Business
Sri Lanka’s digital tax dilemma: Balancing IMF demands and election allies
By Sanath Nanayakkare
The government of Sri Lanka is navigating a precarious fiscal tightrope as it has proposed a new tax targeting individuals earning foreign revenue through digital services, a move aimed at bolstering state coffers but risking alienation of a key voter base.
With the International Monetary Fund (IMF) urging reforms to meet a critical revenue-to-GDP ratio, the government has unveiled a tax proposal set to take effect from April 1, 2025. However, the plan has sparked fierce backlash from digital professionals, including freelancers, IT consultants, and remote workers, who warn that the levy could drive an exodus of talent to countries with more favorable tax regimes.
Amid ongoing discussions on the topic, Dr. Harsha Subasinghe, Chairman-CEO of CodeGen and Member of the Port City Commission, expressed concern during a Hiru TV interview yesterday about Sri Lanka’s abrupt hike in digital service tax from 0% to 15%. He warned that this move risks destabilizing the tech industry and driving professionals abroad.
“These professionals are vital to our economy, generating foreign exchange through hard work, strategic marketing, and established global business ties,” he emphasized.
When questioned on why he had not raised the issue directly with the President, Dr. Subasinghe noted, “The Finance Ministry is hyper-focused on meeting IMF conditions to secure scheduled tranches. But what happens if our top USD earners depart? Today’s IT worker here could be in Singapore tomorrow. Many firms have already relocated overseas, and past waves of emigration saw one million professionals leave. This tax could trigger another exodus—there’s little incentive to stay.”
Highlighting broader opportunities, he pointed to AI’s projected USD 2 trillion contribution to the world economy by 2030.
“If Sri Lanka captures 1% of that, we will be able to earn USD 20 billion. But to do that, we need IT talent here. Instead, policies like this risk driving them away,” he said.
However, Professor Anil Jayantha Fernando at a press conference last month emphasised that this particular tax has been misinterpreted, leading to misconceptions in society.
He clarified that the taxation system applies to all income earned within Sri Lanka, whether the source is domestic or international. However, he highlighted that relief measures have been introduced for those earning from digital services compared to other sectors.
“There has been debate about a 15% tax on service exports, with some believing it is an entirely new tax. Under the Income Tax Act, everyone is subject to income tax. However, individuals earning less than Rs. 150,000 per month will be fully exempt from income tax starting in April, regardless of their industry,” he explained.
Speaking further he said:
“If an individual earns Rs. 200,000 per month from providing digital services abroad, the first Rs. 150,000 is tax-free. The remaining Rs. 50,000 falls within the Rs. 85,000 tax bracket, taxed at 6%, amounting to just Rs. 3,000. While other entities face income tax rates of up to 36%, those in the digital services sector are capped at a maximum of 15%. This provides a relative advantage rather than imposing an additional burden. So, the new tax structure is not an unfair imposition but rather a step toward a more balanced taxation system.”
Business
Hour of reckoning comes for SL’s power sector
By Ifham Nizam
A long-delayed reckoning in Sri Lanka’s power sector is finally beginning to take shape—driven less by choice and more by necessity.
At a time when the country’s fragile economic recovery hinges on stability, the electricity sector—long plagued by inefficiency, political interference, and costly dependence on imported fuel—has re-emerged as both a risk and an opportunity.
It is within this context that The Institution of Engineers, Sri Lanka will host a timely and potentially consequential forum on April 2 at the Wimalasurendra Auditorium, focusing on a “Pragmatic Approach to Electricity Sector Reforms in Sri Lanka and the Way Forward.”
This is not just another technical discussion. It is, in many respects, a reality check.
The keynote address by Eng. Pubudu Niroshan—who stood at the centre of recent reform efforts as Director General of the Power Sector Reforms Secretariat—comes at a moment when the gap between policy ambition and execution has become impossible to ignore.
For over three decades, Sri Lanka has spoken the language of reform. Yet, time and again, progress has been derailed by institutional resistance, political hesitation, and an entrenched reluctance to dismantle inefficient structures.
The result is a sector that continues to bleed financially while passing the burden onto consumers and the broader economy.
High electricity tariffs, supply vulnerabilities, and operational inefficiencies are no longer isolated technical issues—they are macroeconomic threats. Industries struggle to remain competitive, investors remain cautious, and households continue to bear rising costs. The over-reliance on imported fossil fuels has only deepened this vulnerability, exposing the country to global price shocks and geopolitical disruptions.
The economic crisis of 2022 briefly forced a shift in thinking. Under severe fiscal pressure, reform was no longer optional. The passage of the Sri Lanka Electricity Act, No. 36 of 2024 was seen as a breakthrough—an acknowledgment that structural change could no longer be postponed.
But legislation alone does not transform systems.
What has followed is a more grounded, outcome-driven approach—one that attempts to move beyond policy rhetoric. Within a relatively short span, the first phase of restructuring has been pushed through, including the repeal of the decades-old CEB Act, No. 17 of 1969, and the unbundling of the monolithic utility into six state-owned entities.
This is, by any measure, a significant structural shift.
Yet, the real test lies ahead.
Unbundling without genuine market discipline risks becoming another cosmetic exercise.
The promise of a competitive National Electricity Market—long discussed but never realized—will depend heavily on regulatory strength, transparency, and political consistency. Without these, the same inefficiencies could simply be replicated across multiple entities.
Moreover, reform cannot succeed in isolation.
Sri Lanka’s energy transition must be anchored in a broader economic strategy—one that aligns power sector reforms with industrial growth, environmental sustainability, and investment policy.
The proposed “Energy Transition Act,” now under consideration, will be a critical piece of this puzzle. If executed with clarity and discipline, it could provide the legal backbone for a coherent and forward-looking energy framework.
The reference to an Integrated Economic Development Framework (IEDF) in the 2026 Budget underscores this necessity. Energy is not a standalone sector—it is the foundation upon which economic recovery will either stand or falter.
What makes this moment different is the absence of alternatives.
Sri Lanka can no longer afford half-measures or delayed decisions. The cost of inaction is too high, and the margin for error too narrow. Reform, in this sense, is no longer a policy preference—it is an economic imperative.
The upcoming forum at The Institution of Engineers, Sri Lanka is therefore more than a professEng. Pubudu Niroshanional gathering. It is a critical platform where technical expertise must confront political reality, and where long-standing assumptions must be challenged.
For years, Sri Lanka’s electricity sector has been caught in a cycle of discussion without delivery. The shift toward a pragmatic approach signals an understanding that outcomes—not intentions—will define success.
The question now is whether that realization will finally translate into sustained, irreversible change.
Because this time, failure is not just an option—it is a risk the country simply cannot afford.
Business
Dialog introduces Samsung Galaxy S26 Series with AI-powered camera and 5G Connectivity
Dialog Axiata PLC, Sri Lanka’s #1 connectivity provider, announced the availability of the Samsung Galaxy S26 Series in Sri Lanka through its retail and digital channels, bringing Samsung’s latest flagship smartphone lineup to local consumers. The series includes the Galaxy S26, Galaxy S26+, and Galaxy S26 Ultra, combining advanced AI-powered capabilities, premium design and next-generation connectivity for everyday mobile use, with customers able to experience the power of Dialog 5G Ultra on the devices.
The Samsung Galaxy S26 Series introduces an AI-powered camera system featuring a 200MP AI-enhanced rear camera with improved low-light performance, advanced zoom and intelligent editing tools for capturing and refining content directly on the device. The lineup also includes Galaxy AI capabilities, a privacy display that limits viewing angles to protect on-screen information, and steady video functionality for smoother and more stable video recording.
The Galaxy S26 Series features Dynamic AMOLED displays across the lineup, including a 6.3-inch Galaxy S26, 6.7-inch Galaxy S26+, and 6.9-inch Galaxy S26 Ultra, supporting smooth performance for streaming, gaming and everyday productivity. The devices are available with 12GB RAM and storage options of 256GB or 512GB, while the Galaxy S26 Ultra also offers a 16GB RAM variant with up to 1TB storage for users requiring additional capacity.
Business
Ideal Motors celebrates gala ‘Excellence Awards’ honouring outstanding performance
The Mahindra Ideal Excellence Awards ceremony, a grand celebration to recognize dealers and other stakeholders of Ideal Motors, was held at the Wave n’ Lake Banquet Hall & Restaurant in Welisara recently.
The event was graced by the presence of special guests including Nalin Welgama, Founder and Chairman Ideal Motors, Dilani Yatawaka, Group Managing Director/CEO Ideal Motors, Nimisha Welgama, Director Legal and Corporate Affairs Ideal Motors, Sachin Arolkar, Head International Operations, Auto Division Mahindra & Mahindra India. Senthil Selvaraju, Head International Operations and Customer Service Automotive Division Mahindra & Mahindra India, Sujeeth Jayant, Country Head Mahindra & Mahindra India and Shitam Kundu, Head Domestic Services Mahindra & Mahindra India.
Also, in attendance from Ideal Motors were Kasun Fernando, General Manager Commercial Vehicle Sales Division, Sameera Bamunuarachchi, Deputy General Manager Spare Parts, Logistics & Inventory and Prasanna Manamperi, Deputy General Manager After Seles Service.
The Excellence Awards ceremony honoured the top sales dealers at the provincial and national levels. Recipients were presented with awards, certificates of merit, and cash prizes in recognition of their achievements. The three best national‑level sales dealers from the various categories were further rewarded with an opportunity to visit Bangkok, Thailand. In addition, special recognition was extended to banks and financial institutions that partner with Ideal Motors.
Speaking at the event, Nalin Welgama Ideal Motors Founder and Chairman said, “When we began our journey with Mahindra in 2009, the previous company had sold 300 vehicles in the country, of which nearly 150 had various defects. At that time our journey began by engaging with the parent company in India and repairing those vehicles free of charge. That commitment has brought us to where we are today. As we believe, our journey truly begins after the sale. We are dedicated to strengthening our customers, and in doing so, strengthening ourselves. That is how we transformed the after‑sales service experience.”
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