Based on a new Working Paper by IPS researchers titled ‘Incentivizing Foreign Investment in Sri Lanka and the Role of Tax Incentives’, this article argues that a key medium-term challenge facing the country is to find a balance between providing a competitive tax incentives regime to attract FDI and keeping tax foregone to a minimum in order to preserve domestic revenue.

Yes, tax concessions are a vital component in the SME-strengthening effort, and the Budget 2012 has much to offer for SMEs. But tax concessions should not be thought of as the panacea for the struggles of Sri Lanka’s SMEs. Other issues are often equally constraining, and more needs to be done about them. Ministry of Finance has delivered; it is now time for SME-mandated government institutions to sharpen their focus and address the vital issues

> Guest Article by Prof. Mick Moore* Institute of Development Studies (IDS), University of Sussex, UK In our first guest article on ‘Talking Economics’, British political-economist and taxation specialist, Prof. Mick Moore, argues that, as developing countries strive to move away from their dependence on foreign aid, the discussion on the role of tax in [...]

> by Anushka Wijesinha* and Nethmini Perera (Research Officers – IPS) • Extending PAYE (Pay As You Earn) tax to public employees can raise revenue by 23%, but simultaneous raising of the tax free threshold drops revenue by 40%• Yet, restores private-public employee tax equity and helps expand the tax base Sri Lanka began to [...]

> The following interview with Dr. Saman Kelegama, Executive Director – IPS, appeared in the Business Times on 21st November 2010. http://sundaytimes.lk/101121/BusinessTimes/bt10.html  A few days before President Mahinda Rajapaksa presents the 2011 national budget (takes place tomorrow), Dr. Saman Kelegama, Executive Director, Institute of Policy Studies of Sri Lanka and Member of the Presidential Taxation [...]