ECONOMYNEXT- Sri Lanka’s tax free listed bonds issued in the past are likely to be treated the same way until they are redeemed, according to a government minister.
"The principle is that there will be no retrospective taxes," State Minister for Finance Eran Wickramaratne told reporters.
Sri Lanka’s corporate bond markets are in limbo after new taxes were announced in the budget for 2017.
About 30 billion rupees of corporate bonds which were issued preliminary ratings did not go ahead, Fitch Ratings said in June.
Before 2016 tens of billions of listed bonds were issued with interest tax free in a bid to boost the market and popularize them among small investors.
However most of the bonds were snapped up by banks and high networth individuals, and became a tax shelter.
There were concerns that the tax free bonds already issued would be taxed. The existing bonds were issued and price based on the expectations that they would be tax free during their lifetimes, analysts say.
Any retrospective tax, would further undermines Sri Lanka’s investment environment, analysts have said.
Minister Wickramaratne’s comments are interpreted by some analysts to mean that at a minimum no new taxes would be levied on bonds issued before the taxes were announced during the last budget.
In a well-run country, taxes apply from the day they are legislated, but in Sri Lanka there was also a practice of charging taxes which were announced but not legislated, which was challenged during the last value added tax change. (Colombo/Aug29/2017)