ECONOMYNEXT – Sri Lanka’s cabinet of ministers had cleared the granting of tax relief to factories in an industrial zone in Eravur in the East under Strategic Development Project law which may go up to 10 years based on the number of employees and investment.
The tax breaks will be presented to parliament after being granted.
Broad tax reliefs had already been listed.
Firms investing up to 10 million US dollars and employing 150 persons will be given a 5 year tax holiday and 2 years 50 per cent tax.
Firms investing up to 20 million and 200 persons can get a 7 year tax holiday and another 2 years at half the rate, firms investing 25 million and employing 300 persons 8 years and 3 years at half the rate.
Firms investing up to 30 million dollars and employing 350 persons a 9 year tax holiday and 4 years at half the rate and firms investing over 30 million and 400 persons a 10 year tax holiday and 5 years at half the rate.
The exemptions will start 18 months after the date an agreement is signed with the Board of Investments.
The concessions shall apply to exports, deemed exports and ‘import substitution.
Sri Lanka has raised import duties and banned some items after money printing by a Latin America style central bank triggered forex shortages.
‘Import substitution’ came into wide use in several of the Latin American countries that the US Fed had set up similar money printing central banks. Many of them suffered repeated currency crises and sovereign default.
Most East Asian countries had currency boards or currency-board-like central banks which shunned printing money and was part of an ASEAN free trade area. Other than Korea and Taiwan which were former Japanese colonies, most countries grew with extensive foreign direct investment.
Firms in most East Asian countries including now Vietnam could sell in the domestic market improving the living standards of the people. Korean and Japanese brands are cheaper in Vietnam than in the home country.
Tax relief would also be given for Port and Airport Development Levy for imports, and Customs Duty and a Cess import tax, ironically imposed under an export development law.
Sri Lanka imports more than 50 percent of fabric needed for export from countries like China and India.
A higher domestic content will allow Sri Lanka to benefit from free trade deals and also cut down lead times.
Sanjaya Mohottala, Chairman of Sri Lanka Board of Investment has said that the fabric park will provide “end-to-end visibility in the whole supply chain.”
Unlike apparel production, fabric making could increase pollution.
The Eravur zone would have the most modern pollution controls and recycling systems, he had said.
The park will have the most modern water treatment plants, water recovery and will also be testing and innovating new recycling and treatment technology. (Colombo/July07/2021)