Withdraw 5% tax levy on paints, say manufacturers

The Paint Manufacturers Association of Sri Lanka (PMASL) has called upon President Mahinda Rajapaksa to withdraw the 5% tax levied recently on paints as it affects the industry. Paint is a high value commodity and due to the levy the industry has recorded a negative growth this year."

We have been in the paint manufacturing business for twenty-five years and this is the only year that we have recorded a negative growth said President, PMASL Mizver Makeen, the MD of Macksons Paints Lanka (Pvt) Ltd.

He said that there are nine large manufacturers and 40 small-scale manufacturers engaged in the paint industry. They provide employment to over 100,000 people and this levy affects all of them as well. Therefore we call upon the President to remove this levy, as it will help a local industry, which has been in existence since independence. The fledgling industry has grown to be a self-sufficient industry today and we have moved to exports as well.

He said that the tax levy places an additional burden on local paint manufacturers who have been badly affected under the existing statutory taxes and heavy import duties already imposed on raw materials used in paint.

The import duty on raw material on emulsion binder increased from 6%-15% with alkyd resin this year, an increase from 10-15%. All these factors lead the paint industry to experience a negative growth with volumes falling between 15%-20%. This volume drop is expected to result in a 20% fall in the topline and a corresponding drop of 30% in the paint industry's bottom line.

Makeen said that the government coffers would also suffer, as a result and decreased volumes will provide substantially less revenue for the government.

The tax is also a disincentive for small players to expand and new players to enter the market. He said that this negative growth pattern will snowball into several other areas of the industry, in particular employment, a key component of the industry.

Large players alone employ around 15,000 unskilled, semiskilled, skilled and professionals while the allied industries are the livelihood of a further 250,000 persons in small businesses such as packaging.

Buyers such as the hotel industry who rely heavily on paints for continuous maintenance will also have to pay a higher price. This too will affect their bottom line.

Makeen said that they also face the threat of severe competition from inferior foreign low priced paints that have flooded the market where the industry has no protection.

From January to November 2006 14,114,802 kgs of foreign paints and putty valued at Rs. 1,410,592,200 were imported. Unscrupulous importers circumventing the local statutory levies dump these substandard products. Customs duties on precoats and undercoats are as low as 7.5%.

SG