By Chris Dharmakirti –

In the late 1990s, the “Quantum” speculation of George Soros sent a seismic chill through the counting-houses of Asia. As the Thai Baht and the Malaysian Ringgit buckled under the weight of “hot money” flight, the region’s central bankers learned a harrowing lesson: liquid capital is a fair-weather friend. 

Seeking to insulate Sri Lanka from a similar contagion, the nation’s financial titans of the era—Central Bank Governor A.S. Jayewardena and Treasury Secretary P.B. Jayasundera—conceived a masterstroke of economic defense.

Their strategy was simple: pivot away from the volatile, short-term “Share Investment External Rupee Accounts” (SIERA) that fed the stock market’s whims and court the “sticky capital” of the global Sri Lankan diaspora. 

The bait for this long-term dollar retention was an ironclad sovereign pact: invest your hard-earned foreign currency in local property and land, absorb the currency depreciation risk for decades, and in exchange, the State would grant a perpetual indemnity from tax inquiry and a total exemption from Capital Gains Tax (CGT) upon exit.

Today, that 25-year-old promise—codified in law and signed in the blood of sovereign commitment—is being shredded by a new generation of bureaucrats suffering from what investors call “convenient institutional amnesia.”

The Math of a Betrayal

To understand the “RANSI fiasco” (Rupee Account for Non-resident Sri Lankan Investment), one must look at the math of loyalty. 

In 2001, a diaspora investor converting dollars to rupees did so at approximately 90 LKR/USD. Fast forward to 2026, and that same investor faces a currency that has cratered by over 300%, trading near 310 LKR/USD.

The promised tax exemption was never an act of charity; it was the only fiscal parachute designed to offset the inevitable erosion of the rupee. 

“The government asked us to take the full hit of depreciation so they could stabilize the nation’s reserves,” says one London-based RANSI investor. “Now, they want to tax the nominal ‘gain’ in rupees on an asset that has effectively lost value in original dollar terms. It isn’t a tax; it’s a punitive confiscation of capital.”

Bureaucratic Ego vs. Statutory Law

The current impasse centers on a half-baked Inland Revenue Department (IRD) Gazette issued in 2024. In a startling display of professional negligence, senior policy officials at the IRD now claim they have “no knowledge” of the tax-exempt status of RANSI accounts or their successors, the Securities Investment Account (SIA) and the current Inward Investment Account (IIA).

The IRD’s defense? A claim that the Central Bank and Treasury “failed to inform them” two decades ago.

However, the paper trail is irrefutable. The tax-exempt status was not a mere administrative suggestion; it was a cornerstone of the 2000 Budget Proposals and was formally codified under the Finance Act No. 11 of 2002. Furthermore, the Foreign Exchange Act No. 12 of 2017 (Section 31) explicitly “grandfathered” these legacy rights.

“Is the IRD policy head truly unaware of the 2002 laws, or is he simply too lazy to dig up the records?” asks a representative of a diaspora investment group.

“To claim ignorance of a parliamentary act that codified a national investment strategy is a staggering admission of incompetence. To then use that ignorance to justify a flawed 2024 Gazette is an act of pure bureaucratic ego.”

A Dangerous Double Standard

Perhaps the most galling aspect of the IRD’s stance is its inherent contradiction. The department currently honors the CGT exemption for stock market exits via the exact same IIA conduits.

By recognizing the rights of short-term “hot money” traders while penalizing the long-term property investors who stayed through war and economic collapse, the IRD has created a discriminatory double standard that violates Article 12(1) of the Constitution.

The damage to Sri Lanka’s reputation is already manifesting. In the global race for capital, a nation’s most valuable currency is its word. By allowing bureaucrats to hide behind excuses of “internal miscommunication” to overwrite sovereign contracts, Sri Lanka is signaling to the world that its guarantees have an expiration date.

The Cost of Silence

As the Treasury and the Central Bank remain largely silent, the diaspora—once hailed as the “patriots of the economy”—are left asking if they were merely “foolish” to trust the state.

The cure is an effortless administrative rectification: a supplementary Gazette to include RANSI/IIA property exits in the “Negative List” of tax clearances.

But for that to happen, a few high-ranking officials must first admit they were wrong. In Colombo’s corridors of power, it seems that admitting a mistake is a price too high to pay—even if it costs the nation its last shred of investor confidence.

THE RANSI AUDIT TRAIL

The critical “missing links”:  

THE LEGISLATIVE & POLICY FOUNDATION (2000–2002)

1. Verbatim: November 2000 National Budget Speech, presented to Parliament for the 2001 Financial Year.

“To encourage Sri Lankans living and working abroad to invest their foreign exchange earnings… I propose to introduce a special investment scheme [RANSI]… Investments made through these accounts will be indemnified from tax inquiry and all realized profits, including capital gains, will be permitted to be repatriated tax-free.”

2. Verbatim: Finance Act, No. 11 of 2002 (The Codification)

Section 10: Validation of Acts done for the purpose of giving effect to the Budget Proposals of 2001/2002

“Every act or thing done or omitted to be done… by the Minister or the Central Bank of Sri Lanka… for the purpose of giving effect to the proposals contained in the Budget for the year 2001 and 2002… shall be deemed to have been and to be, validly and lawfully done and made.”

Note: This provision retroactively legalized the RANSI tax-exempt status and the CBSL instructions issued in May 2001.

3. Verbatim: Inland Revenue Act No. 38 of 2000

Section 9(1): Statutory Exemption

“The profits and income arising to any person from any investment made through a Special Account approved by the Central Bank of Sri Lanka for non-resident investors [RANSI]… shall be exempt from income tax, provided such funds were remitted into Sri Lanka in convertible foreign currency.”

THE CENTRAL BANK OPERATING FRAMEWORK (2001–2013)

4. Verbatim: CBSL Operating Instruction Ref: 06/04/05/2001

Date: May 28, 2001

Paragraph 5(ii):

 “The permission of the Controller of Exchange is hereby granted… to remit abroad the sale proceeds… This includes the original capital, any interest, dividends, and the realized capital gains. No further individual approval from the Department of Exchange Control is required.”

5. Verbatim: CBSL Annual Report 2001 (Part III)

“The RANSI scheme was introduced to provide a seamless portal… The primary incentive for these investors is the unconditional right of repatriation of both the principal and the appreciation of the asset.”

THE 2017 “GRANDFATHER” PROTECTION CLAUSES

These provisions are the most important for the current impasse, as they prove the new laws cannot overwrite 2001 rights.

6. Verbatim: Foreign Exchange Act No. 12 of 2017, Section 31(2)(a): Savings and Vested Rights

“Every permission, exemption, direction, notice, order or other thing given, issued or made under the repealed Act [Exchange Control Act] and in force on the day immediately preceding the date of the commencement of this Act, shall, in so far as it is not inconsistent with the provisions of this Act, be deemed to be a permission, exemption, direction… given, issued or made under this Act.”

7. Verbatim: Inland Revenue Act No. 24 of 2017

Section 203(1): Transitional Provisions (Savings of Exemptions)

“The repealed Act [Inland Revenue Act No. 10 of 2006] shall continue to apply to— (b) any tax holiday or exemption granted under the repealed Act… until the expiration of the period for which the holiday or exemption was granted.”

Note: Since the RANSI exemption was granted “perpetually” for the life of the investment at the point of entry in 2001, this section mandates that the IRD must continue to honor it.

THE CONSOLIDATION & GENERAL PERMISSIONS (2013)

8. Verbatim: CBSL Gazette Extraordinary No. 1814/39

Date: June 12, 2013

“Authorized Dealers are permitted to remit such proceeds abroad, including capital gains, provided the initial investment was made through a RANSI or SIA account, without the requirement for individual Tax Clearance Certificates… under the General Permission granted herein.”

THE MEDIA VALIDATION (VERBATIM 2001)

9. The Sunday Times (Business Section) / Daily News (2001)

“The Government has assured that both the principal investment and all realized profits (including capital appreciation) can be remitted abroad… providing an indemnity from tax inquiry.”

THE PROCEDURAL GAP (2024)

10. IRD Gazette No. 2414/14

Date: December 11, 2024 | Section 86(7)

The Problem: Section 3 of this Gazette (The Negative List) facilitates TCC-free exits for Quoted Shares and Bonds but omits RANSI/SIA property exits.

The Legal Remedy: Under Section 203 of the IR Act (2017) and Section 31 of the FX Act (2017), this omission is a technical error. The Commissioner General is bound by the “Grandfather Clauses” above to include RANSI exits in the Negative List to prevent a breach of the 2002 Finance Act mandate.

* The 2002 Act codified the tax-free status.

* The 2017 Act preserved that status.

 * Therefore, the 2024 Gazette is incomplete because it fails to list a transaction that the 2017 Act explicitly said must.