“We want a level playing field and not subsidies or protectionism’

by Sanath Nanayakkare

Importers of canned fish have completely crowded out local manufacturers because of a government tax policy skewed towards importers, says Sri Lanka Canned Fish Manufacturers Association (CFMA) President Shiran Fernando.

“It is pathetic that the authorities have not cared about it yet although we have officially informed them of the tax anomaly which has translated into an unfair ‘pricing advantage’ for canned fish importers and a curse for local manufacturers,” he says.

“The government charges less tax from canned fish importers allowing them to mark their prices down by about Rs. 125- 150 for a can of fish. And we, the local canned fish manufacturers who pay income tax, VAT, electricity bills, water bills, EPF/ETF etc., cannot compete with importers who pay only a border tax and get away with it. These canned fish importers need only a desk and chair and some money in the bank or a credit facility from foreign canned fish manufacturers. Their business is such a convenient one whereas ours is a constantly dedicated factory process. And the government’s tax policy complements the importers perfectly to bulldoze the local manufacturers of canned fish who have built this industry from zero. We can’t figure out why these highly qualified government authorities don’t get this basic and simple thing,” he says.

When asked to elaborate on their Association’s current concern, Fernando says,” Look, importers pay only Rs. 200 per kilo of fish they import as a special commodity levy – not for a can; for a kilo of fish. They don’t pay any VAT. We are told that when there is a border tax in the form of special commodity levy, VAT can’t be levied. We don’t know whether that is true or not. However, for us, there is income tax, VAT at the rate of 18%, workers’ wages, fuel costs, EPF/ETF etc. Altogether these push our production costs high. And when we finally send our products to the market, we find that the importers have conveniently converted their tax advantage into a strategic pricing point, and consumers who have been hard hit by the cost of living choose to buy the cheaper product. Importers get two good things at the same time; less tax and pricing advantage whereas we are caught in a double bind between higher production cost and less competitiveness in the market,” he says.

“It has been more than two months now since we pointed out this matter to the authorities in the responsible line ministries. If the government doesn’t want to address this issue objectively and quickly enough, the repercussions of permanent closure of our factories could be dire not only for the 16 manufacturers of our Association who have invested in this industry, but also for the 4,000 direct employees who have toiled for more than 10 years to develop the industry up to this level. This could be the end of a success story of import substitution,” he says.

“Mind you, there will be a lot of Linna fish coming to the market as the season is nearing. But the fisher folk will not see us coming to buy their catch because we can’t compete with imported products that enjoy a pricing advantage over us. This could cause an economic and a huge social issue”, Fernando warns.

When asked what they expect the authorities to do to resolve the issue, Kapila Balasuriya, Secretary CFMA says,” We are not asking for tax subsidies. We know that the government needs revenue and we are willing to pay it. But the government must act upon creating a level playing field for both local manufacturers and importers. That’s key. We must make it clear that we are not asking for protectionist measures.

But the tax anomaly has become a blessing for importers and a curse for local industry. This must be rectified. We have suggested the authorities to increase the Rs.200 per kilo SCL applicable to importers to Rs. 500. Then that will equalize our competiveness in the market and the consumers will be able to buy canned fish for freshness, quality and price instead of considering the price only. We appeal the authorities to create this level playing field for competitiveness. That’s not asking too much as local manufacturers because creating a level playing field for all players in the market is in line with international trade rules.”

CFMA represents all the registered canned fish manufacturers of the country numbering 16 leading companies in the industry. According to CFMA, their production had saved foreign currency worth of 79 million euros per year for the government by way of import substitution in given years.