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Simeon Mitropolitski is a Canadian analyst, of Bulgarian origin, and a former syndicated columnist with the Bulgarian News Agency (BTA). He is the author of several hundred articles dealing with hot political and economic topics, both national and international.
He was part of the first group of Bulgarian intellectuals and students that began the opposition movement that finally put an end to the communist regime in this country in 1989, and in 1996-1997 participated in international observation teams during the elections in several Balkan countries - Romania, Albania and Bulgaria.
In 2002 Simeon and his family moved from Bulgaria to Canada where they live now in Montreal, province of Quebec. Simeon is a Master of Political Science from McGill University and a B.A. of Political Science and History.
Global Real Estate Project
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Sri Lanka: Why prohibitive taxes?As one among very few countries in the world that taxes foreign real estate buyers with prohibitive taxes (100 pct of the property value), for Sri Lanka the main question that comes first is why? This article will discuss some of the most common answers that are provided and will give certain priority to some of them as more relevant.
Third World country mentalityOne of the common answers every time when foreign observers see clear incoherence in economic policy in any Third World country, the first thing they look is to link it with the economic backwardness of the country itself. This is, however, a very ethnocentric approach that usually doesn't work, neither in respect to developing countries, nor in respect to developed countries. Let's consider two good illustrations of the point that contradicts this ethnocentric view: first, some developed countries make possible certain coexistence between economic elements that seem inconsistent, even against any market logic. Second, many developing nations despite all efforts to implement on letter every coherent policy designed abroad, remain poor and underdeveloped. Lastly, Sri Lanka isn't only a pariah within the world with its prohibitive taxes, it's also an exception within the Third World; all this makes the "Third World mentality" explanation highly improbable.
Socialist mentalityAnother frequently mentioned explanation is the so-called socialist past of the country. According to it, there is just no market economy in the country; therefore it's logical to expect prohibitive taxes on any large transaction. This argumentation looks more 'scientific', but it also has several flaws. First, the so-called 'socialist' period in Sri Lanka ended at the end of the 1970s, i.e. approximately 30 years ago. Second, in the mean time the local government tried to attract foreign investors in several industries; therefore it really would seem illogical to maintain the prohibitive taxes on small real estate transaction. Third, even during the socialist past, the market economy wasn't annihilated, as for example in most countries in the former Eastern bloc in Eurasia. Some countries, despite their claim to follow more social goals don't interfere with the real estate market. Therefore, this explanation, although slightly better than the first, is also improbable to cause this strange legislation.
Foreign threatThe third explanation puts the answer in the plate of the international relations. According to it, the people of Sri Lanka, more precisely the ethnic majority of the island, fears foreign investors that will buy out the island. The decades of ethnic animosity in some northern regions with ethnic groups that are seen as 'imported' from outside during the period of the British colonialism, makes this explanation highly probabilistic. There is, however, an inherent flaw in this explanation too. Buying real estate in a foreign country doesn't create any legal rights for the country where the buyer comes from. In other words, a citizen of a country X buying property in a country Y doesn't create legal possibility for X to claim parts of the territory of Y, even if the entire territory of Y is bought out by citizens coming from X. On the other hand, such explanation may be used perfectly as ideological smokescreen.
Rent-seeking lobbyThe last explanation is purely rational and in line with dominant economic theories of what happens in our world and why. According to it, a huge number (for the small country of Sri Lanka) of expatriate workers send more than a billion of dollars each year to their relatives in the country. Some of this money goes to the local real estate market. Fearing foreign competition for purely economic reasons, the lobby of locals supports the government in exchange for maintaining the prohibitive taxes on foreigners buying real estate. The weak point in this explanation is that there are very many Third World countries with significant diasporas of expatriate workers, and Sri Lanka is again an exception in their ranks regarding this legislation. Either there is another explanation for this phenomenon, or the real explanation is a certain combination of the foreign threat (real or imaginary) and of the rent-seeking domestic lobby.
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See also the directory of companies providing real estate services in, and general real estate information of Sri Lanka.
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