By: Staff Writer
July 31, Colombo (LNW): Sri Lanka Government is losing massive amounts in tax revenues due to illegal imports of luxury consumer items, electronic appliances, mobile phones and leather products with the connivance of some corrupt custom officials.
As per Volza’s Sri Lanka Import data, Grey import shipments in Sri Lanka stood at 94.7K, imported by 3,353 Sri Lanka Importers from 2,875 Suppliers.
Sri Lanka imports most of its items illegally from India, Pakistan and China..The top 3 importers of Grey market products are India with 871,942 shipments followed by United States with 609,583 and Indonesia at the 3rd spot with 312,705 shipments.
Thulitha Mendis, Chairman of the Import Section at the Ceylon Chamber of Commerce, recently emphasized the severe economic repercussions of unauthorized imports on Sri Lanka. At the 89th Annual General Meeting,
Mendis explained that grey market products, or parallel imports, involve the unauthorized import and sale of branded goods, which significantly undercuts legitimate importers by avoiding taxes and tariffs.
Mendis highlighted that these unauthorized imports have led to substantial tax revenue losses and foreign exchange outflows.
In 2023, Sri Lanka reportedly lost Rs. 3.1 billion ($9.4 million) in tax revenue and Rs. 31.6 billion ($96 million) through illegal channels due to grey market activities.
The influx of parallel imports is also expected to reduce legitimate imports by Rs. 2.5 billion, driven by the rising costs of genuine products.
The clandestine nature of these operations makes it difficult to quantify the exact losses, but the impact is undeniably severe.
Grey market imports create an uneven playing field for legitimate businesses that adhere to legal importation processes and tax regulations. Authorized distributors and retailers struggle to compete with the lower prices offered by grey market operators who evade the costs associated with tariffs and taxes.
While grey market imports might offer lower prices, they carry significant risks. Products sourced through unofficial channels often lack proper warranties, support, and after-sales service, which can lead to higher costs for consumers if the products fail or need repairs.
Without the backing of the manufacturer, consumers have limited recourse for defective or substandard products.
To mitigate the economic impact of grey market imports, Mendis emphasized the need for a multi-faceted approach. Strengthening regulatory frameworks, raising consumer awareness, and supporting legitimate businesses are essential steps.
The government’s ongoing efforts to curb grey market activities will be crucial in securing a more robust and equitable economy for Sri Lankans. While grey market products might offer short-term financial benefits to consumers, the long-term consequences for the country’s economy are profound.
