Business

Ernst & Young flags trust deficit as Sri Lanka’s new VAT refund system faces reality check

Published

4 months ago

2026/06/1

Colombo — Sri Lanka’s ambitious risk-based VAT refund system, designed to fast-track refunds for compliant exporters within 45 days, is colliding with a stubborn reality: businesses don’t trust what they cannot see.

According to a recent webinar hosted by the International Chamber of Commerce Sri Lanka (ICCSL), where Ernst & Young Principal – Tax Velauthaplillai Shakthivel served as a key panellist, the reform carries genuine promise—but also genuine anxiety among taxpayers .

The new framework, supported by International Monetary Fund technical experts, classifies taxpayers into low, medium and high-risk categories. In theory, low-risk businesses receive refunds swiftly while questionable claims face closer scrutiny. But during the ICCSL discussion, which also featured KPMG Principal Rifka Ziyard and IRD Commissioner P. Disabandara, a recurring theme emerged: uncertainty breeds suspicion .

“We want to comply,” one participant noted, “but we also need to know the rules and trust that the system is fair and working” .

The concerns raised were practical, not ideological. Businesses asked: How exactly are risk levels assigned? Is the RAMIS tax administration system ready? Are IRD officers adequately trained? Most urgently, what happens to longstanding refund backlogs that predate the new system? Some participants reported that older claims appear to be treated less favourably than those filed under the new rules .

Ernst & Young’s presence on the panel was significant. As one of Sri Lanka’s leading professional services firms, EY has long advised exporters that cash flow disruptions from delayed refunds can cripple operations—particularly for small and medium enterprises still recovering from the economic crisis. The firm’s involvement signals that the private sector is watching implementation closely.

ICCSL Chairman Shanil Fernando opened the session by reassuring businesses that the new system “isn’t meant to intimidate” but rather to modernise processing . Yet trust, as several participants stressed, is not granted by speeches—it is earned through transparency.

The remedy proposed by stakeholders was telling. Businesses suggested interactive tools comparable to credit scoring systems used in banking—an online dashboard showing a taxpayer’s risk rating and offering practical guidance for improving it . Such a system would replace suspicion with predictability, allowing firms to understand exactly where they stand.

The stakes are high. For an export-dependent economy rebuilding after crisis, delayed VAT refunds act as an invisible tax—strangling working capital, delaying payroll, and eroding competitiveness. If the new risk-based system becomes a black box, it will replicate the very inefficiencies it was meant to solve.

As Sri Lanka continues its fiscal recovery under IMF guidance, the message from the ICCSL webinar was unambiguous: policy design alone is insufficient. Public confidence must follow. And with Ernst & Young and other leading firms keeping a watchful eye, the IRD now faces a credibility test it cannot afford to fail .

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Business

ADB approves $100 million loan to boost skills development and jobs for youth in Sri Lanka

Published

13 hours ago

2026/10/2

Thilina Walpola

The Asian Development Bank (ADB) has approved a $100 million results-based loan to help Sri Lanka transform its technical and vocational education and training (TVET) system, equip more young people with industry-relevant skills, and strengthen the country’s competitiveness and inclusive growth.

The Skills Development System Transformation Program will support the Government of Sri Lanka’s efforts in improving the quality and relevance of skills training, strengthening links between training providers and industries, and expanding employment opportunities for youth. The program will increase women’s employment opportunities in nontraditional jobs in fields including automotive technology, engineering, information and communications technology, construction, and renewable energy.

“A skilled workforce is essential to Sri Lanka’s long-term economic transformation and competitiveness,” said ADB Country Director for Sri Lanka Shannon Cowlin. “This program will help create stronger pathways from education to employment by making training more responsive to industry needs, expanding opportunities for young people and women, and ensuring that graduates have the skills required by a modern and evolving economy.”

Though Sri Lanka’s economy is recovering, it faces skills shortages in priority sectors, high youth unemployment, and low female labor force participation. Many employers report difficulty finding workers with the skills needed in a changing economy.

Aligned with the Government of Sri Lanka’s Technical and Vocational Education and Training Sector Strategic Framework 2026–2035, the nationwide program will be implemented from 2027 to 2031 and is expected to directly benefit more than 100,000 young people through improved access to quality, employment-oriented training.

Business

USD 40.84m pipeline to secure aviation fuel supplies to BIA

Published

13 hours ago

2026/10/2

Thilina Walpola

By Ifham Nizam

The government has cleared a USD 40.84 million and Rs. 8,548.75 million contract to build a dedicated aviation fuel pipeline from Muthurajawela to Bandaranaike International Airport (BIA), alongside a massive new fuel storage facility with a capacity of 92,000 cubic metres.

Energy Minister Anura Karunatilaka said the project represented a major investment in strengthening the infrastructure underpinning Sri Lanka’s aviation fuel supply and ensuring more reliable fuel availability at the country’s main international airport.

‘This project will provide the infrastructure required to strengthen the reliability and continuity of aviation fuel supplies to Bandaranaike International Airport, Karunatilaka said.

The contract has been awarded to China Petroleum Pipeline Engineering Company Limited, following an international competitive procurement process in which three bids were received.

The project will see a new aviation fuel storage tank complex constructed at Muthurajawela, together with the associated infrastructure required for handling and transferring aviation fuel.

Business

CSE activity up, turnover weak at Rs. 1.4 billion

Published

13 hours ago

2026/10/2

Thilina Walpola

By Hiran H Senewiratne

Trading activity on the Colombo Stock Exchange (CSE) gathered pace yesterday as global fuel prices began to show signs of easing, according to market analysts.In this context, both indices moved upwards. All Share Price Index up by 67.97 points while S and P SL20 up by 8.30 points.

Turnover stood at Rs 1.4 billion with seven crossings. Those crossings were reported in Sampath Bank 1.7 million shares crossed to the tune of Rs 238 million and its share price traded at Rs 140, Access Engineering two million shares crossed to the tune of Rs 159 million and its share price traded at Rs 79.50, LOLC one million shares crossed to the tune of Rs 129 million and its share price traded at Rs 129, HNB 100,000 shares crossed to the tune of Rs 38.4 million and its share price traded at Rs 384, JKH 1.9 million shares crossed to the tune of Rs 35 million and its share price traded at Rs 18.60, Hayleys 100,000 shares crossed to the tune of Rs 22.50 million and its share price traded at Rs 225 and Richard Pieris 847,000 shares crossed to the tune of Rs 22 million and its share price traded at Rs 25.50.

In the retail market top seven companies that have mainly contributed to the turnover were Sampath Bank Rs 114 million (813,000 shares traded), JKH Rs 100 million (5.3 million shares traded) LB Finance Rs 49 million (325,000 shares traded), HNB Finance Rs 30 million (27 million shares traded), HNB Rs 27 million (70000 shares traded), NTB Rs 25 million (82000 shares traded ) and Lanka IOC Rs 21 million (666,000 shares traded). During the day 65 million shares volumes changed hands in 10433 transactions.

The Banking and manufacturing sector counters performed well. In the banking sector Sampath Bank let the market while manufacturing sector especially JKH also significantly performed well. With the fuel revision Land IOC also a significant stock at the floor.

Meanwhile, First Capital Treasuries said that Ramesh Schaffter resigned as a Non-Independent Non-Executive Director with effect from October 1, to facilitate the restructuring of the company’s board.

Yesterday the Central Bank announced the US Dollar rate as against rupee. The rupee was quoted flat at Rs 330.65/80 to the US dollar in the spot market , while bond yields dropped, dealers said.