The Government has allocated over Rs. 31 billion this year to develop the digital economy and engage with industry leaders to create a roadmap that balances taxation with growth incentives, Deputy Minister of Digital Economy, Eranga Weeraratne stated in a media release.
Excerpts of the release:
The Ministry of Digital Economy, in collaboration with industry stakeholders, is actively engaging to ensure that Sri Lanka remains a competitive and attractive hub for digital services, regionally and globally.
The introduction of new tax policies, while impacting stakeholders, is being met with a proactive approach by the Government and industry leaders to mitigate negative consequences and capitalise on long-term opportunities.
A key aspect of the Government’s fiscal strategy has been to ensure a level playing field by requiring all companies —local and international — to pay tax. Historically, non-domiciled digital service providers had an advantage over local companies, as they were not required to pay taxes for services offered within Sri Lanka. This policy shift is expected to generate additional revenue for the Government while ensuring fairness in the market.
However, concerns have been raised regarding the potential implications of increased taxation on digital exports and freelancers, as this may encourage relocation of businesses and banking operations to more tax-friendly jurisdictions. Despite these challenges, the Ministry of Digital Economy, in collaboration with key industry organisations, is focused on implementing measures to sustain and enhance the growth of the digital economy. Several strategies are being explored to provide relief and long-term benefits to industry players. These include concessionary loan schemes, investment in skill development, improved digital infrastructure, and the creation of IT parks and co-working spaces to foster innovation and entrepreneurship.
The Government is in the process of creating a $50 million Fund-of-Funds to attract global investors, with the aim of supporting startups, promoting intellectual property creation, and advancing the Sri Lanka HQ strategy. Another major initiative under consideration is the expansion of GovPay, a digital platform aimed at modernising government payments, reducing fraud and corruption, and streamlining revenue collection.
The Government will relaunch the QR-based payment service with an almost zero Merchant Discount Rate (MDR), along with incentives for receiving payments through digital methods and additional measures to encourage digital payments.
The Government and the digital industry remain committed to achieving the ambitious targets set for 2030, with a vision of growing Sri Lanka’s digital economy to $15 billion and reaching $5 billion in digital exports, the release further stated.
