Sri Lanka should exempt traders from VAT, abolish double taxation

Tax reform advocates are urging the Sri Lankan government to reconsider its value-added tax framework by removing traders from VAT registration requirements while simultaneously addressing instances of double taxation in the current system.

The push comes as businesses continue to face mounting compliance costs and administrative burdens under the existing tax regime. Proponents of the change argue that exempting traders from VAT would streamline operations for the commercial sector and reduce the complexity of the tax collection process.

Double taxation remains a persistent concern within Sri Lanka's business community, with multiple layers of taxation applying to the same economic transaction or income source. Reformers contend that eliminating such overlapping tax obligations would improve cash flow for enterprises and encourage investment and economic growth.

The proposals reflect broader efforts among stakeholders to modernize Sri Lanka's tax system and make it more conducive to business activity. Policymakers are being encouraged to evaluate how targeted exemptions and the removal of redundant tax measures could enhance competitiveness while maintaining revenue collection.

These recommendations come amid ongoing discussions about fiscal policy adjustments needed to support economic recovery and stimulate commercial activity across the island.

Photo: The Inland Revenue Department building in Colombo, March 2017. Rehman Abubakr via Wikimedia Commons (CC BY-SA 4.0).