{"id":246806,"date":"2026-04-08T14:24:31","date_gmt":"2026-04-08T08:54:31","guid":{"rendered":"https:\/\/www.colombotelegraph.com\/?p=246806"},"modified":"2026-04-15T04:50:56","modified_gmt":"2026-04-14T23:20:56","slug":"sovereign-amnesia-how-sri-lankas-bureaucratic-ego-is-torpedoing-25-years-of-investor-trust","status":"publish","type":"post","link":"https:\/\/www.colombotelegraph.com\/index.php\/sovereign-amnesia-how-sri-lankas-bureaucratic-ego-is-torpedoing-25-years-of-investor-trust\/","title":{"rendered":"Sovereign Amnesia: How Sri Lanka\u2019s Bureaucratic Ego Is Torpedoing 25 Years Of Investor Trust"},"content":{"rendered":"<p><span style=\"color: #ff6600;\"><strong><span class=\"s3\">By\u00a0<a style=\"color: #ff6600;\" href=\"https:\/\/www.colombotelegraph.com\/?s=Chris+Dharmakirti\">Chris Dharmakirti<\/a>\u00a0\u2013<\/span><\/strong><\/span><\/p>\n<div id=\"attachment_149788\" style=\"width: 160px\" class=\"wp-caption alignright\"><img loading=\"lazy\" decoding=\"async\" aria-describedby=\"caption-attachment-149788\" class=\"size-thumbnail wp-image-149788\" src=\"https:\/\/www.colombotelegraph.com\/wp-content\/uploads\/2015\/08\/Chris-Dharmakirti--150x150.jpg\" alt=\"\" width=\"150\" height=\"150\" srcset=\"https:\/\/www.colombotelegraph.com\/wp-content\/uploads\/2015\/08\/Chris-Dharmakirti--150x150.jpg 150w, https:\/\/www.colombotelegraph.com\/wp-content\/uploads\/2015\/08\/Chris-Dharmakirti--50x50.jpg 50w, https:\/\/www.colombotelegraph.com\/wp-content\/uploads\/2015\/08\/Chris-Dharmakirti-.jpg 200w\" sizes=\"auto, (max-width: 150px) 100vw, 150px\" \/><p id=\"caption-attachment-149788\" class=\"wp-caption-text\">Chris Dharmakirti<\/p><\/div>\n<p><span style=\"font-weight: 400;\">In the late 1990s, the &#8220;Quantum&#8221; 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 &#8220;hot money&#8221; flight, the region\u2019s central bankers learned a harrowing lesson: liquid capital is a fair-weather friend.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Seeking to insulate Sri Lanka from a similar contagion, the nation\u2019s financial titans of the era\u2014Central Bank Governor A.S. Jayewardena and Treasury Secretary P.B. Jayasundera\u2014conceived a masterstroke of economic defense.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Their strategy was simple: pivot away from the volatile, short-term &#8220;Share Investment External Rupee Accounts&#8221; (SIERA) that fed the stock market\u2019s whims and court the &#8220;sticky capital&#8221; of the global Sri Lankan diaspora.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">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.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Today, that 25-year-old promise\u2014codified in law and signed in the blood of sovereign commitment\u2014is being shredded by a new generation of bureaucrats suffering from what investors call &#8220;convenient institutional amnesia.&#8221;<\/span><\/p>\n<p><strong><span style=\"color: #ff6600;\">The Math of a Betrayal<\/span><\/strong><\/p>\n<p><span style=\"font-weight: 400;\">To understand the &#8220;RANSI fiasco&#8221; (Rupee Account for Non-resident Sri Lankan Investment), one must look at the math of loyalty.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">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.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">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.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">&#8220;The government asked us to take the full hit of depreciation so they could stabilize the nation&#8217;s reserves,&#8221; says one London-based RANSI investor. &#8220;Now, they want to tax the nominal &#8216;gain&#8217; in rupees on an asset that has effectively lost value in original dollar terms. It isn&#8217;t a tax; it\u2019s a punitive confiscation of capital.&#8221;<\/span><\/p>\n<p><strong><span style=\"color: #ff6600;\">Bureaucratic Ego vs. Statutory Law<\/span><\/strong><\/p>\n<p><span style=\"font-weight: 400;\">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 &#8220;no knowledge&#8221; of the tax-exempt status of RANSI accounts or their successors, the Securities Investment Account (SIA) and the current Inward Investment Account (IIA).<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The IRD\u2019s defense? A claim that the Central Bank and Treasury &#8220;failed to inform them&#8221; two decades ago.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">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 &#8220;grandfathered&#8221; these legacy rights.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">&#8220;Is the IRD policy head truly unaware of the 2002 laws, or is he simply too lazy to dig up the records?&#8221; asks a representative of a diaspora investment group.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">&#8220;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.&#8221;<\/span><\/p>\n<p><span style=\"color: #ff6600;\"><strong>A Dangerous Double Standard<\/strong><\/span><\/p>\n<p><span style=\"font-weight: 400;\">Perhaps the most galling aspect of the IRD\u2019s stance is its inherent contradiction. The department currently honors the CGT exemption for stock market exits via the exact same IIA conduits.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">By recognizing the rights of short-term &#8220;hot money&#8221; 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.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The damage to Sri Lanka\u2019s reputation is already manifesting. In the global race for capital, a nation\u2019s most valuable currency is its word. By allowing bureaucrats to hide behind excuses of &#8220;internal miscommunication&#8221; to overwrite sovereign contracts, Sri Lanka is signaling to the world that its guarantees have an expiration date.<\/span><\/p>\n<p><strong><span style=\"color: #ff6600;\">The Cost of Silence<\/span><\/strong><\/p>\n<p><span style=\"font-weight: 400;\">As the Treasury and the Central Bank remain largely silent, the diaspora\u2014once hailed as the &#8220;patriots of the economy&#8221;\u2014are left asking if they were merely &#8220;foolish&#8221; to trust the state.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The cure is an effortless administrative rectification: a supplementary Gazette to include RANSI\/IIA property exits in the &#8220;Negative List&#8221; of tax clearances.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">But for that to happen, a few high-ranking officials must first admit they were wrong. In Colombo\u2019s corridors of power, it seems that admitting a mistake is a price too high to pay\u2014even if it costs the nation its last shred of investor confidence.<\/span><\/p>\n<p><strong><span style=\"color: #ff6600;\">THE RANSI AUDIT TRAIL<\/span><\/strong><\/p>\n<p><span style=\"font-weight: 400;\">The critical &#8220;missing links&#8221;:\u00a0\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400; color: #ff6600;\"> THE LEGISLATIVE &amp; POLICY FOUNDATION (2000\u20132002)<\/span><\/p>\n<p><span style=\"font-weight: 400;\">1. Verbatim: November 2000 National Budget Speech, presented to Parliament for the 2001 Financial Year.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">&#8220;To encourage Sri Lankans living and working abroad to invest their foreign exchange earnings&#8230; I propose to introduce a special investment scheme [RANSI]&#8230; 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.&#8221;<\/span><\/p>\n<p><span style=\"font-weight: 400;\">2. <\/span>Verbatim: Finance Act, No. 11 of 2002 (The Codification)<\/p>\n<p><span style=\"font-weight: 400;\">Section 10: Validation of Acts done for the purpose of giving effect to the Budget Proposals of 2001\/2002<\/span><\/p>\n<p><span style=\"font-weight: 400;\">&#8220;Every act or thing done or omitted to be done&#8230; by the Minister or the Central Bank of Sri Lanka&#8230; for the purpose of giving effect to the proposals contained in the Budget for the year 2001 and 2002&#8230; shall be deemed to have been and to be, validly and lawfully done and made.&#8221;<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Note: This provision retroactively legalized the RANSI tax-exempt status and the CBSL instructions issued in May 2001.<\/span><\/p>\n<p>3. Verbatim: Inland Revenue Act No. 38 of 2000<\/p>\n<p><span style=\"font-weight: 400;\">Section 9(1): Statutory Exemption<\/span><\/p>\n<p><span style=\"font-weight: 400;\">&#8220;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]&#8230; shall be exempt from income tax, provided such funds were remitted into Sri Lanka in convertible foreign currency.&#8221;<\/span><\/p>\n<p><strong><span style=\"color: #ff6600;\">THE CENTRAL BANK OPERATING FRAMEWORK (2001\u20132013)<\/span><\/strong><\/p>\n<p><span style=\"font-weight: 400;\">4. Verbatim: CBSL Operating Instruction Ref: 06\/04\/05\/2001<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Date: May 28, 2001<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Paragraph 5(ii):<\/span><\/p>\n<p><span style=\"font-weight: 400;\">\u00a0&#8220;The permission of the Controller of Exchange is hereby granted&#8230; to remit abroad the sale proceeds&#8230; 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.&#8221;<\/span><\/p>\n<p><span style=\"font-weight: 400;\">5. <\/span>Verbatim: CBSL Annual Report 2001 (Part III)<\/p>\n<p><span style=\"font-weight: 400;\">&#8220;The RANSI scheme was introduced to provide a seamless portal&#8230; The primary incentive for these investors is the unconditional right of repatriation of both the principal and the appreciation of the asset.&#8221;<\/span><\/p>\n<p><strong><span style=\"color: #ff6600;\">THE 2017 &#8220;GRANDFATHER&#8221; PROTECTION CLAUSES<\/span><\/strong><\/p>\n<p><span style=\"font-weight: 400;\">These provisions are the most important for the current impasse, as they prove the new laws cannot overwrite 2001 rights.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">6. Verbatim: Foreign Exchange Act No. 12 of 2017, Section 31(2)(a): Savings and Vested Rights<\/span><\/p>\n<p><span style=\"font-weight: 400;\">&#8220;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&#8230; given, issued or made under this Act.&#8221;<\/span><\/p>\n<p><span style=\"font-weight: 400;\">7. <\/span>Verbatim: Inland Revenue Act No. 24 of 2017<\/p>\n<p><span style=\"font-weight: 400;\">Section 203(1): Transitional Provisions (Savings of Exemptions)<\/span><\/p>\n<p><span style=\"font-weight: 400;\">&#8220;The repealed Act [Inland Revenue Act No. 10 of 2006] shall continue to apply to\u2014 (b) any tax holiday or exemption granted under the repealed Act&#8230; until the expiration of the period for which the holiday or exemption was granted.&#8221;<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Note: Since the RANSI exemption was granted &#8220;perpetually&#8221; for the life of the investment at the point of entry in 2001, this section mandates that the IRD must continue to honor it.<\/span><\/p>\n<p><strong><span style=\"color: #ff6600;\">THE CONSOLIDATION &amp; GENERAL PERMISSIONS (2013)<\/span><\/strong><\/p>\n<p>8. Verbatim: CBSL Gazette Extraordinary No. 1814\/39<\/p>\n<p><span style=\"font-weight: 400;\">Date: June 12, 2013<\/span><\/p>\n<p><span style=\"font-weight: 400;\">&#8220;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&#8230; under the General Permission granted herein.&#8221;<\/span><\/p>\n<p><strong><span style=\"color: #ff6600;\">THE MEDIA VALIDATION (VERBATIM 2001)<\/span><\/strong><\/p>\n<p>9. The Sunday Times (Business Section) \/ Daily News (2001)<\/p>\n<p><span style=\"font-weight: 400;\">&#8220;The Government has assured that both the principal investment and all realized profits (including capital appreciation) can be remitted abroad&#8230; providing an indemnity from tax inquiry.&#8221;<\/span><\/p>\n<p><strong><span style=\"color: #ff6600;\">THE PROCEDURAL GAP (2024)<\/span><\/strong><\/p>\n<p><span style=\"font-weight: 400;\">10. IRD Gazette No. 2414\/14<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Date: December 11, 2024 | Section 86(7)<\/span><\/p>\n<p><span style=\"font-weight: 400;\">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.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">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 &#8220;Grandfather Clauses&#8221; above to include RANSI exits in the Negative List to prevent a breach of the 2002 Finance Act mandate.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">* The 2002 Act codified the tax-free status.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">* The 2017 Act preserved that status.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">\u00a0* <\/span><span style=\"font-weight: 400;\">Therefore, the 2024 Gazette is incomplete because it fails to list a transaction that the 2017 Act explicitly said must.\u00a0<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p> [&hellip;]<\/p>\n","protected":false},"author":255,"featured_media":230637,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[3,46,8],"tags":[],"class_list":["post-246806","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-colombotelegraph","category-constitutional-reforms","category-editorial"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v26.3 - 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