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Granting ad hoc, non-transparent and large tax exemptions has created significant issues for Govt.: IMF
Colombo, July 5 (Daily Mirror) - Granting ad hoc, non-transparent and large tax exemptions in the past has created significant issues, obviously on the fiscal space and revenue - not only in terms of losses in foregone revenue for the government but rise in corruption vulnerability, according to Evan Papageorgiou, IMF Mission Chief for Sri Lanka.
Addressing a virtual press conference on Thursday, he said the revision of tax exemption frameworks is a key cornerstone because the authorities have also committed to refrain from granting tax exemptions until the new tax exemption framework is updated to meet best practices, in line also with technical assistance.
“Under the IMF programme, we have structural benchmarks to amend the Stamp Duty (Amendment) Act by the end of August and the Port City Act by the end of October, as well as the associated regulations driving or spelling out the exemptions. And so, on the back of that, there should be transparent and rules-based eligibility criteria to limit the duration of tax incentives, for example. What we have asked is that until then, the authorities should commit to a continuous structural benchmark, which requires them not to provide new exemptions to businesses based on the Stamp Duty (Amendment) Act and the Port City Act and regulations. The authorities have agreed and shown a strong commitment to this so far,” he said.
He said that tax exemption should not be the primary tool for attracting foreign investment.
“There should be policy continuity and to reduce uncertainty by having a well-defined tax exemption framework that is going to last,” he said.
He said that sustained revenue mobilisation is critical to restoring fiscal sustainability and creating the necessary fiscal space.
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