Brewing Challenges: The Influence of Corporate Tax on Tea Factory Operations in the Southern Region, Sri Lanka.

Abstract

As the aroma of Ceylon tea wafts globally, a bitter aftertaste of escalating corporate tax threatens the operational vitality of private tea factories in Southern Sri Lanka. Recognizing the pivotal role of the tea industry in Sri Lanka's economy, this study investigates the specific ramifications of increasing corporate tax on the operations of these crucial manufacturing entities. Employing a quantitative research design rooted in positivism and a deductive approach, data were collected via an online questionnaire from a randomly selected sample of 123 private tea factory owners out of a population of 174 in the southern region. Statistical analyses, including descriptive measures, Pearson correlation, and chi-square tests, were conducted to identify and analyze the significant impacts. The findings reveal that heightened corporate tax burdens significantly impede the increase in Prices of Products and Services, Percentage Increase in Corporate Income Tax, Net Income Reduction and Decrease in Reinvestment, jeopardizing their factory operations. The research supports overcoming the issues that factory owners face in performing operations due to corporate tax increases and suggests policy interventions such as corporate tax rate adjustments, incentives for direct exports and foreign exchange earnings retention, and targeted tax relief for reinvestment in machinery modernization to foster a supportive environment for the continued prosperity of Sri Lanka's tea industry.