Regulatory & Policy News
View all(69)🤖 SASSRI Hosts Landmark Forum on Drones, AI, and Sri Lankan National Defence
• Strategic Overview: The South Asia Sustainability & Security Research Institute (SASSRI) concluded a high-level panel discussion in Colombo focusing on "Drones, Deterrence, and Defence." The forum addressed how small states like Sri Lanka can navigate geopolitical competition, artificial intelligence (AI), and technological disruption. • Key Focus Areas: Drones & UAVs: Explored the expanding role of Unmanned Aerial Vehicles (UAVs) in maritime surveillance, border management, intelligence gathering, and protecting critical national infrastructure. Cybersecurity & AI: Highlighted the critical convergence of national security and digital infrastructure protection, emphasizing the need for robust cyber resilience against hybrid warfare. Policy & Governance: Emphasized developing indigenous ICT/technological capabilities and creating updated regulatory and ethical frameworks to balance innovation with security. • Stakeholder Collaboration: The event brought together officials from the Ministry of Defence, Ministry of Foreign Affairs, Civil Aviation Authority, Tri-Forces, Police, and private sector technology leaders. Panelists included experts from CLASS, EGUARDIAN, Rabdan Academy, and veteran Sri Lankan UAV operators, who concluded that safeguarding sovereignty requires a unified, whole-of-government approach and deeper regional cooperation.
📜 Sri Lanka's Taxpayer Charter: A Foundation for Trust & Compliance
The Inland Revenue Department (IRD) highlights the significance of Sri Lanka’s Taxpayer Charter (published in 2023) as a crucial social contract aimed at boosting voluntary compliance, transparency, and domestic revenue mobilization. • Core Framework & Taxpayer Rights The charter outlines nine fundamental rights for taxpayers to ensure professionalism and dignity. These include the right to fair treatment, professional service, privacy, redress for grievances, and clear reasons for tax decisions. • Taxpayer Obligations To balance these rights, the charter enforces four key obligations: providing accurate information, maintaining proper records, filing returns and payments on time, and cooperating honestly with tax authorities. • Economic Impact & Business Certainty By establishing predictable procedures, the framework reduces administrative friction and fosters a stable environment. This clarity is vital for small and medium enterprises (SMEs) to plan finances, reassures salaried taxpayers, and enhances investor confidence in Sri Lanka's macroeconomic climate. • Modernization & National Development As Sri Lanka drives digital transformation in tax administration (via e-filing and digital payments), the charter ensures systems remain fair and accessible. Sustainable revenue mobilization directly funds critical public services like healthcare, education, and infrastructure, moving the nation away from confrontational enforcement toward civic partnership.
Sri Lanka’s 5G Rollout: Policy Stalls Threaten $15B Digital Economy Goal 📈
• Overall Situation: Following a successful LKR 15 billion 5G spectrum auction in December 2025, Sri Lanka’s transition to high-speed internet has hit a regulatory bottleneck in Q2 2026. While urban mobile 5G is trickling out, commercial approvals for 5G Fixed Wireless Access (FWA)—or 5G Home Broadband—remain stalled by the TRCSL. • The Digital Divide: Approximately 80% of Sri Lankans (9 million people) live in rural or suburban areas lacking fibre optic infrastructure. Nearly 40% of the national population still lacks reliable internet access, hindering the country's "National Digital Economy Strategy 2030" target of a USD 15 billion digital GDP. • Market & Sector Impact: • Existing 4G home broadband infrastructure has reached its physical capacity, with peak speeds dropping to 1 Mbps. • Local telecom giants Dialog and SLT-Mobitel have already paid billions for 5G spectrum rights (including Dialog’s high-capacity 27 GHz millimetre-wave spectrum) but are barred from deploying it for home routers. • Industry whispers suggest regulatory delays stem from a desire to protect state-backed fibre investments, despite global trends showing 5G FWA and fibre act as complementary technologies. • Regulatory Contradictions: The current policy chokehold on domestic operators stands in sharp contrast to the rapid 2024 licensing of foreign satellite provider Starlink, whose local operations were recently suspended due to data monitoring and national security concerns. _Note: Summary based on industry analysis and provisional 2026 deployment data._
⚖️ IRD Seeks Court Order to Recover Rs. 1.03 Bn VAT Default from CMC
The Department of Inland Revenue (IRD) has initiated legal proceedings against the Colombo Municipal Council (CMC) over massive tax arrears. • Overall Figures: The Commissioner General of Inland Revenue is seeking the recovery of approximately Rs. 1,034 million (Rs. 1.03 Billion) in alleged unpaid Value Added Tax (VAT). • Legal Action: The case has been filed before the Colombo Magistrate’s Court requesting an official order to recover the funds owed to the Government. • Respondent: The Colombo Municipal Council has been officially named as the sole respondent in the case. _Status: Based on initial court filings._
⚡ CA Sri Lanka Examines CEB Restructuring & New Electricity Acts
The Association of Public Finance Accountants of Sri Lanka (APFASL), the public sector wing of CA Sri Lanka, hosted a seminar analyzing the major structural and economic reforms hitting the energy sector. • The Reform Blueprint: The Electricity Act No. 36 of 2024 introduces the core concept of unbundling the Ceylon Electricity Board (CEB). The primary goals are boosting efficiency, accountability, transparency, and financial visibility. • The Engineering Correction: The subsequent Electricity (Amendment) Act of 2025 was introduced to fix structural gaps identified during initial planning. It addresses critical issues regarding ownership structures, governance arrangements, staff transfers, and operational clarity. • Role of Finance Professionals: CA Sri Lanka President Tishan Subasinghe emphasized that accounting and finance professionals are vital to national reforms, providing necessary expertise in governance, financial management, and strategic decision-making. • Implementation Outlook: Keynote speaker Prof. M. Thilakasiri noted that while the framework is a massive strategic step toward a financially viable energy sector, it is not a silver bullet. Execution will face major practical and institutional challenges, requiring a continuous, Kaizen-based improvement approach to support long-term national development.
📈 ADIC Urges Stronger Tobacco Policy Action to Curb Rs. 214 Bn Economic Burden
The Alcohol and Drug Information Centre (ADIC) has called for progressive policy measures on World No Tobacco Day 2026, highlighting the severe healthcare and economic toll of tobacco use in Sri Lanka. • Overall Health & Economic Impact: Tobacco causes ~20,000 preventable deaths annually in Sri Lanka. Daily domestic spending on cigarettes stands at Rs. 520 million. Based on 2019 data, health and economic costs reached Rs. 214 billion, vastly outweighing the Rs. 92.9 billion generated in cigarette tax revenue. • Taxation & Production Trends: A 20% cigarette tax hike in 2023 led to an 18% YoY drop in sales (521.5 million fewer sticks) and boosted state revenue by Rs. 7.7 billion. Conversely, slower tax increases in 2025 led to a 5% YoY increase in cigarette production, reversing previous declining trends. • Policy Delays & Industry Interference: Key amendments to the NATA Act—including a ban on single-stick sales and the introduction of plain packaging—have faced nearly 8 years of delay due to industry lobbying. • Proposed Interventions: ADIC strongly backs the Sri Lanka Medical Association's (SLMA) 2025 Tobacco-Free Generation (TFG) proposal to ban tobacco sales to anyone born after 2010. Further recommendations include indexing tobacco taxes to inflation, creating a uniform tax structure, and rejecting deceptive "harm reduction" narratives (like e-cigarettes) targeting youth.
📈 SMEs Urge President to Temporarily Ban Non-Essential Imports
A collective of small and medium businesses, the Ceylon United Business Alliance (CUBA), has written to President and Finance Minister Anura Kumara Dissanayake requesting an immediate, temporary ban on non-essential imports to protect depleting U.S. dollar reserves and local industries amid Middle East crisis supply shocks. • Core Demand: Impose temporary restrictions on consumer products that can be manufactured locally, specifically targeting sectors where domestic industries can meet 70% or more of the national demand. • Priority Sectors for Restriction: Apparel, footwear, tiles, plastic products, processed food, and furniture. • Financial Impact: Restricting apparel & textiles imports alone is estimated to save between US$ 75 Mn and US$ 150 Mn per month. • Exemptions Requested: Essential imports and production inputs must continue undisrupted to support the national economy. This includes raw materials, fabric, intermediate goods, fuel, rice, medicine, machinery, steel, and tourism-related requirements. • Objective: The association states this urgent action is a national priority required to preserve USD, safeguard local employment, prevent industry collapse, and avert another severe economic crisis.
📈 IRCSL targets doubling insurance penetration by 2030
The Insurance Regulatory Commission of Sri Lanka (IRCSL) has unveiled an ambitious roadmap to double the country's current insurance penetration level of 1.1% by 2030, and triple it by 2035. Key Figures & Enforcement: • Out of 8.8 Mn registered vehicles in Sri Lanka, 2.8 Mn (approx. 32%) are currently uninsured, including State-owned vehicles. • A new digital motor insurance card system with QR codes came into effect on May 1, 2026, eliminating traditional printed certificates and reducing industry plastic waste from 6 Mn annual physical cards. • Traffic Police across 608 stations can now instantly verify policy validity via a digital verification platform, SMS, USSD (1338#), or IVR to eliminate the usage of invalid cards during premium grace periods. Compensation & Sector Integration: • The motor insurance sector has established an "Insurance Crib" (national vehicle insurance database). • The financial limit for the Optional Compensation Scheme for third-party accident victims (death/permanent disability) has been doubled from Rs. 500,000 to Rs. 1.0 Mn, with Rs. 50 Mn already disbursed since March 2024. • IRCSL is negotiating with the Health Ministry to integrate insurance with the healthcare system to alleviate national budget fiscal burdens, where healthcare currently holds the second-largest allocation.
📈 EPF Transparency Lags Behind CSE-Listed Firms and Banks, Reports Verité Research
A new research brief by Verité Research highlights critical transparency gaps in Sri Lanka's largest financial institution, the Employees' Provident Fund (EPF), compared to other regulated entities managing public savings. • The Core Issue: The Central Bank of Sri Lanka (CBSL), as manager of the EPF, applies lower transparency and disclosure standards to the fund than those required for companies listed on the Colombo Stock Exchange (CSE), licensed commercial banks, and unit trusts. The EPF discloses less information, in less detail, less frequently, and with less timeliness. • Global Standards: The fund falls short of international benchmarks for public disclosure, specifically missing standards set by the OECD’s International Organisation of Pension Supervisors (IOPS) principles and the Global Pension Transparency Benchmark (GPTB). • Member Risks: Because private sector workers are legally mandated to contribute to the EPF, lack management input, and cannot withdraw funds at will, high transparency is the sole safeguard for their retirement welfare. This is critical given the fund's past exposure to financial malpractice exposed in 2019 forensic audits. • Proposed Reforms: Verité Research identifies three short-to-medium-term actions: ensuring full compliance with the EPF Act, adopting international best practices, and enacting the 2024 private member’s Bill on EPF disclosure. Long-term goals require robust independent regulation to protect member interests.
🔒 Govt. Pushes AI-Powered 'National Cybersecurity Framework' to Fight Fraud
Sri Lanka is establishing a unified national cybersecurity architecture powered by AI to combat rising digital financial fraud, cybercrime, and identity scams amid its rapid digital transformation. Key Initiatives & Strategy • National Security Priority: Digital Economy Deputy Minister Eranga Weeraratne stressed that cybersecurity must transition from a technical issue to a national security priority. • AI-Powered Autonomic Security: The government warns traditional, passive systems are obsolete against international AI threats like voice cloning and advanced scams, urging real-time AI detection systems. • Unified Framework: The Digital Economy Ministry is prioritizing a "National Cybersecurity Framework" to eliminate vulnerability gaps caused by isolated security systems currently run independently by banks, telecom providers, and government entities. Collaborations & Ecosystem • Public-Private Cooperation: The "Scam Shield" initiative—locally engineered by Google Cloud and NCINGA (Google’s 2026 Social Impact Partner)—was commended as a model for developing localized AI-enabled security capabilities. • Broad Inclusion: The state aims to secure a digital ecosystem ensuring trust for citizens across all regions, from rural farmers to ICT/BPM entrepreneurs, fostering broader economic participation. • Stakeholder Alignment: A recent forum hosted by Google Cloud and NCINGA drew top leaders, including Presidential Senior Adviser on Digital Economy Dr. Hans Wijeyasuriya, SL CERT officials, and international experts, aligning strategies against AI-driven global cybercrime.
📈 18% Penalty for Local Suppliers: FTZMA Demands Level Playing Field
The Free Trade Zone Manufacturers’ Association (FTZMA) has urged the Sri Lankan Government to remove the 18% VAT disadvantage imposed on domestic manufacturers supplying Board of Investment (BOI) exporters. • The Structural Issue: Foreign suppliers import raw materials into BOI zones at 0% VAT and zero customs duty. However, local suppliers face an 18% VAT at the point of sale, pricing them out of procurement contracts for over 20 years. • Broad Economic Impact: This tax bias impacts all major dollar-earning sectors, including apparel & textiles, rubber and tyres, electronics, engineering, pharmaceuticals, packaging, chemicals, and food processing. • Failed Mechanisms: Administrative remedies like Suspended-VAT vouchers, deferred refunds, and the Risk-Based VAT Refund Scheme (introduced 1 October 2025) fail because procurement decisions are made on upfront quote prices rather than delayed refunds. • Regional Comparisons: Peer export nations zero-rate local inputs at source. Consequently, Bangladesh's "Deemed Export VAT" helped local mills secure 75%-80% of knitwear fabric demand. Malaysia, India, Indonesia, and Vietnam (effective 1 July 2025) operate similar tax-free local sourcing models. • Proposed Solution: The FTZMA requests the Minister of Finance to issue a single gazette notification to zero-rate qualifying local supplies to BOI exporters at source. • Economic Outlook: The reform requires no Treasury outlay or new Parliament Acts. It is projected to be revenue-positive by boosting corporate income tax, PAYE, and EPF/ETF contributions from expanding domestic SMEs, while conserving fragile foreign exchange reserves.
📈 Sri Lankan Banking Sector Vulnerable to Frauds Amid Systemic Gaps
A comprehensive review by a former veteran banker highlights critical structural weaknesses across four key stakeholders in the banking & finance sector, driving recent financial frauds and malpractices. • Internal Bank Vulnerabilities: A negative shift toward "target-oriented credit" to chase supernormal profits has degraded credit quality. Operational risks are elevated due to 8–10 fragmented IT systems operating in silos, weak internal controls, downsized audit teams, and a critical lack of specialized forensic auditors. Cost-cutting measures, such as over-reliance on inexperienced interns and appointing apex leaders based on connections rather than competence, have demotivated middle management. • Regulatory & Oversight Gaps: The Central Bank of Sri Lanka (CBSL) and SEC need heightened vigilance over aggressive competition, suspense accounts, and ultimate business ownership in CSE transactions to prevent money laundering. There is an urgent need for CBSL to collaborate with global bodies like the World Bank to implement a unified, centralized core banking system for real-time fraud alerts. • Role of Auditors & Customers: External auditors fail to robustly challenge bank directors or verify qualitative annual disclosures against high staff turnover. Meanwhile, low financial literacy among customers and poor digital hygiene (e.g., sharing PINs/passwords) leave the public highly susceptible to cyberattacks. _Note: Based on published industry commentary and analysis._