IMF has not shut the window for incentives, says ex-BOI Chairman

While locally invested foreign businesses are facing new taxes that have come into effect since January, the IMF in its diagnostic report on Strategic Development Project Act (SDP) has not shut the window for incentives, former Board of Investment (BOI) Chairman, Thilan Wijesinghe said.

Referring to the IMF diagnostic report published on September 2023 on SDP, Mr. Wijesinghe quoted the report, “Abolish or suspend the SDP Act until explicit criteria are established to evaluate all proposals, including the provision of public information on projected benefits and costs, and a transparent process is defined to apply the criteria.”

During a breakfast forum on ‘Economic Freedom and its pathway to Prosperity’ summit organised by the Colombo-based think tank Advocata Institute on Monday, Mr. Wijesinghe made these remarks.

He said, “What is the right balance in formulating legislation and incentives to facilitate investments? Out of 1700 BOI companies that are in operation, almost 80 per cent of them are paying taxes at the normal rate. At the beginning they are given incentives, then they set up operation and after a while they have to pay all of the normal taxes that are applicable to all businesses in this country. I disagree with the aggressive nature of which tax holidays were granted particularly for projects that Sri Lanka is giving up on something. For example, a 20-year income tax holiday was given to the port terminal where they are making a 40 per cent profit margin. How fair is that?”

“According to the IMF diagnostic report on SDP, it has not shut the window for incentives. The IMF is urging the government to be more transparent in the way it formulates the investment incentives and frame the regulation to the investment criteria,” he added.

Further Mr. Wijesinghe also suggested that going forward the government must introduce public-private partnership law and update the existing guidelines. Rethink investment incentives with external specialists in consultation with the Finance Ministry and IMF. Introduce interim changes to the BOl law before bringing in new laws: Relook at merging provisions in SDP Act with BOl Law: Revamp Port City Law: Enhance the infrastructure budgets for ‘plug and play’ investments.

Strengthen research and processes for FTAs and introduce anti-corruption provisions in all laws and digitise the investment approval process. Make public service attractive again for capable private sector individuals, he noted.