Sri Lanka revives stock trade levy after opposition to Capital Gains Tax

Reuters: The Bourse will re-impose a 0.3% Share Transaction Levy it stopped in January, an exchange official said on Tuesday, after a proposal to tax capital gains met strong opposition amid a foreign outflow from the stock market.

Prime Minister Ranil Wickremesinghe on 8 March proposed to impose a Capital Gains Tax for the first time since 1987 as the country faces a debt trap, partly due to infrastructure borrowing by the previous Government.

Since the announcement, the Bourse has seen about Rs. 3.8 billion ($26.22 million) in foreign outflows, Bourse data showed.

“There will be 0.3% Share Transaction Levy as it was until January,” Rajeeva Bandaranaike, Chief Executive of the Colombo Stock Exchange, told Reuters.

The levy, which helped to raise Rs. 1.5 billion last year, would be re-imposed from Friday, he said.

Every buyer and seller will have to pay 0.3% on the turnover of their share-trading transactions, the Bourse said in a statement.

Stockbrokers and analysts expect investors to respond positively.

“Though there is a charge, it is better than a Capital Gains Tax,” said Dimantha Mathew, Head of Research, First Capital Equities Ltd.