United States cautions Sri Lanka of the pitfalls in going ahead with Colombo Port city project with Chinese assistance

2021-04-13 09:53:50 International Ports News

United States has warned Sri Lanka of the pitfalls in going through the Colombo Port city project and said the city could turn into a money laundering haven according to Sri Lankan media reports.

Sri Lanka has unveiled draft legislation for a Colombo Port City Commission which allows for sweeping tax breaks, tax-free salaries and to be an offshore financial centre.

US Ambassador to Sri Lanka and Maldives, Alaina Teplitz has warned Sri Lanka of unintended consequences of ‘nefarious actors’ who may try to misuse a China-backed Colombo Port City’s easy business rules as a permissive money laundering haven amid concerns of tax leaks.

“Any legislation relating to the port city has to be considered very carefully for its economic impact,” Teplitz told reporters in Colombo in an online discussion.

“And of course among those un-intended consequences could be creating a haven for money launderers and other sorts of nefarious actors to take advantage of what was perceived as a permissive business environment for activities that would actually be illegal.”

The agency running the Port City has powers to exempt businesses from taxes of up to 40 years

The agency running the Port City would have extensive powers to exempt businesses from taxes of up to 40 years, though it is not a tax haven in the traditional sense.

Sri Lanka’s tax revenues have plunged in 2020, raising concerns over debt and the fiscal path, credit downgrades and the ability of the government to provide vital public services to the people, while managing loss-making state enterprises.

Sri Lanka to be careful of what it might be to open doors to bad practice and unfair competition for the rest of the country,” said Teplitz

“I do recognize that the government of Sri Lanka wants to take advantage of the investment that has already been made in creating the Port City foundation, but the legislation really needs to be reflected to address these challenges and to be careful of what it might be to open doors to bad practice and unfair competition for the rest of the country,” said Teplitz.

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