Sri Lanka investment agency awaits tax policy in budget

Sept 07, 2010 (LBO) – Sri Lanka’s state investment promotion agency is waiting for the harmonization of a tax regime in the island following a budget later this year and it is also likely to undershoot an investment target for the year, an official said.

Sri Lanka has a bloated state sector, with more than 50 cents out of every tax rupee collected being used to pay salaries and pensions of state workers. State worker salaries including those of income tax officials are exempt from taxes. The Board of Investment was originally expecting a billion US dollars in realized investments in 2010 after a 30-year war ended in 2009.

“My guess is that it won’t be a billion,” BOI chairman Jayampathi Bandaranayake
who took over the reins of the agency in May said.

“We may exceed last year’s figure. But ballpark around that figure.”

According the Central Bank data Sri Lanka’s foreign direct investment flows fell to 384 million US dollars in 2009. In 2008 the FDI estimate was 691 million US dollars.

Sri Lanka counts realized FDI and not deals signed. Bandaranayake said two elections in the year had delayed investments.

“The reality is what you are realizing are investments signed up earlier,” Bandaranayake said.

“What is being sign