Features
Sri Lanka’s Tax Conundrum – 2025
The eagerly awaited Performance Report of the Inland Revenue Department (IRD) for 2024 has recently been published. It offers some context regarding the IRD’s tax collections. There is room for wider disclosure that would improve transparency. The timeliness of the report’s release could also be considerably enhanced. After all, most large corporations listed on the Colombo Stock Exchange publish their Annual Reports within two months of the financial year’s end.
Sri Lanka’s fiscal challenges remain pressing, despite the strong headline growth in Inland Revenue Department (IRD) collections for 2024. The performance report shows an impressive 44% increase in collections, reaching Rs. 2.6 trillion compared to Rs. 1.8 trillion in 2023.
However, this growth has been heavily skewed towards indirect taxes, particularly Value Added Tax (VAT), whose collections increased by nearly 89%. The structural imbalance between direct and indirect taxes has widened once again, with the ratio shifting from 50:50 in 2023 to 40:60 in 2024.
While VAT reforms, including higher rates and lower registration thresholds, have expanded collections, income tax performance remains weak. The Rs. 1 trillion collected from income taxes conceals significant inequities: fewer than 1 million individuals out of a workforce of over 8 million are within the tax net, and a very small segment of high-income earners shoulder a disproportionate share of the personal income tax burden. This situation is both socially and economically unsustainable.
Recent reports, including the World Bank’s Public Finance Review and commentary from international experts such as Professor Mick Moore, highlight systemic weaknesses in Sri Lanka’s tax administration. Outdated methods, inadequate human resource planning, and governance failures at the IRD undermine enforcement and modernization. Structural reforms, particularly digitization, improved compliance enforcement, and the recruitment of skilled professionals, are essential to move away from reliance on regressive indirect taxation.
Revenue Performance: Headline Gains but Fragile Foundations
The IRD’s collection of Rs. 2.6 trillion in 2024 is unprecedented in nominal terms. VAT alone contributed an additional Rs. 615 billion, nearly doubling year-on-year. This sharp increase is attributable to two main factors: the rate hike, which saw VAT increase to 18% from 15%. – Wider base: The registration threshold was reduced from Rs. 80 million to Rs. 60 million annually, pushing the number of VAT-registered establishments to 21,227—a 53% increase.
However, reliance on VAT has shifted the tax mix towards indirect taxes. The direct-to-indirect ratio dropped back to 40:60, weakening equity. Indirect taxes, by their nature, impact lower-income households more heavily, increasing inequality.
In contrast, income tax collections reached Rs. 1 trillion in 2024—a modest 13% increase from the previous year. Given the urgent need to expand the tax base, this figure highlights the limited success of enforcement and compliance efforts.
Who Pays Income Tax?
Income tax collections reveal the narrowness and inequities of Sri Lanka’s direct tax base:
– Corporate income tax, Rs. 582 billion, from 100,049 companies. The collection represents an increase of 5% over 2023.
– Personal and partnership income tax: Rs. 442 billion from 976,498 individuals and 16,227 partnerships. The collection represents an increase of 26% over 2023.
In the year 456,035 new taxpayers were added to the tax base (mostly individuals). However, the report fails to disclose how much additional revenue these new taxpayers contributed. Such disclosure would improve transparency and might also help dispel the feeling that the IRD is squeezing the same lemon!
Similarly, revealing how many of the registered companies actually pay income tax would promote greater transparency.
The Rs. 442 billion collected as personal income tax has been broken down as follows:
Advance Personal Income Tax (APIT) – private sector employees: Rs. 198 billion.
Advance Income Tax on bank interest payments: Rs. 66 billion.
Advance Income Tax from specified fees and others: Rs. 98 billion.
The APIT collection from private sector employees increased by Rs. 53 billion in 2023, representing a 36% rise. There is a shortfall of Rs. 81 billion in Non-Corporate Income Tax that I could not find in the report.
Private Sector Advance Personal Income Tax Data
A new table in the performance report sheds light on who pays income tax through Advance Personal Income Tax (APIT):
This table highlights three key issues: – Even in the formal private sector, 77% of employees pay no income tax as their earnings fall below the income tax-free threshold. – A very small group (61,293 individuals) accounts for over three-quarters of APIT paid.
With the 2025 increase in the tax-free threshold to Rs. 1.8 million, around 275,000 employees will exit the tax net, further narrowing the base.
Tax Return Compliance
It is compulsory for those liable to income tax to submit a tax return by 30th November following the end of the tax year, detailing their income for the year, as well as assets owned, and liabilities owed. According to the IRD, very few companies and individuals submit their returns on time.
Only the large Corporate Taxpayers, numbering 621, achieved a 93% compliance rate. Of the remaining 91,183 companies, only 26,241 submitted their returns on time, which corresponds to a compliance rate of 29%.
The compliance rate among individual taxpayers is also very poor, with only 110,240 out of 792,530 submitting their returns on time, resulting in a compliance rate of just 24%.
Failing to submit tax returns on time does not necessarily mean taxpayers are evading taxes, but assuming so is reasonable.
World Bank’s Public Finance Review 2025
The World Bank’s Report Towards a Balanced Fiscal Adjustment highlights the fragility of Sri Lanka’s revenue model: – 75% of revenue gains since 2022 came from indirect taxes (VAT, SSCL, excise duties). – Regressive impact: VAT consumes 5.3% of pre-fiscal income for the poorest decile, compared to 3.3% for the richest. – Poverty impact: The 2024 VAT hike alone increased poverty by 2.2 percentage points. – Sustainability concerns: Reliance on indirect taxation is not only socially unjust but also economically unsustainable.
The report calls for digitization and comprehensive reform of the IRD, emphasizing the need for better sequencing, resourcing, and HR capability development. It also warns against the “easy option” of squeezing a narrow taxpayer base, urging policymakers to prioritize compliance enforcement and structural reforms.
Professor Moore’s Perspective: 20 Years Behind many African Countries
Professor Mick Moore, a leading political economist on taxation, argues that Sri Lanka’s IRD is as outdated as its Customs Department—lagging 20 years behind even many African peers. He highlights systemic failures: – Low compliance: e.g., only 20,000 of 110,000 businesses in Colombo pay local property tax. – Outdated practices: reliance on manual processes and weak data integration. – Poor HR systems: lack of skilled recruits, minimal training, and outdated promotion practices.
Moore stresses that enforcement should target large businesses and high-value taxpayers, rather than informal operators. He says that without skilled staff, modern audits, and investment in IT/data analytics, Sri Lanka cannot close its revenue gap.
Human Resource and Institutional Challenges
The IRD’s own performance report presents a grim view of institutional capacity: – Approved cadre: 1,639 officers. – Vacancies: 227 (14%). – Ageing workforce: 33% of staff are aged 51–60, with most serving over 15 years. – Promotion bottlenecks: Dozens of senior positions remain in “acting” status due to Public Service Commission delays, causing staff dissatisfaction and demotivation.
Compounding the problem, earlier officer-level recruitment was halted by trade union pressure, resulting in the discontinuation of the Tax Officer and Assessor posts. New recruits are now directly appointed as Assistant or Deputy Commissioners, roles that were previously reserved for experienced officers. This undermines institutional knowledge and succession planning. I understand that between 2007 and 2017, there was no recruitment to the officer cadre.
The lack of skilled professionals in IT, data science, and financial analysis has left the IRD unprepared for digitisation and modern enforcement.
Policy Implications and Reform Agenda
Sri Lanka cannot rely solely on rate hikes and regressive indirect taxes to fund its budget. The IRD’s weaknesses demand urgent reform. Some of the key initiatives identified by agencies and experts include:
· Digitisation and Data Integration
· Build a modern, unified tax administration platform integrating VAT, income, excise, and customs data.
· Use third-party data (banks, utilities, property registries, travel agents) to cross-check declarations and expand the net.
· Broadening the Tax Base
· Enforce compliance among high-income professionals and self-employed groups who are currently under-reporting.
· Strengthen property taxation, aligning municipal and IRD databases.
· Human Resource Overhaul
· Recruit IT specialists, data analysts, and forensic accountants.
· Reform promotions to be performance-based rather than seniority-based.
· Resolve acting appointments to restore morale and accountability.
· Targeted Enforcement
· Prioritize audits on large businesses, high-net-worth individuals, and multinational corporations.
· Avoid excessive focus on small informal operators, who contribute little revenue but face disproportionate harassment.
· Institutional Independence and Governance
· Strengthen the autonomy of the IRD to shield it from political interference.
· Ensure stable leadership and merit-based recruitment.
Conclusion
The 2024 IRD performance report highlights both achievements and vulnerabilities. The revenue increase of Rs. 800 billion over 2023 is genuine but relies heavily on regressive VAT hikes, rather than on structural reforms or a broader tax base. Income tax remains underdeveloped, with fewer than 12% of the workforce contributing directly. The result is a narrow and inequitable system that discourages compliance, undermines social fairness, and hampers long-term growth.
The World Bank and experts like Professor Moore deliver a clear warning: Sri Lanka’s tax administration is outdated, under-skilled, and politically ignored. Without urgent reforms—such as digitization, enforcement of compliance, HR renewal, and governance restructuring—the state will keep squeezing a small pool of taxpayers while leaving most outside the net.
Previous governments’ failure to strengthen the IRD has cost the country dearly in lost revenue and fiscal instability. The task now is to develop and implement reforms that are both technically sound and politically viable. A better tax system is crucial for building public trust, reducing inequality, and boosting Sri Lanka’s economy.
By Sanjeewa Jayaweera ✍️
Features
Polarizing rhetoric greets America on its epochal anniversary
Democratic and progressive opinion in the US and the world over would likely have been further jolted by the divisive rhetoric blared forth by US President Donald Trump on no less an occasion than the 250th anniversary of the US Declaration of Independence from Britain. The world has been placed on notice that what it would be having in the main is aggravated polarization on multiple fronts during what’s left of the Trump tenure.
If the world was expecting positive moves by the Trump administration to bridge divisions, heal rifts and usher in a more harmonious international political order, this is very unlikely to be. Instead, in all probability we would be left with a far more ‘dangerous place to live in’.
Some of the more thought-provoking recent ‘takes’ from President Trump are : ‘A generation after we fought and won the cold war against the menace of communism, there is now a resurgence of the communist menace in our land, including from newcomers to our country who embrace ideas totally opposed to our way of life and our great success.’ ‘We will send them (immigrants) quickly away, and we will continue to build our country bigger and better than ever before.’ ‘We are going to give our country its identity back.’ ‘You can be loyal to Karl Marx or you can be loyal to America. You can be a communist or you can be a patriot. You cannot be both.’
Accordingly, what the world would have in increasing measure going forward are stepped-up attempts to consolidate a white supremacist administration in the US accompanied by a suppression of ethnic, religious and cultural minorities at home along with renewed attempts to spread and consolidate US hegemonism world wide.
The latter project would mainly translate into US military interventions abroad of the Venezuelan type and a persistence if not a resurgence of identity based conflicts globally. Violent reactions internationally to what are seen as attempts by the US to bring recalcitrant sections in particularly the South under white supremacist control will provide the basis for the steadfast presence and spiking of identity politics globally.
Moreover, the path has been paved for stepped-up ethnic, religious and cultural disharmony within the US. A united state is far from possible, given this backdrop. Put simply, it would be a question of steeper political polarization at home and abroad.
The persistent, widespread support for the hard line Islamic regime in Iran locally and globally should serve as an eye-opener for the political decision-makers of the US. Huge crowds at the funerals of Iran’s political leaders could very well be state-orchestrated but they are a pointer to the fact that political Islam is far from on the decline. To the extent to which this is so, the phenomenon could be a hurdle in the path of a stridently expansionist US.
Looking back, it was the consolidation of the Islamic regime in Iran in the late seventies of the last century that, besides proving a major challenge to the unfettered global power expansion of the US and its Western allies, provided the motive force as it were for the proliferation of Islam-based identity politics in particularly the South. This continues to be so.
Going forward, the US would need to figure out how best it could manage the persistent presence of Islamic fundamentalism world wide, and for that matter other forms of identity politics, without drastically losing its global power and influence.
The recent successful challenge by Iran to the US’ efforts to exercise its diktat in West Asia should prove an ‘eye-opener’. In these confrontations both sides were bloodied but Iran proved that it could successfully take on the US militarily. The inference for the US ought to be that projecting its military might in the Middle East in a no-holds-barred fashion would not prove easy.
Arising from the foregoing a foremost policy challenge for the US would be to curb Iranian military power while avoiding another major military confrontation with the Islamic state that would cost the US and the world dearly in particularly economic and material terms. The US would have no choice but to persist with the often flagging West Asian peace effort and to render it fully workable.
Ukraine presents the US with another formidable challenge. As is known, Ukraine is proving no easy ‘push-over’ for Russia, but it is badly in need of more sophisticated Western arms, particularly effective air defense systems, to fully neutralize the Russian invasion. What would the US choose to do; go to Ukraine’s assistance fully or opt not to ruffle and antagonize the Putin regime, with which it is on some cordial terms?
A negotiated solution is best in Ukraine and the Trump administration would do well not to lose sight of this ideal but Russia too should see the need for a diplomatic solution if it is to salvage itself from its military stalemate in Ukraine. The US needs to try being a peace mediator in the latter theatre but if the Russian political leadership fails to opt for peace the US would have no choice but to join the rest of NATO and Europe in continuing to arm Ukraine.
The US would need to take the latter course if the ‘world’s mightiest democracy’ is to remain committed to its founding ideals. If President Trump fails to meet this challenge he would prove that he is nothing more than an ‘empty rhetorician’.
However, it should not come as a surprise to the world if Trump chooses not to strongly back the rest of the West on Ukraine. Domestic and foreign policy are closely intertwined. Since the Trump administration is committed to building a white supremacist state at home, democratic development worldwide has been of the least importance to it.
The Trump administration’s strong affinities to white jingoism would increasingly compel it to opt for a policy of international isolationism. As a result Ukraine could prove unimportant for the US going forward.
Consequently, US-Western Europe friction in particular is only likely to intensify in the days ahead. Coupled with the contentious issues growing out of the persistence of identity politics, the Trump administration’s far-sightedness in managing foreign policy issues would be tested to the fullest. Whether the world would have comparative peace or continued blood-letting would depend crucially on such judiciousness.
Features
Beyond concrete: Sunela Jayewardene urges Sri Lanka to rediscover an ancient wisdom for a planet in peril
It was more than a lecture on architecture. It was a challenge to rethink civilisation itself.
Standing before a packed audience at Dilmah by Genesis in Maligawatte, internationally acclaimed environmental architect, author and conservationist Sunela Jayewardene delivered a keynote that transcended blueprints, buildings and urban planning.
Instead, she invited her listeners on an intellectual journey into Sri Lanka’s ancient past, arguing that the answers to some of the world’s gravest environmental crises may already exist within the island’s forgotten ecological wisdom.
Her address, titled “Beyond Concrete: Architecture for the Coexistence of Species,” was at once philosophical, historical and deeply practical. It questioned humanity’s obsession with dominating nature and called for a return to a design ethic rooted in respect, restraint and coexistence.
“The road is actually very simple,” Jayewardene said. “We have simply forgotten it.”
That observation became the defining thread of an afternoon that challenged conventional thinking about architecture and development.
According to Jayewardene, modern society has inherited a worldview shaped largely by colonial values that placed human needs above those of every other living organism.
“Our value system was turned on its head,” she observed. “We accepted a Western way of looking at nature without questioning it. Today we can clearly see the consequences. The world is in crisis. Species are in crisis. Our lifestyles are in crisis.”
She was careful not to romanticise the past, nor was she dismissive of modern science. Instead, she argued that Sri Lanka’s pre-colonial civilisation possessed a sophisticated environmental philosophy that modern planners and architects have largely ignored.
For Jayewardene, environmental architecture is not about fashionable sustainability slogans or cosmetic landscaping.
It begins with humility.
It begins by recognising that humans are only one species among millions sharing the same landscape.
“The built environment should not exist in opposition to nature,” she said. “It should become part of nature.”
One of the most captivating moments of her presentation came when she introduced her own research into the island’s ancient sacred geography.
Using digital mapping and satellite imagery, Jayewardene demonstrated the remarkable alignment of Sri Lanka’s four original Saman Devalayas, whose axes converge on Sri Pada, historically known as Samanthakuta.
The extraordinary precision of these alignments, she argued, raises profound questions about the scientific and surveying capabilities of ancient Sri Lankan civilisation.
“What kind of technology enabled them to achieve this?” she asked the audience.
Her purpose was not to offer speculative answers but to challenge deeply ingrained assumptions that ancient societies lacked scientific sophistication.
“We often underestimate what our ancestors knew,” she said. “Yet the evidence around us tells a very different story.”
That forgotten knowledge, she argued, extended well beyond engineering.
It shaped an entire philosophy of living with the landscape rather than imposing human will upon it.
Displaying photographs from archaeological sites including Ritigala, ancient monasteries and rock pavilions hidden within Sri Lanka’s forests, Jayewardene illustrated how builders carved steps around natural boulders, integrated structures into existing rock formations and preserved the contours of the land.
Modern construction, she suggested, would almost certainly have bulldozed those landscapes into submission.
“Our ancestors honoured the land,” she said. “They accepted the landscape instead of trying to conquer it.”
For Jayewardene, that principle remains the foundation of every project she undertakes.
She described environmental architecture as an exercise in listening rather than commanding.
Every site, she explained, possesses its own identity, ecological history and natural rhythm.
The responsibility of the architect is to understand that identity before attempting to intervene.
“The land tells you what it wants to become,” she said.
Throughout the presentation, one word repeatedly surfaced—context.
Without understanding context, she argued, architecture becomes little more than sculpture.
Good design cannot be copied indiscriminately from one country to another or even from one district to another.
Climate differs.
Rainfall differs.
Vegetation differs.
Wildlife differs.
Culture differs.
Even the stories associated with landscapes differ.
All of these, Jayewardene insisted, must shape architecture.
“When I speak about inhabitants, I don’t mean only human beings,” she explained.
“The birds, insects, reptiles, mammals, trees and every living organism already occupying that land must become part of the design equation.”
This broader understanding forms the basis of what she describes as non-human-centred design—an approach that rejects the notion that cities exist exclusively for people.
Instead, landscapes should provide refuge for biodiversity while simultaneously serving human communities.
It is an idea that resonates strongly at a time when rapid urbanisation continues to erode habitats across Sri Lanka.
Jayewardene also challenged prevailing attitudes towards development itself.
Too often, she argued, “development” has become synonymous with replacing natural systems by concrete infrastructure.
She questioned whether flattening hillsides, redirecting streams and clearing vegetation can genuinely be described as progress.
In her view, genuine development should first ask what ecological value already exists before deciding what should be built.
One of the simplest yet most profound examples she offered concerned water.
“I always say it is acceptable to interrupt water,” she remarked. “But never disrupt it.”
That distinction reflects an ecological understanding often absent from conventional engineering.
Natural drainage systems, she warned, perform countless functions that remain invisible until they are damaged.
Floods, soil erosion, biodiversity decline and even changes in local climate frequently follow.
“We disrupt far more than water,” she said. “We disrupt entire ecological relationships.”
Equally significant was her distinction between degraded brownfield sites and relatively untouched greenfield landscapes.
Brownfield sites require ecological restoration, rehabilitation and renewal.
Greenfield sites demand restraint.
Minimal intervention, she argued, is often the highest form of environmental design.
The keynote found an appropriate setting within Dilmah Conservation’s own efforts to restore degraded urban landscapes.
Earlier in the programme, Rishan Sampath of Dilmah Conservation outlined the organisation’s transformation of an abandoned industrial property in Moratuwa into a flourishing urban forest containing over 300 tree species and more than 1,000 individual plants.
Scientific studies conducted within the restored forest have already demonstrated improvements in air quality compared with adjoining urban roads, providing measurable evidence that biodiversity restoration can improve city life.
For Jayewardene, such initiatives represent far more than beautification projects.
They demonstrate that ecological restoration can become a guiding philosophy for future urban planning.
Her address ultimately became a call to rethink humanity’s place within nature.
Architecture, she argued, should no longer celebrate domination over landscapes.
It should celebrate coexistence.
Every building should strengthen biodiversity.
Every development should restore ecological balance.
Every designer should ask not merely how a project serves people, but how it serves life itself.
As the audience left the hall, they carried with them more than architectural ideas.
They carried a challenge
To question inherited assumptions.
To rediscover indigenous ecological wisdom.
And to recognise that Sri Lanka’s greatest contribution to global sustainability may not lie in importing new environmental models, but in rediscovering the timeless principles embedded within its own civilisation.
For Sunela Jayewardene, the future will not be secured by building more impressive skylines.
It will be secured when humanity learns once again to build gently, intelligently and respectfully—allowing architecture to become not an act of conquest, but an expression of coexistence.
By Ifham Nizam
Features
Colombia’s “back-to-back queen”
Beyond modelling, Colombia’s Katherine Castaño, who captured the crown at the Top Model of the World 2026, in Egypt, is also a TV host, entrepreneur and social media influencer.
She’s based in Miami, Florida right now — a hub for fashion and influencer work — a city she calls home base, while representing Colombia on the world stage.
Her Miami base gives her access to fashion, entertainment, and business networks, while her title keeps Colombia front and centre in the global modelling conversation.
Off the runway, she says she enjoys singing, playing the piano, and tennis.
Katherine didn’t make the trip to Egypt as a newcomer. She’s built a strong international portfolio before winning the crown.
In fact, her résumé reads like a fashion passport: Colombia Moda, New York Fashion Week, Miami Swim Week, Miami Fashion Week, Nicaragua Diseña, IXEL Moda, and Mercedes-Benz San José.
On June 8, 2026, Katherine Castaño was crowned by outgoing winner Natalia Garizabal Vera, also of Colombia. That gave Colombia a historic back-to-back victory — the first time any country has done it in the competition’s history, and Colombia’s 4th win overall.
As Top Model of the World 2026, Katherine’s reign is centred on elevating her profile as a model, influencer, and entrepreneur.

She’s built a personal brand around beauty, ambition, style, and professionalism, with strong reach across fashion, social media, and business.
As titleholder, she’s now the face of the pageant’s international fashion platform, representing Colombia globally, while based out of Miami.
Ahead of the competition she was clear about the stakes: “This is bigger than me. This is for my country. This is for the story I’m here to write… And I’m not going quietly… we’re going for that back to back.”
As the reigning titleholder, Katherine Castaño’s role extends far beyond the sash. She’s using the platform to grow her brand as a model, influencer, and entrepreneur rooted in “beauty, ambition, style, and professionalism”.
She will also be doing runway shows, photoshoots, brand appearances, and fashion events.
Sri Lanka’s representative at this pageant was NetalieWithanage.
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