Sri Lankan businesses that cater to the domestic market alone would struggle as citizens will reduce consumption due to the increase in VAT and income tax, Chairman of the Ceylon Chamber of Commerce (CCC) Duminda Hulangamuwa said in a televised interview recently.

“With an 18 percent VAT and a 36 percent upper threshold in PAYE tax, people will reduce consumption. I told the government that an 18 percent VAT was too much. I told them it would be great if we can keep it at 15 percent. If people reduce the volume of consumption, the government will not be able to achieve tax goals, even if it increases tax to 25 percent,” he said.

Hulangamuwa said that given the current context, the government will have to borrow from the market to meet its needs. When that happens interest rates will go up, he said.

“In this context, tourism is the lowest hanging fruit. We need to change some laws, we need to develop our airport and try to increase the flights that are coming in. I think tourism is the easiest way for us to revitalize the economy. Boosting exports takes at least two to three more years at least,” he said.