ECONOMYNEXT - Sri Lanka had the potential to attract large investment where he would also like to participate but a "generally unfriendly attitude toward businesses" with retrospective taxes will hurt investment, Mark Mobius, an international fund manager has said.
"We would encourage a more favourable tax environment to attract foreign investors, without the threat of retroactive taxes," he said in a blog post after visiting Sri Lanka.
"The retroactive “Super Gains Tax” targets large companies deemed to be making “excessive” profits. Companies have started paying these retroactive taxes since the third quarter of 2015 and it has had adverse impacts for shareholders."
Prime Minister Ranil Wickremesinghe has said that there will be no more retrospective taxes but there are fear that a future administration will resort to the same tactic now that the way has been shown.
Fitch ratings has said that a series of large taxes on alcohol companies are likely to kill off several small players. There has been allegations of widespread excise tax fraud against some of the small players.
However under globally and regionally accepted principles of public finances, taxes that kill companies are not imposed analysts say.
"It remains to be seen if foreign investment will continue to rise in view of the more aggressive tax regime and a generally unfriendly attitude toward businesses with some retrospective and ad-hoc tax proposals in recent times," Mobius said.
Funds managed by his company is the largest investor in Sri Lanka government bonds.
He had met Prime Minister Wickremesinghe in Colombo.
"I had the pleasure of meeting Wickremesinghe, who was quite generous with his time," Mobius said.
"He was very relaxed and seemed confident about his term in office under the new government, although he recognized challenges, including the ability to get legislation passed."
He referred to a policy statement made by Wickremesinghe in November, which aimed to reform state enterprises, pension systems and wanted to make Sri Lanka more open to international trade.
"In order to expand capital markets, in our view it will be necessary to carry out more privatizations of state enterprises and encourage the growth of businesses generally," Mobius said.
"Privatization immediately brings revenue to the state, increases productivity with more efficient management and increases tax revenue. We think this model is better than state-owned regimes in terms of driving economic prosperity."
Sri Lanka should also modernize critical and diversify the economy.
"We would encourage a more favourable tax environment to attract foreign investors, without the threat of retroactive taxes," he said in a blog post after visiting Sri Lanka.
"The retroactive “Super Gains Tax” targets large companies deemed to be making “excessive” profits. Companies have started paying these retroactive taxes since the third quarter of 2015 and it has had adverse impacts for shareholders."
Prime Minister Ranil Wickremesinghe has said that there will be no more retrospective taxes but there are fear that a future administration will resort to the same tactic now that the way has been shown.
Fitch ratings has said that a series of large taxes on alcohol companies are likely to kill off several small players. There has been allegations of widespread excise tax fraud against some of the small players.
However under globally and regionally accepted principles of public finances, taxes that kill companies are not imposed analysts say.
"It remains to be seen if foreign investment will continue to rise in view of the more aggressive tax regime and a generally unfriendly attitude toward businesses with some retrospective and ad-hoc tax proposals in recent times," Mobius said.
Funds managed by his company is the largest investor in Sri Lanka government bonds.
He had met Prime Minister Wickremesinghe in Colombo.
"I had the pleasure of meeting Wickremesinghe, who was quite generous with his time," Mobius said.
"He was very relaxed and seemed confident about his term in office under the new government, although he recognized challenges, including the ability to get legislation passed."
He referred to a policy statement made by Wickremesinghe in November, which aimed to reform state enterprises, pension systems and wanted to make Sri Lanka more open to international trade.
"In order to expand capital markets, in our view it will be necessary to carry out more privatizations of state enterprises and encourage the growth of businesses generally," Mobius said.
"Privatization immediately brings revenue to the state, increases productivity with more efficient management and increases tax revenue. We think this model is better than state-owned regimes in terms of driving economic prosperity."
Sri Lanka should also modernize critical and diversify the economy.
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