SL to implement digital tax on software imports
Sri Lanka is looking to implement a digital tax on the importation of digital content, such as software, considering the growth of the domestic information and communication technology (ICT) sector, a Parliament report stated.
According to the first report of the Committee of Ways and Means of Parliament, Sri Lanka Customs has raised the need to impose a tax on the importation of digital content such as software.
According to Sri Lanka Association for Software Services Companies (SLASSCOM) data, the ICT sector in Sri Lanka, which became the third highest exporter in 2022 with $ 1.5 billion in export revenue, has a workforce of over 150,000 employees.
Therefore, the committee recommended that the Harmonised System Codes (HS codes) and a digital tax for digital content and services be introduced upon conducting a comprehensive study on the impact of the new tax on the ICT sector and the best practices of other countries.
In the first half of 2023, Sri Lanka Customs recorded a revenue of Rs. 400 billion, against an annual revenue target of Rs. 1.2 trillion which was later revised to Rs. 970 billion.
However, Customs presented the committee with a forecasted revenue of Rs. 638,673 million for the year 2023 by analysing the trends for the year.
The UK-based BMI Research, a subsidiary of Fitch Solutions, said in their report of Sri Lanka’s ICT sector that a modest growth is expected in the IT sector in Sri Lanka which is set to be unlocked from late 2023 after the severe downtrend observed in 2022.
“IT market growth will be bolstered from 2024 onwards by catch-up potential in the level of IT device and solution adoptions across the private and public sectors, towards the levels reached in developed markets.” The report said that the Sri Lankan IT industry is well-positioned to capitalise on a stream of public and private sector modernisation efforts and Sri Lanka’s position as an outsourcing destination in the region.
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