Existing tax holidays to remain Act only curtails future tax concessions

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By 2017-09-13

By Mario Andree

Despite Finance and Media Minister Mangala Samaraweera highlighting a Rs 1.4 billion revenue loss due to steep tax concession, the Government has decided not to strip tax holidays already given to some Board of Investment (BOI) approved projects.
During the Rajapaksa regime, the BOI granted steep tax concessions spanning up to 25 years for several projects such as the Colombo Port City, Shangri-La and Krrish Colombo.

Recently, Minister Samaraweera noted that the government had lost more than Rs 1.4 billion due to the steep tax concessions given by the previous regime, which has indirectly burdened the public.
Addressing a recent Forum, Deputy Treasury Secretary,
S.R. Attygalle said tax concessions given by the Government and the BOI will be honoured, despite the new Inland Revenue Act.
However, future tax concessions will be curtailed with the new Inland Revenue Act and the government would encourage investment through a 150 per cent depreciation allowance, 200 per cent in the case of investments to the once war-torn Northern Province.

The new Act will curtail the discretion given to Ministers and higher state officials to provide tax concessions for investments.
Following the removal of tax concessions, the Foreign Direct Investment (FDI) inflow to the country reduced considerably. Since the Government took over in 2015, FDI inflows slipped from US$ 1.66 billion in 2014 to US$ 1.16 billion in 2016.

In a bid to increase FDIs to favourable levels, the Government introduced a road map to improve the investment climate in Sri Lanka titled 'Sri Lanka means business' focusing on improving eight 'ease of doing business' indicators.

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