Inconsistent tax policies seen as major constraint in attracting FDIS

Inconsistencies in Sri Lanka’s taxation policy during the last 4-6 years have created a significant impact on attracting new investments to the country, Sri Lanka’s largest foreign direct investor said.

Participating in a panel discussion at an event organised by the American Chamber of Commerce in Sri Lanka, Dialog Axiata PLC Group CEO Supun Weerasinghe said that authorities have failed to send a consistent message to potential investors in terms of taxation over past 4-6 years, which has adversely impacted investor sentiments.

He stressed that policy consistency is vital for long-term investors in making decisions, expecting return on their investments in 10-15 years.

“Something that makes us nervous closer to the end of the year is the budget and new proposals on taxation coming through the budget proposals. That has a significant impact on attracting new investments,” Weerasinghe stressed.

He noted that as the country faces challenges in collecting taxes, Sri Lanka’s thriving telecom industry has become a victim since the government has been looking into imposing additional taxes on the telecom industry.

“The telecommunication industry has become one of the vehicles for which the government looks at collecting taxes. That has a significant impact on consumption, cost ownership, owning service or access to broadband connectivity and finally the overall adoption of the services,” he said.

The government has proposed to impose a Rs.200, 000 tax on mobile towers in the last budget. However, a high level of uncertainty remains over the implementation of the proposal.

According to Fitch Ratings, if the budget proposals were to be implemented, Dialog would have to pay Rs.4-6 billion in taxes for its mobile towers.

Weerasinghe also stressed that the consistent tax policies should not be limited to corporates, but they must also be extended to consumers.