The Land Alienation Act which restricts the foreigners owning lands is currently being reviewed by the new rainbow government and the Prime Minister, Ranil Wickremesinghe will soon address this issue, according to a top government official.
“The government is looking at certain limits in land ownership and foreigners owning lands. I raised this with the Prime Minister. He is going to address this very soon. So, you will have an answer,” said the Senior Advisor to the Prime Minister, R. Paskaralingam.
The former United People’s Freedom Alliance (UPFA) government passed the much debated Land (Restrictions on Alienation) Bill last October no longer permitting the foreigners to buy land in Sri Lanka with retroactive effect from January 1, 2013.
Prior to the Bill, foreigners (individuals or companies with foreign shareholding of 50 percent or more) could purchase land but with a huge transfer tax of 100 percent. Under the new Act this also is prohibited but foreigners can acquire land on 99-year lease basis, that also with a hefty lease tax payable up front for the entire duration of the lease period.
However Paskaralingam did not elaborate the nitty-gritty of the revised land policy of the government.
“I don’t want to tell you the details of it at this moment. But it is being addressed,” he said at a recent forum organized by the Ceylon Chamber of Commerce titled ‘Policies in place, bring in the investments’.
The controversial bill was passed amid concerns raised by many stakeholders on its appropriateness in relation to attracting much needed foreign direct investments (FDIs), but the former regime gave precedence to national interests over FDIs.
Meanwhile, the government is also reviewing the Strategic Development Project (SDP) act which gives sweeping tax breaks for larger projects leaving room for corruption.
Speaking at the same forum, Investment Promotion Deputy Minister Eran Wickaramaratne said discretionary incentives are not the way forward for promoting investments in Sri Lanka.
“The Strategic Development Project Act is under review. We feel that discretion is not the best way forward. It’s better to have an open, transparent and a well defined policy where people will know what they exactly get and what they don’t get and that is the direction that we want to take,” he said.
Meanwhile, Deputy Minister of Policy Planning and Economic Affairs, Dr. Harsha de Silva stressed the significance of bringing in reforms in all factor markets such as land, labour and capital but said the reform agenda had to be postponed until after the impending parliamentary election.
“Very likely the reform agenda could be implemented after the election because these are the things which are politically sensitive,” he said adding that whoever comes into power, reform agenda must be their top priority.
Dr. de Silva is of the belief that reforms are possible soon after an election hence said that they must not be postponed.
Mansion tax too under review
Paskaralingam further said the one time mansion tax which was revised once soon after the interim budget is too under further review.
The interim budget presented to the parliament on January 29, 2015 proposed Rs.1 million annual levy by those who own residences valued over Rs.100 million or spanning over 5000 square feet. However the Finance Minister Ravi Karunanayake later said the one-time tax would not be applicable for large ancestral homes that have been coming down from family to family for generations and the tax is effective for properties built after year 2000.
Further the value of a residence was also raised up to Rs.150 million.
But it appears that the revised mansion tax is now under re-revision.
Economists have warned that the country’s economy sooner or later will face an acute fiscal slippage as many of the original mini budget proposal either being revised or challenged in court by the respective parties affected by them.
Last week the Supreme Court issued an interim order suspending the gazette notification which states that all liquor and beer manufacturers must pay a minimum monthly excise tax of Rs.200 million.
Telcos too are contemplating to resort to legal action against the one-off and the recurring taxes slapped on them by the new administration.
Following the new taxes, Fitch Ratings revised their outlook on the Sri Lankan telecom sector to ‘negative’ from ‘stable’.
Country’s once upbeat business community is now in disarray due to some of the policies which are anti- business in nature and the lack of clarity in the new government’s economic policy.