EU Tax Break On Sri Lankan Imports Benefits UK Investors

by Robert Lee, Tax-News.com, London

15 August 2005

A tax break given to Sri Lanka by the European Union in the wake of the 2004 Indian Ocean Tsunami disaster, designed to help the economy through the difficult recovery phase, also presents benefits to international firms seeking to do business in the country, particularly those from the United Kingdom, according to an article in the Daily Telegraph.

Under the import tax concessions granted by the European Union, which came into effect on July 1, tax was removed from nearly 200 items, representing nearly 90% of the imports into EU countries from Sri Lanka. This makes Sri Lankan textiles and garments 12.5% cheaper, and other goods 15% cheaper.

A significant proportion, around 13%, of Sri Lankan exports are destined for the UK, which in turn supplies much of the materials used by Sri Lankan manufacturers that are subsequently exported as finished goods.

Norman Collier, managing director of Stretchline UK, which supplies elastic to the Sri Lankan garment industry, observed in the Telegraph report that the EU import concessions indirectly benefit UK suppliers to the Sri Lankan textile industry.

"We're not directly affected because we make the product which is sewn into the garment, but having zero tax rating enables the manufacturer to be more competitive and we get on the tailwind of that benefit," he said.

Furthermore, the import duty concessions, combined with Britain's historic links with Sri Lanka as a member of the Commonwealth, can also benefit British firms seeking to invest directly into Sri Lanka, says Jay Perera, chairman of the UK Sri Lankan Business Council.

"Sri Lanka is an attractive business proposition for joint ventures, partnerships and start-ups because there is much that is familiar to UK business people. Historically there has been a good rapport with Britain, and English is widely spoken. Many senior members of the major organisations have been educated in England - and cricket is the country's most popular sport!" he told the Telegraph.

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