee a big jump in prices but we will know what the situation is by next week,” he said.
The prices of chicken and poultry products would also increase in view of the proposed 25 percent cess, Poultry Association President D. D. Wanasinghe said.
According to him, this will be a major blow to the already-suffering poultry industry following India’s decision to curtail maize exports.
“The poultry industry is facing a huge crisis at the moment with the price control on chicken. We requested the authorities that the cess on maize be removed or applicable only during the harvest or else we would be compelled to increase the prices of chicken. This will be a burden on the consumer, but we have no choice,” he said. Vehicle spare parts and vehicle prices will also go up.
“Sales have already plummeted with the cost of vehicles increasing. This will have drastic consequences for the businesses with cash flows being greatly affected and this would lead to a definite price increase of vehicles,” Ceylon Motor Traders Association chairman S. Amarasinghe.
He said that last week, the Central Bank had increased the deposit (margin) for importing vehicles to 200 percent from 100 percent. With all the existing taxes added, for a mid-size car, the taxes would stand at 290 percent.The proposed 50 percent increase in cess on consumer electrical items would affect consumers directly as almost all branded and good quality items were imported, traders said.
An official of Brown and Company said none of the company’s products were locally manufactured.
“Consumers are conscious of the brands and a good finish. But with the cess and two import levies definitely we have no option but pass it on to the consumers,” he said.
Sarees, sarongs, ready made garments, material imported for local use, footwear, handbags, belts and other leather goods also would see a price hike.
With a cess of Rs. 200 a kg being imported on hand bags and other leather goods, P. G. Martins Managing Director Lalith Nimalasiri said the prices of luggage, hand bags and school bags would increase.
Hameedias Managing Director Fouzul Hameed said the imposition of a cess on ready made garments and material imported for local use was unreasonable. This definitely discouraged up and coming small textile industries, he said.
Mr. Hameed warned if the prices of clothing items went up, more items would be smuggled into the market by various means.
Prices of exercise books and stationery items that include paper would also go up with the 5 percent tax imposed on paper.
“We have already priced for the next school season, but we might consider increasing the prices if other companies increase,” said an official of a leading stationery company.