Ownership registries

The proposed Port City Commission Bill has opened up public discourse on tax avoidance and tax revenue losses as well as the potential legal and other challenges that could emerge if sufficient transparency is not ensured in the legislation that will eventually be passed in parliament. However, this is a challenge that is not just limited to the Port City, but also Sri Lanka as a whole, and the time has come for the country to consider stronger policies to address tax leakages.  

Cyprus, Ghana and Kenya have become the latest countries to finalise so-called ‘beneficial ownership registries’ that require local companies to declare owners to national authorities. Law enforcement, transparency activists and tax inspectors have long recognised the value of such disclosures in deterring criminals and corrupt officials.

Spurred in part by scandals such as the International Consortium of Investigative Journalists’ 2016 Panama Papers investigation, more and more countries have enacted laws to create such registries or signalled an intention to do so.

Progress has been “considerable,” according to a 2020 review by the Tax Justice Network. As of February 2020, 81 countries approved laws requiring ownership information to be registered with national governments — more than double the number two years earlier. The registries essentially ensure that the Registrar General’s Department, or the Registrar of Companies is entrusted with the verified identities of every person behind each company. These registries are then circulated to other Government Departments, such as Customs and Inland Revenue Departments, so officials can monitor their transactions more efficiently. 

In Kenya, both private and public companies have to be listed in beneficial ownership registries. Kenya’s parliament has also directed the country’s tax office to hire more than 2,000 new employees to track down tax cheats. All companies have to comply with the new regulation by July, according to reports. In response to the growing number of countries pushing companies to declare their ownerships, even Canada has said they will consider a similar step, showing that developing countries can lead the way in combating corruption. 

While beneficial ownership registries of some companies are not publicly available, it does nonetheless provide a starting point for tracking and minimising tax losses. They also mean that whatever tax holidays governments give, companies will be held responsible for sticking to them. The issue of taxes and how they are administered have been a long standing issue, which needs to be addressed with strong policies and long-term commitment. 

Challenged with high debt and desperately in need of investment, the Government has maintained the Port City is an economic imperative. They argue that the Bill will be a catalyst for improving Sri Lanka’s competitiveness at a global scale and will be more efficient than the long-drawn out affair reforms generally tend to be.  

The fate of the Port City Commission Bill is before the Supreme Court, but tax concessions and their impact on larger governance and economic functions deserve a larger public discourse, especially since it is taxes that fund many crucial welfare schemes, including education, healthcare and housing. These are the dividends that will benefit the greater public and truly ensure sustainable development in Sri Lanka.