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Sri Lanka Slaps Tax On Foreigners, Raises Defense Budget

Nov. 21, 2013 - 08:54PM   |  
Sri Lankan President Mahinda Rajapakse arrives Nov. 17 at the final working session of the Commonwealth Heads of Government Meeting (CHOGM) in Colombo. (Manjunath Kiran / Getty Images)
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COLOMBO — Sri Lanka slapped a new property tax on foreigners and increased telephone charges in a new budget on Thursday that also included another rise in defense spending four years after the civil war ended.

President Mahinda Rajapakse, who is also the finance and defense minister, told parliament he was raising the telecom tax from 20 percent to 25 percent to rake in more revenue from the rapidly growing industry.

Rajapakse introduced a 15 percent tax on land leased to foreign nationals, slapped a two percent tax on banks and raised duties on the import and export of several commodities.

The estimated revenue from the new measures for 2014 was not immediately clear.

“We will not allow any land to be sold outright to foreigners,” Rajapakse told parliament. “We will charge 15 percent up front on the value of lease agreements with foreigners. They can lease, but not buy land in Sri Lanka.”

A treasury source said foreigners who already own land will not be affected, but they will not be allowed to transfer ownership to non-nationals.

The government had earlier this year announced a complete ban on the sale of real estate to foreigners.

In recent years, foreigners had snapped up prime locations along the island’s southern coast, as well as heritage sites where Portuguese, Dutch and British colonial rulers had their forts.

Tourism has picked up rapidly after troops defeated Tamil Tiger rebels in May 2009 to end 37 years of ethnic bloodshed which according to the UN claimed at least 100,000 lives.

The government allocated a record 253 billion rupees ($1.95 billion) for the defense ministry, despite international pressure to scale down the military after the war.

The 2014 defense budget is marginally higher than the 249 billion rupees budgeted for this year.

The government has not explained the increase, but official sources said the sustained high defense spending included repayments of loans taken out to buy arms at the height of the fighting.

Defense and police together account for nearly 12 percent of the government’s total estimated spending of 2.54 trillion rupees in 2014, marginally lower than the 2.56 trillion this year.

Rajapakse told parliament Thursday that he expected the economy to grow 7.5 to 8 percent in calendar 2014.

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