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.

By Norman Palihawadane

Speaker Mahinda Yapa Abeywardena said on Friday that he had no powers to initiate disciplinary actions against Ali Sabri Raheem, who was arrested at the Bandaranaike International Airport (BIA) in Katunayake along with a stock of undeclared gold and mobile phones on Tuesday (May 23).

Commenting on a letter handed over to him by 20 opposition MPs seeking action against Raheem, the Speaker said that the Opposition MPs stated that Raheem had misused his MP’s privileges.In the letter, the MPs noted that Raheem had misused Parliament privileges accorded to MPs and his diplomatic passport to smuggle the undeclared goods via the VIP lounge of the Bandaranaike International Airport (BIA).

“He has violated the Parliament-approved Code of Conduct for Members of Parliament in its entirety,” the letter said.

The group stressed that the violation of laws passed in Parliament by the MPs themselves will lead to a breakdown of trust among the public towards MPs of both the Government and the opposition.

“It may lead to a situation where the citizens will also refuse to adhere to the country’s laws,” they said.  The MPs, therefore, called on the Speaker to take strict action against the offending MP.

The request was signed by opposition leader Sajith Premadasa, several other MPs of the SJB, SLFP General Secretary Dayasiri Jayasekara, Supreme Lanka Coalition member MP Udaya Gammanpila, MP Vasudeva Nanayakkara and several others.

Puttalam District MP Ali Sabri Raheem was arrested at the BIA along with a stock of undeclared gold and mobile phones on May 23.

The Customs officials on duty at the airport had impounded a total of 3.5kg of undeclared gold and 91 mobile phones from the possession of the parliamentarian who was returning to the island from overseas.Later, the MP was fined Rs. 7.5 million and released on payment of same while the undeclared gold and mobile phones were confiscated.

Sanjiv Hulugalle has been appointed Group President – Hospitality & Real Estate in May 2023 overseeing all aspects of Kohler luxury hospitality businesses and championship golf courses, the company announced.

“He provides full-scope strategic and operational leadership strength, vast global experience, and a service mindset. He possesses an outstanding track record of hiring, training, engaging, and retaining high-performing teams focused on delivering exceptional one-of-a-kind luxury resort experiences, a news release on the appointment said”.

Prior to joining Kohler, Hulugalle served as Regional Vice President and General Manager at Mauna Lani Resort, Hawaii, part of the Auberge Resorts Collection. In that role, he managed Mauna Lani along with regional responsibility for five additional properties around the world, delivering significant growth, large-scale renovations, and increased revenue.

Before that, he was the Regional Vice President and General Manager at Jumeirah Al Naseem and Madinat located in Dubai, and spent 22 years with Four Seasons Hotels and Resorts in general management leadership roles.

His vast work experience in the luxury resort business has led him to work in 12 countries on four continents, including Syria, Dubai, Malaysia, and China.

He holds a bachelor’s degree from the Australian College of Physical Education in Sydney and began his upwardly mobile career as a physical training instructor in the hotel industry serving a short internship at Ahungalle Hotel during his university period.Sanjiv is the son of Mr. Arjuna and Mrs. Sally Hulugalle of Colombo.