Sri Lanka stock exchange chairman lauds budget, tax privileges

ECONOMYNEXT – Chairman of Sri Lanka’s Colombo Stock Exchange, Vajira Kulathilake has lauded the tax breaks and other support given by a budget for 2016 to the stock market.
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He has also praised the removal of a small share transaction levy, which however tended to raise transaction costs.
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The budget cut corporate tax to 15 percent from 28 percent for most companies. It also cut corporate tax for listed plantations companies in which the state has shares.
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The budget also proposed the use of retirement fund money to fund venture capital, one of the riskiest forms of investments in the world.
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Sri Lanka has earlier give tax breaks to support venture capital firms, through which owners imported tax free cars and most of the firms went bust, partly due to lack of skills.
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A well-functioning capital market, where the state does not hamper it, is vital to channel capital for investment and job creation.
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The budget proposed the removal of several nuisance taxes on debt.
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The stock exchange however has depended on tax privileges of various kinds for a long time.
Sri Lanka raised valued added tax and a turnover tax on basic goods but stock market capital gains are out of the reach of the tax net.
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<i>The full statement is reproduced below:</i>
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It is admirable to note the support extended to the capital market of Sri Lanka through the recent budget. 
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Firstly, it has maintained all the concessions granted to capital market by the previous Governments.
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Secondly,it is a forward looking budget. It encourages introduction of REITs , an extremely positive step to introduce an alternative investment option i.e. real estate to investors. REITs will enable smaller investors to benefit from returns generated from  real estate by investing small amount of money.
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Encouragement given to list Dollar denominated securities of Foreign Companies will help Sri Lankan Capital Market achieve hub status in the region. Waiving of the requirement to set up SIA accounts to Foreign investors is also a positive step to minimize administrative burdens for global investors.
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The budget has requested to expedite to de-mutualisation process of the stock exchange. This will enhance the Governance aspects of the capital Market. CSE and SEC will work towards achieving the target of completing this process during 2016. 
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It also encourages setting up Venture Capital and Private Equity Funds an essential pre-requisite for funding business from ideas of entrepreneurs to growth of such businesses  These firms will act as feeders to capital market to raise capital or divestitures.
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It should be highlighted that where ever Venture Capital and Private Equity thrived, the business enterprises developed and the countries achieved growth. An examples are South Korea. Most of the leading Technology companies such as Google, Facebook and Indian IT Companies are funded by Venture Capital and Private Equity Capital.
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The budget has suggested to set up a SME board at the Colombo Stock Exchange . We will introduce this shortly. The idea is to offer a listing option for SMEs with less stringent conditions to raise capital.
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The idea of divestures of non-core businesses of the Government and listing of Government owned entities is extremely helpful to the Capital Market growth and to increase market capitalization.
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Removal of Share Transaction Levy will stimulate trading in the share market thus increasing the liquidity. This will help to address one of the major drawbacks of Sri Lankan share Market.  
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The budget has supported the minority  share holders by increasing the minimum amount of dividend to be distributed by quoted companies
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I should say this budget not only helps to activate the Capital Market but also supported  a vision to achieve greater heights.
 

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