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Attracting foreign investment is a priority for Sri Lanka as it seeks to strengthen growth, create jobs and expand exports. Yet the growing reliance on tax concessions deserves reconsideration. Preferential tax treatment can encourage some investments, but it carries a fiscal cost, creates disparities between businesses and does not guarantee the benefits governments expect.
Tax concessions are revenue foregone that could fund public services and infrastructure or reduce borrowing. They also tilt the playing field towards selected businesses. The central question is not how much investment a concession attracts, but whether that investment would have come anyway and whether the benefits justify the revenue forgone.
Strategic Investments Still Need to Justify Their Tax Benefits
The Colombo Port City illustrates these concerns. It already enjoys significant locational, infrastructural and regulatory advantages, including proximity to Colombo’s financial districts, modern infrastructure, planned airport expressway connectivity and a more flexible labour framework. Additional tax concessions on top of these raise questions about necessity and justification.
Concessions to port terminal operators also warrant scrutiny. Sri Lanka’s location on major East-West shipping routes is its ‘oil in the ground’, and the Port of Colombo has been an established maritime hub for over a century. Granting terminal operators tax holidays of up to 25 years raises the question of whether the country is capturing the full value of its strategic location.
Colombo West International Terminal (Pvt) Ltd, which operates the West Container Terminal, received a 25-year corporate income tax exemption under the Strategic Development Projects Act through a government-to-government arrangement rather than an open tender. Colombo International Container Terminals (CICT), which operates the South Terminal and was chosen through competitive tender, also enjoys a 25-year tax holiday. Private investment and expertise are valuable, but the government must ask whether the scale and duration of these concessions are proportionate, given that modern port operations are highly automated and generate limited direct employment.
Tax concessions should not be granted simply because an investment is large. The government must establish what additional benefits it will generate and whether they justify the fiscal cost.
The Long-Term Costs of Generous Investment Incentives
Generous incentives granted under earlier regimes can create lasting advantages for beneficiary companies. Long-standing concessions under Section 17 of the Board of Investment (BOI) Law, with tax-free periods followed by extended preferential rates, illustrate this.
According to their financial statements, Overseas Realty (Ceylon) PLC, Dialog Axiata PLC and Mobitel (Private) Limited received 15-year tax exemptions under BOI agreements signed in 2005, 1997 and 1994. After these expired in 2020, 2012 and 2009, each became eligible for a 2% tax on turnover for a further 15 years. These arrangements end in 2035 for Overseas Realty and 2027 for Dialog, while Mobitel’s expired in 2024.
Such investments may generate wider benefits through employment and related activity, but these must be weighed against the scale and duration of the relief. Long-term concessions should not continue by default and should be reviewed periodically to confirm that the intended benefits have materialised.
Selective concessions for real estate raise similar concerns. Havelock City (Private) Limited received a 15-year income tax exemption under a 2016 BOI agreement, while many other commercial developments proceeded without one. Several residential developers in the Port City, including Prime Melwa Port City (Pvt) Ltd, Home Lands Port City (Pvt) Ltd, Marina Hotel Holdings (Pvt) Ltd and ICC Port City (Pvt) Ltd, have received substantial exemptions and incentives unavailable to comparable projects elsewhere. This disadvantages competitors and raises questions about the criteria for qualifying.
The concern is sharper where incentives support luxury developments that largely cater to wealthier buyers and rely heavily on imported materials and fittings. With Sri Lanka needing to strengthen its external position, the government should ask whether import-intensive property is the best use of tax concessions, judging cases by their employment, foreign exchange earnings and economic linkages rather than the scale of investment.
More broadly, differential tax treatment distorts resource allocation. Capital and labour should flow to where they generate the greatest returns to society, but preferential rates raise the after-tax returns of favoured activities relative to others, even when they are not the most productive. The wider the variation in effective tax rates, the greater the inefficiency.
The Port City BPO (Private) Limited received a 25-year tax holiday for an initial investment of USD 500,000, with a commitment to create 2,500 jobs within five years. Employment is an important justification, but it matters whether these jobs go to the domestic workforce. Recent reports that over 14,300 foreign worker visas have been issued under the Port City framework raise questions about who benefits. This highlights the need for greater transparency and monitoring by the Colombo Port City Economic Commission (CPEC) to ensure commitments are met. A 25-year exemption for a modest initial investment requires clear justification, and the resulting domestic employment, investment and economic activity must be proportionate to the revenue forgone.
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The Securities and Exchange Commission of Sri Lanka warmly welcomes the Government’s 2027 Budget and is particularly encouraged that two proposals submitted and consistently advocated by the SEC have been recognized and incorporated into the national budget framework: “A Share for Everyone” and the SME Listing Support Mechanism. These initiatives represent a significant milestone in our collective efforts to deepen Sri Lanka’s capital market, broaden investor participation, and strengthen the link between economic growth and capital formation.
The powers, duties and functions of the Commission include advising the Government on the development of the securities market and assisting in the effective implementation of the policies and programmes of the Government with respect to the securities market. It is in this capacity that the SEC put forward these proposals, and we are pleased to see them taken forward.
The SEC has long emphasized that a vibrant capital market must be accessible to all segments of society. The introduction of “A Share for Everyone”, under the vision of “Let’s Know, Let’s Learn, Let’s Invest,” is a groundbreaking step toward cultivating a new generation of investors. By providing eligible Advanced Level students with an opportunity to enter the capital market and gain firsthand exposure to investing, the programme will enhance financial literacy, promote long-term wealth creation, and foster a culture of informed investment among young Sri Lankans.
Equally important is the introduction of the SME Listing Support Mechanism. Small and Medium Enterprises are the backbone of Sri Lanka’s economy, contributing significantly to employment generation, innovation, and regional economic development. Supporting SMEs to access capital through stock market listings will provide them with new avenues for growth, improve corporate governance standards, enhance transparency, and create a broader range of investment opportunities for the public.
At present, participation in the capital market remains relatively low compared with the country’s full potential. These two initiatives directly address this challenge from both the supply and demand sides. While “A Share for Everyone” aims to expand the investor base and build a stronger investment culture, the SME Listing Support Mechanism will encourage more businesses to enter the market, thereby increasing the diversity and depth of investment opportunities available to Sri Lankan investors.
The SEC is particularly pleased by the Government’s recognition of the important role the capital market can play in Sri Lanka’s economic transformation. A broader investor community and a wider range of listed companies will contribute to improved capital mobilization, increased financial inclusion, enhanced market liquidity, and stronger long-term economic resilience.
We also appreciate the commitment demonstrated through the allocation of resources for these initiatives and the collaborative approach involving the Colombo Stock Exchange and other market stakeholders. This partnership reflects a shared vision of building a more inclusive, dynamic, and accessible capital market ecosystem that benefits students, entrepreneurs, businesses, investors, and the wider economy.
The SEC looks forward to working closely with the Ministry of Finance, the Colombo Stock Exchange, market intermediaries, educational institutions, and industry stakeholders to ensure the successful implementation of these programmes. We are confident that the measures announced in Budget 2027 will serve as catalysts for a new era of capital market participation and contribute meaningfully to Sri Lanka’s economic growth and prosperity.
The SEC extends its sincere gratitude to His Excellency Anura Kumara Dissanayake, President and Minister of Finance, Planning and Economic Development; Hon. Dr. Anil Jayantha Fernando, Deputy Minister of Finance and Planning; Hon. Chathuranga Abeysinghe, Deputy Minister of Industry and Entrepreneurship Development; and Dr. Harshana Suriyapperuma, Secretary to the Treasury, for their support, guidance, and willingness to consider the SEC’s proposals.
“These are not merely budget proposals. They are investments in Sri Lanka’s future investors, future entrepreneurs, and future economic growth. The SEC is proud that these long-standing proposals have been taken into consideration, and we remain committed to ensuring their successful implementation for the benefit of the nation.”
(Securities and Exchange Commission of Sri Lanka)
Continue Reading Business Ceylon Chamber secures new institutional link to Italy’s business network through Unioncamere Agreement Published
Sri Lankan businesses will have new avenues to access the Italian market and establish commercial partnerships following a Memorandum of Understanding (MoU) signed between The Ceylon Chamber of Commerce and Unioncamere, the Italian Union of Chambers of Commerce, Industry, Handicraft and Agriculture. The agreement establishes a framework for direct engagement between the business communities of the two countries, with a focus on trade promotion, investment opportunities and business collaboration.
The signing took place at Unioncamere headquarters in Piazza Sallustio, Italy, with representatives of Unioncamere and the Italian diplomatic mission in attendance. Representatives of the Ceylon Chamber, the Sri Lanka–Italy Business Council (SLITBC) and the Sri Lankan diplomatic mission joined the ceremony virtually from Sri Lanka.
Representing Unioncamere were Andrea Prete, President, and Pietro Infante, Internationalization Manager. The Sri Lankan participants included Satya Rodrigo, Ambassador of Sri Lanka to Italy, Dhawood Amanullan, Minister and Head of Chancellery at the Sri Lankan Embassy in Rome, Damiano Francovigh, Ambassador of Italy to Sri Lanka, Shiran Fernando, Secretary General and CEO of the Ceylon Chamber of Commerce, and Ms. Dushy Jayaweera, President of SLITBC. Daminda Mulgama, Immediate Past President of SLITBC also joined the ceremony virtually, alongside other representatives of both institutions.
The agreement provides a direct institutional link to Italy’s extensive chamber network, creating opportunities for Sri Lankan companies to identify business partners, explore market opportunities and establish commercial relationships. Planned areas of cooperation include business delegations, B2B matchmaking, knowledge exchange and the promotion of trade and investment.
The agreement follows more than a year of engagement initiated by Mr. Daminda Mulgama, Immediate Past President of the Sri Lanka–Italy Business Council, who pursued discussions with Unioncamere over more than a year, including a visit to its headquarters in Italy.
Through the SLITBC, the Ceylon Chamber will work to translate the agreement into greater business engagement, opening further avenues for Sri Lankan companies to connect with Italian counterparts and explore opportunities in the Italian market.
Nations Trust Bank PLC (NTB) recorded a strong financial performance for the nine months ended 30th September 2026, supported by sustained growth across its key business segments and continued earnings momentum. The Bank recorded a Profit After Tax (PAT) of Rs 20 b, while maintaining healthy asset growth and a strong balance sheet during the period.
The Bank continued to build on its performance through a focus on growing its Consumer, Commercial and Corporate Banking businesses, while building service excellence, advancing its digital capabilities and exercising disciplined risk management. This approach enabled NTB to sustain growth while maintaining the quality and resilience of its portfolio.
NTB’s performance was supported by healthy asset growth, stable Net Interest Margins (NIMs) of 5.40%, and disciplined risk management, resulting in a Net Stage 3 Ratio of 0.72%. Return on Equity (ROE) stood at 26.11%, reflecting the Bank’s continued earnings momentum and effective deployment of capital.
Total income grew by 14% during the quarter, partly offset by costs associated with the acquisition of HSBC Sri Lanka’s retail banking portfolio, and Day 1 provisions on the acquired portfolio.
Commenting on the results, Nations Trust Bank Director and Chief Executive Officer, Hemantha Gunetilleke said, “The strong performance that NTB has delivered during the first nine months of 2026 reflects the continued momentum across our businesses and our focus on sustainable growth. We have maintained a clear commitment to strengthening customer relationships and service excellence. As we move into the final quarter of the year, we intend to build on this progress and deliver long-term value for our customers and other stakeholders.”
Nations Trust Bank PLC serves customers across Consumer, Commercial and Corporate Banking segments through an extensive network of physical and digital touchpoints. The Bank remains focused on enabling customers through innovative banking solutions and advanced digital capabilities. NTB is the issuer and sole acquirer of American Express Cards in Sri Lanka and continues to hold a leading position in premium banking.
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