Good governance activist Chandra Jayaratne has written to the Minister of Investment Promotion requesting clarifications on the controversial casino bill that the Government was proposing to present to parliament but subsequently withdrew for amendment in the face of strong opposition.

Chandra Jayaratne

Referring to the Gazette Notices Issued under Strategic Development Projects Act No.14 of 2008 on 23rd September 2013 Jayaratne asks the Minister to be transparent about the scope of the tax concessions to the resorts operating in the proposed casino zones and the revenue loss to the state from the proposed tax breaks to casinos that will operate under the Strategic Development Act. Jayaratne demands answers from the Minister on 10 key points in the public interest.

His letter to the Minister in full is found below:

28th October 2013

Hon. Minister of Investment Promotion

Ministry of Investment Promotion,

Levels 25 & 26, West Tower,

World Trade Center,

Echelon Square,

Colombo 1.

Dear Mr. Minister,

Clarifications Re; Gazette Notices Issued under Strategic Development Projects Act No.14 of 2008 on 23rd September 2013

I kindly refer you to the two gazette notices issued by you, dated 23rd September 2013, in terms of Sub Section 4 of Section 3of the Strategic Development Projects Act, in connection with the proposed setting up of Integrated Resorts.

In order that the public can assess the long term socio economic benefits to the nation and citizens of Sri Lanka as publicly declared by you, arising consequent to these projects, I would be most grateful if you will kindly, transparently clarify the under noted issues at your earliest convenience;

1. As argued by you, since there are no new licenses being issued and only the currently operating Casinos are to be transferred to these new Strategic development project sites, and operated within these complexes by designated new entities, free of tax or with special concessions, kindly clarify;

• That all casinos operating in Sri Lanka, whether upon payment of the presently levied revenue fees and tax revenue or not, will be compulsorily required to relocate to the designated areas?
• What consequential actions will be taken against Casinos, continuing to operate outside the designated sites, whether they are maintained upon payment of the presently levied revenue fees and tax revenue or not?
• Whether the present Casino operators have the complete freedom to transfer their existing approvals or licenses to any third party of their choice? Or, whether such transfers need formal approval or supervised consent of the state or any state party? And whether such approval or supervised transfer arrangements are subject to any once and for all payment to state revenue?
• Whether, upon such relocation of existing casinos, now coming under a new taxation and concessions regime, there will be a decline in the current state revenues presently generated from existing casinos and if so the estimated annual revenue lost to the state?

2. When, as announced, the Kingsbury project and Casino similar to the projects as referred to in the gazettes is established in D R Wijewardena Mawatha by a Casino license holder, and he transfers all his present operations in to this new site, what will be the revenue losses to the state? and will it not significantly impact on state revenue?

3. Are the taxation of all business activities carried on by the site development designated Companies and their subsidies within these new sites, tax free or with special exemptions? ie. are the benefits of these exemptions and concessions available to all these companies within the holding company group? and if so, will these companies collectively or even the holding company by itself have an unfair competitive tax advantage and concessions advantage over similar business outside of Casino designated areas,  by incorporating within the approved projects the businesses of building, selling and operating

• Apartments,
• hotels
• super markets
• Leisure and Spa Centres
• Sports Centres
• office premises
• Renting advertising space and promotional or service facilities connected to the sites
• Other businesses

4. Have the comparative costs of entry and operation of mega up market Casinos in Sri Lanka, under the concessions as set out in the Gazettes with similar entry costs in other countries been computed? and if so, kindly disclose same? and, if the entry costs in Sri Lanka are negligible in relation to similar costs of entry in other competing nations, what is the justification for such low entry costs in to Sri Lanka? Please place details of the national economic and social cost benefit computations, in justification of Sri Lanka and its people as a nation in the long term conceding optimum comparative national economic potential from such projects? Have you validated that this incremental comparative loss of entry revenue or a part thereof have not been shared with the current license owner and or others by way of undeclared and non taxed transactions?

5. Will, these new projects and existing Casinos licensed and allowed operations without prior agreeing transparently, the applicable regulatory regime and having in place such regimes in effective operation, with an effective enforcement framework, result in a breakdown in required controls over;

• Anti-money laundering
• Revenue and profit accounting for tax
• Exchange Control regulations
• Associated other vices taking place within these premises, eg. trade in sex and narcotics also escaping taxation and control?

6. Were the long term discounted net foreign exchange earnings (including foreign exchange earnings through original investments and expected earnings in foreign currency) from these projects computed? And, if so, please disclose these transparently? And, how do they compare with the government minimum target for approval, which also should also please be disclosed? With similar tax concessions allowed are the comparative long term discounted net foreign exchange earnings of the two projects comparable, and if not which project enjoys the comparative advantage? What were the justifications for giving such an advantage to one project?

7. Were the total long term discounted costs of tax concessions and other benefits extended, including foregone comparative entry costs granted to these two projects computed? And, how do they compare with the long term discounted net national socio-economic value addition expected from these projects? Please disclose details?

8. Were the long term discounted potential negative social costs of introducing and formally recognizing this vice industry, with a state patronage benefits package, computed? If so, please disclose details? And, what impacts will such negative costs make in the evaluations done in terms of (7) above?

9. With you as the Minister publicly stating that similar concessions will be given to all new investors, will it entitle any present holder with multiple licenses, to set up a new project for each of the several licenses now held?

10. Will any operations carried out outside these project sites by the approved owning companies and or their subsidiaries and other entities, in the generation of direct or indirect revenue for these projects and or in servicing the businesses associated with the owning companies, enjoy similar tax benefits and concessions as enjoyed by the gazette entities?

Your early public response will be gratefully appreciated.

Yours Sincerely,

Chandra Jayaratne

Cc; Secretary to H.E the President,

Secretary, Ministry of Finance & Planning

Secretary, Ministry of Economic Development,

Secretary, Ministry of Investment Promotion