The restrictions on land ownership by foreigners brought in by the government this February has disturbed the country’s industrialists the most, as fears of such restrictions would hamper foreign investments in the manufacturing sector, according to Sri Lanka’s apex industrial body.
These restrictions have become even more relevant to the country’s industrial sector which represents 30 percent of the Lankan economy, and the large manufacturing companies mostly owned by foreigners.
“We were disturbed by the ban on foreign ownership of land and the imposition of a 100 percent tax on leasing of land which would curtail expansion and entry of foreign-owned manufacturing entities,” re-elected Chairman of Industrial Association of Sri Lanka (IASL), Pravir Samarasinghe, said.
However, the ex-Board of Investment (BoI) Chairman, M.M.C. Ferdinando was reported to have said in May, the tax on lands leased by foreigners would be brought down to 5-15 percent with certain exemptions granted on freehold land ownership by long established foreign companies with no restriction.
Samarasinghe’s remarks could not have come at a better time when the entire industrial sector is concerned of the lower foreign direct investments into this important sector.
“Although industry accounts for 30 percent of the GDP and the factory subsector has a major 17 percent share in it, manufacturing grew only by 5 percent in 2012 down from 8 percent a year ago. It is important that suitable conditions are maintained for industry competitiveness and development,” he emphasized.
Another impediment hindering the progress of the sector was the 100 percent land tax. However, the tax was later brought down to 15 percent as a result of continuous lobbying by the stakeholders. Samarasinghe further appealed relevant authorities to exempt BoI-approved entities leasing premises in Industrial Zones from such land tax. Meanwhile, inconsistent property rates have also been a cause for concern for the industrialists.
“We have made submissions for an affordable and uniform structure for property rates for SMEs and other industries. Currently varying assessments from 5 percent to 30 percent are being levied by different local authorities. We are confident that necessary laws will be enacted shortly,” Samarasinghe said, calling for uniformity in the system. It appears that local authorities are yet to take steps to establish benchmark valuations for property taxes to overcome valuation complexities and update relevant license fees and other regulatory charges as announced in the 2013 budget last November.