Sri Lanka President halts land clearing of RIGID Tyres: report
ECONOMYNEXT – Sri Lanka’s President Maithripala Sirisena had halted work on a tyre factory which had received unusual benefits from the current administration after it emerged that work had begun even before a land lease had been signed, a media report said.
Sri Lanka’s The Sunday Times newspaper said clearing of land allocated from a Board of Investment industrial zone to RIGID Tyre Corporation, owned by controversial businessman Nandana Lokuvithana was stopped by security officers.
The report said the firm had been given 100-acres of land on a 99-year lease while other investors were given land for only 50-years.
The investor had also been allowed to buy land by paying an upfront fee, and 100 rupees per year thereafter while others had to pay a 3,850 dollars a year, per acre.
The firm had also been allowed to sell, up to 40 percent of its output domestically, which is also higher the usual, the report said.
While allowing export oriented firms domestically will increase competition and benefit the consumer, giving the discretion for politician and bureaucrats to provide higher rates to some and lower rates to others leaves the door open to corruption, critics say.
Tyres are import tax protected allowing any domestic producer to overprice goods, exploit consumers and earn exorbitant profits (rents) by playing the tax difference (tax arbitrage).
After allowing domestic sales of up to 40-percent the firm had been given a 15-year tax holiday, the report said. A 15-percent preferential tax rate had been given thereafter.
Ceylon Steel, the promoter of RIGID Tyres is also a tax-arbitraging firm benefiting from import duty protection and raising building costs of the nation, critics say. (Colombo/Jan30/2016)