BOI battling tax issues
View(s):Sri Lanka’s investment promotion agency, the Board of Investment (BOI) while battling against low foreign investment is now in a quagmire with countervailing duties imposed by countries like the US on exports from BOI firms. Officials said that because of the World Trade Organization (WTO) agreement that Sri Lanka is party to which limits them from taxing firms, the BOI is at a catch 22 situation. “As Sri Lanka has signed this WTO trade pact, when the BOI grants tax concessions to firms that want to set up here, at the point of import of their goods they’ll be taxed. So this doesn’t make economic sense for them. This applies only to new firms but we are not on a good footing right now,” a BOI official told the Business Times.
He said that the agency is already under pressure to attract more FDI and that last month it received only five applications for possible investment. He reiterated that concessions are needed to attract foreign firms to the country. He added that the issue started with the International Monetary Fund (IMF) requesting the BOI to stop concessions to firms that are trying to set up here. “That was a condition that they laid out in order for Sri Lanka to get the IMF facility last year. As we are now war-free it made sense but then firms didn’t'exactly’ flock into the BOI after that,” he said pointing out that the countervailing duties made life even more difficult. The agency is trying to make representations to the Treasury on this issue, he said.