TAX POLICY DESIGN FOR INDUSTRIAL DEVELOPMENT IN SRI LANKA

The purpose of this study is to develop recommendations for the reform of the corporation income tax system in Sri Lanka in order to improve the fiscal climate for long term industrial investment. The present tax system is characterized by high statutory rates and a wide array of opportunities for tax avoidance. Corporation income tax rates (including surtax) are currently 46% for publicly traded stock companies, 51.75% on privately owned companies, and a rate of 33% on small business enterprises. The tax rates on large companies are high by international standards, particularly for the region.