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ECONOMYNEXT – Taxes foregone due to investment relief given through a Strategic Development Project Act was 1,085 million rupees, according to a tax expenditure disclosure made by the Finance Ministry.
The taxes are calculated for 14 strategic projects. The law has come under fire for discretionary tax holidays given up to 25 years, compared to lower periods under the Board of Investment Law.
The discretion has been blamed for opening doors to corruption.
Controversially, the law also exempts key expat workers from income tax for a period.
Lost corporate taxes are estimated at 805 million rupees for the year of assessment 2022/2023 on a tax base of 3,353 billion rupees.
The tax expenditure is measured against a corporate tax rate of 28 percent.
Lost value added taxes were estimated at 280 million rupees.
Value added taxes as well as import duties and some other protectionist border taxes are exempted for material imported during the project investment period to reduce the cost of investment in Sri Lanka versus countries with free trade.
The project investment period has expired in the case of 6 projects and will expire in case of four others in 2024.
The longest project investment period of 12 years has been given to HCL Technologies.
A ‘tax expenditure’ statement in respect of Board of Investment firms showed 23.94 billion rupees have been lost.
RELATED Sri Lanka income taxes lost due to BoI concessions Rs23.94bn in 2022
But a tax rate of 20 percent, which is the standard rate of East Asian countries with monetary stability has been considered a ‘concession’ in the analysis. (Colombo/Mar14/2024)
