SL Tax Loopholes Threaten Local Industries & State Revenue ⚖️

Multinational Companies (MNCs) are reportedly exploiting ambiguities and loopholes in Sri Lanka’s tax laws, creating an uneven playing field that threatens compliant domestic industries and results in substantial revenue loss for the State. • Core Issue: MNCs utilize global expertise to minimize/avoid tax payments, forcing local enterprises (which face high costs and regulatory burdens) to compete unfairly, pushing many toward closure or relocation. • Case in Point: The digital service sector (Rides & Eats) is cited. The locally incorporated entity pays full taxes (CIT), while its foreign counterpart, operating through a dependent agent, allegedly evades similar tax obligations. • Legal Stance: Sri Lanka’s IR Act and Double Tax Avoidance Agreements (DTAAs) are clear: non-resident entities operating through a Permanent Establishment (PE) or a dependent agent are liable for income tax on profits. • Evasion Attempt: Non-resident companies are reportedly attempting to register under the new VAT Amendment Act (for entities without a PE), which could be a bid to incorrectly claim exemption from income tax, despite evidence of dependent agency. • Wider Scope: The problem extends beyond "Rides" to numerous non-resident digital and service providers in sectors like tourism, hotel booking, and e-commerce. • Call to Action: Authorities must enhance capacity and consistently enforce the law to recover billions in lost revenue, ensure a fair tax regime, and protect local businesses.