Investors want CB to untangle regulations
Free trade zone exporters have raised crucial issues with the Central Bank (CB) as they fear if their problems are not addressed they would have to pull out. But it is learnt that the regulator seems to remain optimistic of investor confidence.
While some foreign investors were busy in India finding places to relocate to from Sri Lanka, exporters in Colombo had a crucial meeting with the CB Governor Ajith Nivard Cabraal on Tuesday where other bank officials were also present raising their concern over the recent regulations that restricted smooth business operations.
During the meeting exporters pointed out that companies were still facing the pressure on their revenues due to COVID-19 and other global economic issues and pointed out that the export sector as the primary contributor of foreign exchange at the moment “must be protected and developed further”.
It was pointed out that the newly introduced levy of “Social Security Contribution” at 2.5 per cent turnover tax on companies with revenues of more than Rs.120 million “will cause enormous pressure on the bottom line profitability of exporters”. Its implementation is expected to deplete 30 per cent or more of the bottom line of companies.
On the one-time surcharge tax at a rate of 25 per cent on individuals or companies with a taxable income exceeding Rs.2 billion for the year of assessment 2020/2021, exporters queried whether it covers the FDIs under the BOI as well because if so such a retrospective effect on a financial year that is closed is not practically possible.
However, exporters were asked to refer this matter to the Finance Minister.
Exporters also highlighted the investors’ inability to make dividend payments as profits to their foreign shareholders/holding companies and the severe restrictions in the operation of Foreign Currency Banking Unit (FCBU) accounts contrary to the provisions in the exemptions granted under Section 17 of the BOI law No. 4 of 1978.
Investors are currently facing restrictions in the operation of Inward Investment Accounts (IIA) which enable investors to bring foreign currency into Sri Lanka for new investments, expansions, dividend payments, disposal of liquidation, and recovery of loans.
They also pointed out that they were unable to make payments for goods / services, raw materials that investors have acquired or rendered from suppliers for business continuity. It was pointed out that these payables are debts that must be paid off within a given period to avoid default.
Issues pertaining to transfer of money from a company to any company within the group within the same holding company; and transfer of money from any commercial bank to another; has become another area of concern, exporters said.
About 13 investors participated at the meeting held at the CB which included about five foreign investors. Investors noted, that they found the discussion to be very cordial and that the CB seemed to believe that investors will not pull out.
The governor is said to have pointed out that regionally and globally countries follow similar practices but exporters said that Sri Lanka does not fall into this same bracket as those economies were not the same as Sri Lanka.
Exporters believe that authorities were now fully aware of their concerns and remained optimistic that their issues will be addressed and any relevant amendments will be carried out where necessary.
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