It was recently announced by the Prime Minister’s Office that PM Mahinda Rajapaksa will be waiving off the entertainment tax on the Sri Lankan cinema industry for the years 2021 and 2022. It was stated that the decision was taken considering the requests made to him by industry professionals in the country.
A decision has been taken that during the years 2021-2022 the relevant ministries will grant permission to waive off the entertainment tax from cinemas islandwide. Additional relief in the form of a tax reduction will also be provided, where the entertainment tax on the cinema industry will be lowered to 7.5% from 2023 onwards.
This comes as a relief to all in ownership of cinema circuits in Sri Lanka, particularly considering that at present, the entertainment tax on cinema has varied for each local government area from 10% up to 25%. However, under the new decision, the entertainment tax will be made uniform throughout the country.
Speaking about the uniformity that will be imposed, Scope Cinemas (Pvt.) Ltd. Director/Chief Executive Officer (CEO) Thushan Meemanage shared a bit of history with us in regards to the entertainment tax, stating that the imposition of the tax originated due to the added liability cinema halls used to carry due to the technology they employed in the past. He explained that “in the past, films stock used to be made of the incredibly flammable silver nitrate otherwise known as celluloid, and during the early days of cinema, the relative risk of transporting these prints was borne by the distribution companies in the form of a tax paid to the government due to the additional manpower required to ensure fire safety”.
However, Meemanage shared that nowadays, all cinema halls employ digital projectors which no longer carry that risk. Yet, the tax continued to be charged. He further stated that easing the tax is a great first step, and that it is likely that the Government may reconsider its imposition at all, once the two years are up and 2023 rolls around.
While all of this may come as good news, especially with regards to the tax-free operations that those in film distribution will be operating under, it would appear that the primary solution that some are looking for has not been effectively addressed, which is the issue of audiences not visiting cinemas to begin with.
MPI Film Circuit Managing Director (MD) Sunil T. Fernando stated that they are entirely dissatisfied with these new developments, stating that they are meaningless platitudes, and that the announcement, which was only prompted after the industry had struggled for an extended period of time and put their foot down, is still somewhat irrelevant to their current predicament.
Fernando said that this tax reduction will make absolutely no difference to them if people won’t purchase tickets to watch films at the cinema. “As someone who owns cinema halls around the island, I can tell you that the situation is dire. There are over 75 cinema halls that have closed due to not being able to operate and not afford maintenance costs, and many of them were turned into supermarkets,” he said, adding that reducing tax and even removing it outright is neither here nor there, and that what the Government should do is actively promote the means for people to get out and visit cinema halls.
He said that while ensuring physical distancing and all necessary precautions are taken by their circuit, it is in the Government’s hands to take measures to create an environment where it is safe or encouraging for audiences to take a step out of their homes.
