Sri Lanka set to end tax breaks for Port City Colombo project

Sri Lanka is set to end tax breaks for the Port City Colombo project being implemented by a Chinese state-run firm as part of commitments under an International Monetary Fund (IMF) bailout package, a move expected to hit the viability of the $1.4-billion venture.

- Rezaul H Laskar

Following the fourth and latest review for Sri Lanka's extended fund facility from the IMF to help overcome the island nation’s worst economic crisis, the government in Colombo has committed to amend the Strategic Development Projects (SDP) Act and Port City Act within this year to introduce “transparent, rules-based, best-practice aligned eligibility criteria for time-bound” incentives and to reduce the length of tax holidays.

There are already significant concerns about the economic viability of Port City Colombo, being developed on 269 hectares by China Harbour Engineering Company (CHEC) as part of Beijing’s Belt and Road Initiative (BRI). CHEC is a subsidiary of state-run China Communications Construction Company (CCCC), which has been on the US sanctions list since 2020 for its role in building militarised structures in South China Sea.