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Personal income tax shock dims economic activities
ECONOMYNEXT –Sri Lanka’s personal income tax hikes have hit economic activity in the first quarter though despite currency stability helped businesses cut prices, Hemas Holdings, a top consumer goods group has said.As the currency stabilized, as central bank ended contradictory money and exchange policy conflicts, businesses had cut prices. Mainstream economists generally claim that price falls lead to delayed transactions and try to generate positive inflation through money printing, though businesses believe otherwise.
“The market witnessed price reductions and promotional trade schemes to stimulate consumption,” Hemas Holding told shareholders in the March quarterly statement.
“However, changes made to the personal income tax structure severely impacted modern trade sales volumes as consumers rationalised their purchases under reduced disposable income levels.”
Sri Lanka hiked personal income tax rates in 2023. Value added taxes were raised to 15 percent from 8 percent last year. Another 2.5 percent cascading tax was imposed on top of VAT, the effect of which was estimated to be around 4.5 or more through the cascading effect.
While value added tax allows the government to get tax revenues after citizens make transactions and getting the economy to work, based on best decisions needed to drive the economy to satisfy real needs, income tax kills economic decisions and transfers money to state actors, analysts say.
Net gains on income tax therefore comes at a cost of lost value added tax as well as killed real economic activities which would otherwise have been based on decisions of those who earned the money.
UK also almost doubled VAT in 1979, also to 15 percent, cut the base income tax rate and widened thresholds above inflation to give choice to individuals, amid criticism from Keynesian style or mainstream economists to recover the economy, after two back-to-back IMF programs failed to deliver concrete results, analysts point out.At Hemas Holdings, group revenues went up 52.6 percent to 32 billion rupees in the March 2023 quarter from year earlier amid price inflation as the rupee fell, and cost of sales went up 45.1 percent to 22.2 billion rupees, allowing the group to boost gross profits 72 percent to 9.8 billion rupees, interim accounts showed.
However, administration costs went up 54 percent, selling and distribution costs went up 36 percent, and finance costs went up to 1.3 billion rupees. Profit after tax was flat at 1.06 billion rupees.Sri Lanka’s central bank stabilized the rupee in the second half of 2022 after the rupee collapsed from 200 to 360 to from two years of money printing and also removed a surrender rule in March allowing the exchange rate appreciate.
The US Fed also tightened policy from March 2022 helping bring down global commodity prices after triggering inflation not seen for 40 years through Coronavirus linked money printing or accommodating a real shock through monetary expansion.
“While the modern trade channels witnessed a slow down due to the adverse impact of the tax reforms and high cost of credit on the middle-class urban population, the general trade channels experienced significant growth and increased foot fall,” Hemas told shareholders.
“The decline in global commodity prices in the second half of the year, enabled the business to make price reductions across the portfolio.
“However, the benefit of appreciation of the Sri Lankan Rupee in March 2023 was not seen during the quarter due to the lag effect but is expected to realise in the quarters to come, provided the current economic conditions prevail.”
Hemas is also has operations in Bangladesh where the central bank is also buying up government securities with tenors as long at 20 years to mis-target the interest rate, triggering forex shortages and depreciating the Taka, according to analysts who study the country.
Inflation had hit 9.3 percent in Bangladesh by March.
“In the face of numerous challenges including slowdown in the global economy, depreciation in Taka, heightened inflation and depleting foreign currency reserves, the country entered an IMF programme in January 2023,” the firm said.
“The value-added hair oil market witnessed a degrowth, as consumers curbed consumption in many non-essential items and switched to value-for-money alternatives.”
Mainstream economists mis-target rates to boost growth known as either monetary stimulus or bridging an output gap, though the effort result in instability and economic contractions.
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X-Press Pearl disaster fuels global call to classify plastic pellets as hazardous
Nearly five years after the catastrophic sinking of the X-Press Pearl, off Sri Lanka’s western coast, the environmental scars remain visible — from contaminated beaches to disrupted fisheries. Now, that tragedy has become a rallying point for an international coalition of scientists, demanding urgent reforms to global maritime law.
A group of leading researchers and environmental experts is calling on the International Maritime Organisation (IMO) to formally recognise plastic pellets — commonly known as nurdles — as hazardous to the marine environment. They argue that existing international shipping regulations fail to adequately address the environmental devastation caused by pellet spills.
Their appeal comes through a newly accepted scientific commentary, published in Cambridge Prisms: Plastics, consolidating decades of research on the impacts of plastic pellet pollution.
Plastic pellets are small, lentil-sized (2–5 mm) particles made from virgin or recycled plastic and used to manufacture a vast range of plastic
products. Scientists say that spills occur frequently during handling and transport, both on land and at sea. Once released into the ocean, pellets persist for decades, spreading across vast distances and entering marine food chains.
Dr. Jennifer Lavers, who studies pollutants in seabirds, warned that the scale of plastic ingestion has reached crisis levels.
“Today the volumes of plastic pellets entering the marine environment are enough to ‘feed’ millions of young seabirds,” she said. “In some areas we are seeing nearly a 100% rate of plastic ingestion, with pellets being particularly problematic.”
Beyond physical harm such as digestive blockages in wildlife, pellets also pose chemical threats. According to Dr. Sinja Rist of DTU Aqua, they are far from inert materials.
“Pellets are persistent, widely dispersed, readily ingested by wildlife, and capable of transporting hazardous chemicals,” she explained, noting that they can absorb and release toxic substances across oceans.
Sri Lanka’s experience with the X-Press Pearl disaster, in 2021, highlighted these dangers on an unprecedented scale. The burning container ship released vast quantities of chemicals and billions of plastic pellets into the sea, causing widespread marine contamination and severe economic losses to coastal communities.
Hemantha Withanage, Chairperson of the Centre for Environmental Justice in Sri Lanka, said the disaster exposed major gaps in international maritime regulation.
“After studying the aftermath of the X-Press Pearl disaster, it is impossible to argue that plastic pellets are harmless cargo,” Withanage stressed. “The impacts in Sri Lanka were immediate, widespread, and long-lasting. Stronger international regulation is essential to prevent this from happening again.”
Under the International Convention for the Prevention of Pollution from Ships (MARPOL), the intentional discharge of plastics is banned. However, scientists argue that current rules are inadequate when it comes to preventing or responding to accidental spills, especially those involving container ships.
The researchers are urging the IMO to assign plastic pellets a specific United Nations classification number. Such recognition would formally acknowledge their environmental hazard potential and trigger stricter requirements for packaging, labelling, and emergency notification during shipping.
Dr. Therese Karlsson, lead author of the commentary and Science Advisor for the IPEN, said the scientific case is clear.
“There are decades of studies highlighting threats from plastic pellets released into the oceans, including risks to marine animals and the food chain,” she said. “Plastics contain thousands of chemicals, many known to cause harm to the environment and human health. It is past time for global regulations to protect our oceans.”
The European Union has recently introduced measures aimed at preventing pellet losses throughout the supply chain, and in 2021 the IMO committed to addressing pellet pollution as part of broader efforts to reduce marine plastic litter. Yet experts warn that without binding global action, pellet spills will continue.
For Sri Lanka, still recovering from one of the worst maritime environmental disasters in its history, the international call carries particular urgency.
Scientists say the message from the island nation’s experience is unmistakable: plastic pellets must no longer be treated as ordinary cargo, but as hazardous materials demanding strict global oversight.
By Ifham Nizam
News
Foreign Minister Herath decries deadlock in global disarmament
Minister of Foreign Affairs, Vijitha Herath, has underscored the urgent global need for enduring peace, security, and strengthened multilateral cooperation, warning that rising geopolitical tensions have created deadlocks in global disarmament efforts and posed serious challenges to international humanitarian law.
The Minister said so while addressing the High-Level Segment of the Conference on Disarmament (CD) in Geneva on Monday (23 Feb), reaffirming Sri Lanka’s firm commitment to global disarmament and multilateral cooperation.
Minister Herath said that safeguarding the future of humanity must be treated as a paramount priority, stressing that trust and mutual respect are essential foundations for effective decision-making in multilateral forums. He reaffirmed that Sri Lanka remains committed to ensuring a secure and stable world for future generations.
Highlighting Sri Lanka’s longstanding role in nuclear disarmament, he recalled the country’s contribution to the 1964 Non-Aligned Movement Summit in Cairo, which called for the establishment of nuclear-free zones. He reiterated that Sri Lanka continues to strongly support such initiatives, particularly in the Middle East, and emphasiSed that total elimination and non-proliferation remain the only guarantees against the use of nuclear weapons.
Sri Lanka also urged that non-nuclear-weapon states must receive unconditional, non-discriminatory, legally binding security assurances, achievable through the work of the Conference on Disarmament.
On humanitarian demining, Minister Herath noted that Sri Lanka remains an active partner in that effort and currently serves as a senior member of the victim assistance committee of the Anti-Personnel Mine Ban Convention. He further reaffirmed Sri Lanka’s continued commitment to the Cluster Munitions Convention, which the country presided over in 2019.
Recognising the rapidly evolving threat landscape, the Minister warned of the impact of emerging technologies that have already reshaped the global disarmament architecture while putting international humanitarian law at significant risk. In this context, he said Sri Lanka has been advocating for the early start of negotiations on a legally binding instrument to prohibit lethal autonomous weapon systems.
He also addressed growing threats to outer space security, stressing that Sri Lanka, long a supporter of disarmament in outer space, continues to back negotiations on a legally binding instrument to prevent an arms race beyond Earth.
Minister Herath concluded by affirming Sri Lanka’s readiness to work with all nations to ensure global efforts toward a safer world are accelerated and achieved at the earliest opportunity.
News
CoPF orders officials to establish legal framework for Rs. 200 for estate workers daily attendance allowance
The Parliamentary Committee on Public Finance has directed officials to establish a proper legal framework for the Rs. 200 daily attendance allowance provided by the Government to estate workers.
During the Committee meeting on February 17, 2026, chaired by MP Dr. Harsha de Silva, members emphasised that while there is no objection to increasing estate worker wages, the current payment mechanism lacks a formal legal basis. The allowance is being distributed under a Memorandum of Understanding (MoU) with private plantation companies without gazette notification, leaving the arrangement vulnerable to termination and excluding contributions to the Employees’ Provident Fund (EPF) and Employees’ Trust Fund (ETF), according to parliament sources.
Officials noted that the MoU with plantation companies was valid for three years, and thereafter a policy decision would be required to continue the payments. The Committee stressed that public funds should not be used to pay salaries in private institutions without proper financial discipline, despite the allowance being approved under the 2026 Budget as a “development subsidy.” The Deputy Secretary to the Treasury suggested the payment would be more appropriately classified as a “production incentive,” though existing payments and MoUs did not specify such requirements.
The Committee also reviewed disaster relief efforts for those affected by Cyclone Ditwah. Officials reported that approximately Rs. 24.4 billion had been disbursed under various relief programs, including allowances for house cleaning, household purchases, and school assistance. Delays in housing reconstruction and rental support were attributed to damage assessments and land identification, with Committee members urging faster delivery of housing aid.
Officials from the National Insurance Trust Fund (NITF) highlighted reinsurance claims of around Rs. 11 billion following Cyclone Ditwah, noting that although NITF had not reinsured its exposure internationally since 2023, it was capable of settling existing claims.
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