Rifka Ziyard
With a special allocation of Rs. 8,000 million to expand the technology sector and another Rs 10,000 million to establish techno parks, no doubt Information technology could be identified as a star sector in the Budget 2021.
The Honourable Prime Minister Mahinda Rajapaksa in his capacity as the Finance Minister delivering the Budget Speech 2021 on 17th November 2021, shared the Government aspiration to create a techno- entrepreneur led economy which would contribute to the increase of exports and foreign earnings from the technology field. He shared that the Government intends to establish 5 fully-fledged plug and play Techno Parks in Galle, Kurunegala, Anuradhapura, Kandy and Batticaloa districts.
Colombo Times spoke to Imran Furkan FCPA, FCMA, MBA, the Chief Executive Officer Tresync and former CEO of the Sri Lanka Association for Software Services Companies (SLASSCOM) to understand the key impact stemming from Budget 2021 on IT & BPO sector. Imran is based in Australia and Sri Lanka.
Imran tags this as a dream budget for the IT/BPM industry. The National Export Strategy of Sri Lanka aims to generate USD 5.0 billion of revenue creating 200,000 direct jobs and establish 1000 IT/BPM startups via the IT/BPM industry. He further added “This budget clearly codified this message through incentivizing the IT/BPM industry as a thrust or core industry. Imran explained that the proposal to remove income tax on earning from both domestic and foreign sources by those engaged in businesses in Information Technology and enabling services (resident & nonresident) is the highlight of the Budget 2021 in his view.
“The IT/BPM industry requires little capital, can grow exponentially very fast and can help prevent brain drain while offering the capacity to grow internationally as well. Removing all taxes would influence more people to get into the industry while also helping attract Sri Lankan diaspora to invest in Sri Lankan startups plus return to the country to work in this industry” said Imran.
Imran was particularly impressed with the proposal to provide concessions up to 10 years for investments more than USD 10 million for export industries including information technology under the Strategic Development Act as it gives long term certainty for larger projects. Therefore, the budget meets the requirements of the IT/BPM Industry in terms of generous tax exemptions he added.
On concessions provided to encourage listing, Imran added “Many local startups such as Pickme are now ready to list. Hence the partial tax holidays and concessionary tax rates for such companies that are listed before 31 December 2021 will encourage more listings of IT/BPM companies and let the general public benefit from the growth of the IT/BPM industry”.
The budget aims to create Digital Governance using Information Technology and the budget speech refers to “Establishment of an international e-commerce and e-payment systems, the high speed data exchange system and the related mobile network systems are investment priorities”. This would offer many opportunities for the IT/BPM industry to be partners said Imran.
He further explained, the intention to introduce laws relating to data security, cyber security and intellectual property rights which I have been personally pushing for will protect IT/BPM stakeholders and help establish the country as favoured investment destination. Creating a ‘Technology based society and digitally inclusive Sri Lanka” is the government’s vision. Under this the “Gamata Sanniwedanaya” (Communication for the Village) aims to grow the Telecom infrastructure to provide high speed access across the country which will permit the IT/BPM industry to be located anywhere.
Imran highlighted that another welcome proposal in budget 2021 is the proposal to provide loans of Rs.500,000 at an interest rate of 4 percent as start-up capital to support the young men and women, who start their own businesses on the successful completion of vocational education. This loan scheme will have a grace period of one year for both principal and interest, with a further 4 years to settle the loan. This will help encourage many new IT/BPM start-ups in Sri Lanka.
Imran commenting on what he identifies as a ‘dream budget for IT/BPO sector’ said “the Budget 2021 addresses the full IT/BPM ecosystem from startups to more established businesses and new listings and encouraged”.
(The above only considers certain proposals impacting the IT/BPO industry and is not an exhaustive list of proposals. Please refer link for the full budget speech http://www.treasury.gov.lk/budget/speeches )