Lanka sees food grain smuggling amid high ‘thosai-vadai’ border tax

ECONOMYNEXT –Sri Lanka has confiscated a stock of 17 tonnes of undu grain (ulundu or vigna mungo) hidden in a container of chickpeas imported from India, a statement from Customs said.

The stock was worth 31 million Sri Lanka rupees and the government stood to lose 5.1 million rupees in taxes.A levy of 5.1 million rupees for a 17 metric tonne consignment of undu indicates border taxes of about 300 rupees a kilogram.

Ulundu is the key ingredient of thosai and vadai, popular foods in the country.Chickpeas are however taxed at 5 rupees a kilo according to rates listed on the Customs website.

High border taxes lead to smuggling and corruption.Economists have increasingly started to point out that Sri Lanka is no longer an ‘open economy,’ amid high and suddenly changed border taxes.

Sri Lanka has high and regressive border taxes and licensing on foods due to economic nationalism, despite stunting and malnutrition of children.

Economic nationalism in the form of import substitution and rent seeking by big business is indirectly by an inflationist central bank which prints money to cut rates in the hope of boosting growth (now called targeting potential output) triggering forex shortages, critics say.

As a result, economic policies in the post-independent period have been centred around ‘saving foreign exchange’. Sri Lanka had over 3000 imported banned after the more extreme deployment of macro-economic policy to target potential output in its post-independent history with both rate and tax cuts.