Broken Record

Any new levies that the Sri Lankan government proposes for its 2005 budget shouldn’t be applied retroactively, as such a policy will erode foreign investor confidence, a tax expert warned Monday. Any new levies that the Sri Lankan government proposes for its 2005 budget shouldn’t be applied retroactively, as such a policy will erode foreign investor confidence, a tax expert warned Monday. The government, due to present its budget for 2005 on Nov. 18, is expected to propose new taxes to cut its budget deficit.

In an interview with Dow Jones Newswires, Premila Perera, a partner at KPMG Ford, Rhodes, Thornton and Co. in Sri Lanka, said, “If there was retrospective amendment of legislation, then you cannot rely on the legislature of the country. This will erode investor confidence.”

She pointed out tax experts have questioned a plan to tax bond trading profits from April 2002. Since 2000, profits made from dealing in government bonds were not taxed to encourage trading, but last month’s decision essentially reverses the earlier policy.

The tax of about 30% would apply to profits made since April 2002 when bond yields started to drop sharply as the government commenced peace talk