Lankans have overseas accounts as they don’t trust authorities with the money- BT poll
View(s):Many Sri Lankans open bank accounts abroad to either evade taxes or because they believe their money is unsafe against Government scrutiny or possible seizure, a Business Times (BT) poll on overseas ‘secret’ bank accounts has revealed.While a majority said tax havens were being used by locals to evade paying local taxes, one respondent said it was ‘for their own protection from extortionists, to circumvent exchange control regulations, due to concerns about stability of local monetary system and fears of state expropriation”.
Another respondent noted that, “people have been stashing money for a long time primarily because of exchange controls and uncertainty about the safety of funds in this country. That means even honestly acquired money may be stashed in foreign accounts as a type of insurance and diversifying risk. So keeping some money in a foreign bank account may be an alternative to migrating”.
Results of the poll are on Page 1. Here are excerpts of the comments received:
On taking action against secret account holders:
* Action is necessary only if its black money, from drug deals or other illegal means.
***
On action by the Central Bank and/or the Tax Departments:
• Neither is trustworthy.
• Both these institution have a set of officials who are completely outsmarted by the so-called money mafia (examples Golden Key/Ceylinco, etc) or (some) are in the pockets of these sharks. Nobody will step in.
On why Sri Lankan have secret accounts:
* Dishonesty, in some cases including politicians
* Because people are reluctant to pay taxes to make the life of politicians more comfortable. One respondent said that people may be stashing ill-gotten money abroad, such as through commissions involving foreign companies and so on.
He said that exchange controls are peculiar laws where the state tells citizens what to do with their own money – even honestly acquired wealth – and tries to stop them from taking steps to protect against inflation/currency depreciation or outright expropriation.
“What a person acquires through honest means and does after that, having paid local taxes shouldn’t concern the state,” this respondent said.
He added that those who are investing in Sri Lanka through tax haven companies are actually bringing some stashed money back and it can be argued that there was an intentional policy by successive governments to encourage such money to be brought back by a no-questions asked policy.
| SL needs transparent, wealth management products for investors
Kajanga B. Kulatunga, a popular Business Times columnist and founder of the Delaware-based Centre for Investor Behaviour who currently resides in Australia, makes some interesting points on tax havens. He says tax havens are a complicated area. The reason people use them are mostly uncharitable: avoid taxes, violate exchange control rules or transfer proceeds of a crime. “That said, they exist because local systems have been too slow to catch-up with the times. Some of the legitimate reasons why people transfer money overseas are simply to expand their investment choices. For instance, a retail bank in Singapore or Dubai can offer very simple global investment products which are not available in Sri Lanka. The country currently has no transparent wealth management products for investors of any type. If the authorities move to liberalise foreign exchange control, thus allowing a choice in global asset allocation to the average investor, they remove the legitimate reason for tax heavens. To flush out the illegitimate reasons, we need what’s required in almost all areas – an incorruptible judiciary with specialised skills in white collar crime,” he added. |
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