Sri Lanka’s Board of Investment (BOI) will be completely restructured to cater to the needs of specific sectors and in future act as a facilitator of Foreign Direct Investments (FDI), the country’s Treasury Secretary said.
Dr P.B. Jayasundera said tax holidays will not be granted to each and every foreign investor, confirming a series of stories in the Sunday Times/Business Times on the future of the BOI. He noted that a company has to get the BOI approval even to import an elevator, and this system should be changed, he said. He said that the BOI will be entrusted with the task of promoting quality investment abroad as well as monitoring and follow up activities while managing export zones efficiently.
He made these comments while addressing a packed audience of corporate leaders, senior government officials, bankers and heads of financial institutions in Colombo on Tuesday at a budget forum organised by audit firm Ernst &Young.
He said Sri Lanka’s 2011 budget, presented by President Mahinda Rajapaksa on Monday, is aimed at accelerating growth and development and is a bold step taken to secure the future of the people as the country will have to face the problem of an aging population while emerging from a 30 year-long North-East conflict.
The Treasury Secretary noted that the pension scheme for the private sector and informal sector has been introduced to secure the future of the people. He said the budget proposals contain changes that affect the overall tax system and that the Inland Revenue Department will now have to concentrate on the corporate sector while ‘throwing away tax files of minor individual tax payers numbering around 200,000 as such persons are exempted from filing tax returns.’
He added “we have read the pulse of the economy and corporate sector has to deliver the goods taking advantage of tax reductions granted to them”.
Sri Lankan expatriates have remitted over US $ 4 billion this year becoming the biggest segment of direct foreign remittancesto the economy. “But none of the Governments gave priority to this important segment,” he said. “The market did not address the aging issue. However, there are still unorganised sectors such as three-wheeler drivers, farmers and many others and this segment should also be looked after,” he said.
Dr Jayasundera said that budget proposals contain changes that affect the overall tax system and the Inland Revenue Department will now have to concentrate on the corporate sector ‘throwing away tax files’ of minor individual taxpayers numbering around 200,000 as such persons are exempted from filing tax returns. Existing files of individuals will be cancelled. Administrative mechanisms will be in place to cancel the non effective files, he added.
The Treasury Secretary called upon Sri Lankan banks to provide more long-term loans. He added that tax cuts in the 2011 budget are aimed at encouraging long term lending. "Bankers must look beyond what they've been doing - mainly lending for short-term working capital requirements or 2-3 year lending - to 10- 15 year capital, " he said.
Tax cuts for banks and the corporate sector in general announced in the 2011 budget Monday are aimed at freeing up capital for lending and investment. Banks will contribute in the equivalent of 8 % of financial value added tax to an investment account with Sri Lanka's Central Bank for three years, according to the budget proposals.
"An investment fund account is to be set up and it will basically divert these differences in taxes for a period of three years to build long-term capital which will be guided under Central Bank regulations and the Department of Inland Revenue," he said. |
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