Parachute tourists carry on booming businesses in the South and East of Sri Lanka
An investigative report carried out recently by the ‘Sunday Times’ journalist Namini Wijedasa reveals that several foreigners on tourist visas have set up unauthorized businesses , such as restaurants, guesthouses, surf schools and yoga camps in the Southern and Eastern coastal regions of the island – specifically in Arugam Bay, Unawatuna, Weligama, Mirissa and in the villages located in-between.
Many of these seasonal entrepreneurs operate in a cyclic pattern - arriving at a time when the tourist ‘arrivals’ peak and return to their homeland when visitor numbers ebb. This ‘parachute’ band of businesspersons, masquerading as tourists, blatantly abuse the country’s laws, do not pay taxes, illegally route their earnings below the radar or collect payments overseas and seem to enjoy a status quo that places the many locals who operate legitimately… in an unfair playing field.
In Arugam Bay, a leading cause for concern was Israeli tourists who run surf schools and restaurants. In the South, in addition to Israelis, there was also a reference to “draft-dodging Russians” who live in Sri Lanka to avoid being recruited in the war against Ukraine. Their main income was to lease properties and to sublet them, creating an informal guesthouse network that they market to tourists who typically make payments abroad.
Although yet to quantify how many foreigners on tourist visas were running businesses, the Chairman of Sri Lanka Tourism Development Authority (SLTDA) said that they are aware of the proliferation of unlicensed businesses and the multiple problems created. Furthermore, he has pledged that the regulator will address the issue with the relevant agencies.
Speaking to Namini Wijedasa, Prithivi Virasinghe, owner of “Spice Trail” in Arugam Bay and Ahangama said “. “A lot of people came here during COVID and didn’t leave. They saw the benefits here and decided to stick around and figure out something to do.”
Virasinghe who says he pays personal and corporate tax, excise and trade license fees, the environmental protection area license fee, fire safety license fee, Road Development Authority dues for signage and the SLTDA development levy. He also makes EPF and ETF Fund contributions to his staff and has erected water recycling facilities to comply with required hotel standards. “None of these applies to the illegal businesses. There is a legal framework that is not followed. And local businesses, which have survived all the hardships, now suddenly have to face this huge unfair competition from entities that are not contributing to the overall growth of the area.” he complained.
“It’s very difficult for people to legally come, set up and compete against these things,” Virasinghe lamented, adding that it took him two years to acquire a liquor license. “If these foreign tourists can subvert the rules and run without licenses…why not? It’s a lot easier and cheaper.”
Explaining matters further, a restaurant operator had this to say, “A legitimate business would charge 26-27% on top of its base menu price.” This is made up of 10% Service charge (goes to the staff), 15% Value Added Tax (VAT), 2% Nation-Building Tax (NTB) and 1.1% Tourism Development Tax (TDL), whereas the foreign tourists who operate illegitimately collect only 10% service charge. He goes on to pose the question “Why should we pay the government taxes when we can do the same as what they do?”
One Southern resident said. “When I travel abroad on holiday, it’s not even on my horizon to think about working there,” she said. “But we see these guys come here and it’s completely their world–like it’s here for them to take as much as they want”.
It also appears that there are smaller fish in the bigger scheme of things, too, like models, photographers, DJs, all working on tourist visas”.
Others pointed out that many of these tourist-run businesses also import their labour including waiters, cooks and busboys. The only domestic hires are a few area inhabitants that they might require in order to navigate the local politics. “Even legitimate Israeli businesses bring down Israeli workers on tourist visas to construct their buildings,” one Weligama-based industry consultant said.
When local offices–top to bottom–and red tape make it agonizingly difficult to set up and register businesses (as well as obtain a liquor license and fulfill other requirements), entrepreneurs are either discouraged from setting up anything or go underground. And that’s where there appears to be a system of “informal payments” to local and central Government authorities which allows the status quo to continue uninterrupted.
To read the full article: - https://www.sundaytimes.lk/230618/news/parachute-tourists-carry-on-booming-businesses-in-the-south-and-east-523282.html
Source: Sunday Times
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