BOI to be replaced by new Authority

Review of tax concessions to focus on foreign direct investment
By Bandula Sirimanne

The Board of Investment (BOI), Sri Lanka’s premier investment promotion agency, is to be abolished.
It will be replaced by a new agency, which a Finance Ministry official said, would have wider powers to create a “globally competitive investment climate”.

He said the move would be aimed at making the country the most preferred investment destination.The new agency, for which a blueprint has already been drawn up, would be more pro-active, focused, devoid of red-tape and corruption-free, he said.

The official said the government was also considering cutting down on tax incentives to attract foreign direct investments (FDI) and concentrate on improving the business climate to maximize the benefits of peace as the main incentive to invest in Sri Lanka.

A new tax structure for FDIs would be introduced in the 2011 budget, the official said, adding, “The BOI tax incentive regime has resulted in an erosion of tax revenue as it has granted, and continues to grant, broad tax incentives."

A senior official of the Economic Development Ministry said the BOI which was set up 32 years ago, would be transformed to a vibrant investment promotion agency to meet the present global needs. The current structure of the BOI is outdated, he added. An Investment Promotion Division of the Ministry of
Economic Development was set up for this reason, he said.

The Government is actively encouraging private sector investment in infrastructure, on the basis of BOO (Build, Operate and Own) and BOT (Build, Operate and Transfer). Currently there are private investment projects in power, ports, water sanitation, transportation (highways and rail) and information technology.
Various special incentive schemes and programmes would be introduced with the objective of facilitating and encouraging investors, so that investors could implement their projects in a hassle free atmosphere in Sri Lanka, the Economic Development Ministry official said.

With the end of the war, it is predicted that FDI as well as the Sri Lankan stock market will attract more foreign interest.

In the disposal of property by persons resident outside Sri Lanka, the remittance of sales proceeds is permitted without prior approval of Exchange Control only to the extent of the investment made in foreign exchange for the purchase and development of the property (out of inward remittance made through the banking system), while any capital gain realized on such disposal should be placed in a blocked account in the name of the non-resident and is not remittable. All these incentives would be be changed under the new agency replacing the BOI, the official said.

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