In the late 1990s, the “Soros Effect” sent shockwaves through Asia. As George Soros and speculative hedge funds moved against the Malaysian Ringgit, the resulting capital flight decimated regional currencies.
Leaders like Mahathir Mohamad realised that short-term “hot money” was a poison; the antidote was long-term capital from the Diaspora—loyal, domiciled citizens living abroad who would bet on their homeland’s future.
Sri Lanka followed suit. Inspired by India’s successful NRI (Non-Resident Indian) dollar bonds, the Government of Sri Lanka introduced the RANSI (Rupee Account for Non-resident Sri Lankan Investment) framework. The deal was simple: bring your hard-earned Dollars, Pounds, and Euros, convert them into Rupees to stabilise our reserves, and in exchange, you get a sovereign guarantee—total tax immunity on your gains and an iron-clad right to repatriate your capital.
Today, that promise is being shredded by the Inland Revenue Department (IRD) in an act of “bureaucratic amnesia” that borders on financial criminality. Yesterday’s Daily FT featured a Guest Column by Chris Dharmakirti titled “The Ghost in the Gazette.” It is worth a re-read (see online https://www.ft.lk/opinion/The-Ghost-in-the-Gazette/14-790493)
For two decades, RANSI investors have been the silent pillars of the economy. They didn’t just bring dollars; they bore the crushing weight of the Sri Lankan Rupee’s depreciation. A dollar brought in during the early 2000s is worth a fraction today in real terms. 90 rupees to the dollar is now 309. A 300% depreciation in value.
Yet, the IRD—ignoring the sovereign risk these investors took—is now attempting to levy “Capital Gains Tax” on property exits. By taxing a “gain” in nominal, depreciated Rupees, the State is effectively taxing a ghost. In original foreign exchange terms, many of these investors have actually lost value.
To tax the “exit” after the investor already saved the State’s FX reserves is not just bad policy; it is Double-Jeopardy.
The IRD’s claim that they are “unaware” of these exemptions is a legal impossibility. The protections are etched into the very fabric of our law:
The Finance Act No. 11 of 2002 (Section 10): Explicitly validated the RANSI framework, giving it the full force of law to implement the budget’s tax-free promises.
The Foreign Exchange Act No. 12 of 2017 (Section 31): Categorically states that every exemption granted under the old Exchange Control Act remains valid and “saved” under the new regime.
The Inland Revenue Act No. 24 of 2017 (Section 203): Mandates that tax holidays and exemptions granted under previous acts MUST continue until they expire.
If the law is this clear, why is the IRD acting as if it doesn’t exist?
The most galling aspect of this betrayal is the inconsistency. If you used your RANSI funds to buy Quoted Shares on the Colombo Stock Exchange or invested in Sovereign Bonds, the IRD leaves you alone. Your gains are recognised as tax-exempt.
But if you invested in Real Property—the most long-term, stable asset class—the IRD suddenly demands a pound of flesh.
This is a blatant violation of Article 12(1) of the Constitution (Right to Equality). The State cannot selectively honour a promise based on the asset class when the conduit and the legal guarantee are identical.
A “Statutory Demand for Performance” has now been served upon the Secretary to the Treasury, the Governor of the Central Bank, and the Attorney General. The demand is clear:
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Stop the coercive TCC demands.
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Issue a Standing Certificate of Exemption for RANSI legacy assets.
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Refund the ultra-vires taxes already snatched from investors.
The Government must realise that investor confidence is a fragile thing. If you renege on a sovereign promise given to your own Diaspora, who will ever trust a «Sovereign Guarantee» from Sri Lanka again?
The 90-day clock for a formal ruling is ticking. If the State fails to act, the next stop unlikely to be a boardroom—it is the Supreme Court for a Fundamental Rights application that the State simply cannot win.
