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
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.
He further said the government should consult relevant stakeholders before coming up with policies. “Such proposals need to be debated earlier.”
Weerasinghe urged the government to sustain its policies particularly in the areas of fiscal regulations, taxation, spectrum and governance.
However, he acknowledged that Sri Lanka’s telecommunication industry received assistance in terms of investment facilitation by successive governments to become a thriving industry, which was also one of the reasons for Dialog’s Malaysian parents to pour in US $2.3 billion into Sri Lanka over the years, becoming Sri Lanka’s largest foreign direct investor.
“Telco industry itself is a good case study on how BOI and the government helped through various incentives and initiatives to be ahead of the region. Sri Lanka’s telco industry even ranks ahead of some of the Asia Pacific countries” he said.
Weerasinghe also recommended telecom industry as a good case study for other industries to learn from in order to attract investments.
He further insisted that Sri Lanka should also capitalise on local talent in attracting investments as it was one of the key reasons for Dialog Axiata to keep re-investing in Sri Lanka. He said the 99 percent of Dialog Axiata is run by Sri Lankans.