COLOMBO (EconomyNext) – The deadline for Sri Lanka’s parliament to ratify tax breaks to a 1.4 billion US dollar sea reclamation project by a Chinese company had run out this week, Deputy Investment Promotions Minister Eran Wickramaratne said.
"Within three months you have to get it approved in parliament," Wickramaratne said.
"They have to talk again."
He said the three months had ended on February 17 and the process will have to be re-started if the project is to go ahead.
CHEC Port City Colombo (Pvt) Ltd was proposed a 25 year tax holiday and its main contractor China Harbour Engineering Company Ltd an 8-year tax holiday in a gazette notice issued on November 17, 2014 under Sri Lanka’s Strategic Investment Projects Act.
Inputs for the project was also exempted from import duties and value added tax.
Under the law the tax breaks outlined in the gazette have to be ratified by Sri Lanka’s parliament within three months. If the resolution is not approved the proposed concessions are "deemed to be rescinded", according to the law.
In this case no resolution had been presented to parliament at all.
The project company started filling up the sea ear Colombo’s main port and beachfront last year, even before final approval for the tax concessions were given.
However in addition to tax breaks, such deals also have an underlying concession agreement involving permission to reclaim the sea, land ownership rights, penalty clauses and arbitration in case of disputes, analysts say.
Prime Minister Ranil Wickramasinghe said in parliament Wednesday that the project was not transparent and agreements had been signed by the Rajapaksa regime without cabinet approval and a series of legal processes had not been followed.
The last administration had also not submitted a report to parliament as promised, when the then opposition raised queries, he said.
Wickramasinghe said a committee was probing the project and a final decision will be taken after its findings.