Deputy Minister of Economic Development Nisantha Jayaweera has said that steps will be taken to make Sri Lanka’s current tax system simpler and easier to understand for the public and businessmen from next year.
It is reported that the main objective of this initiative is to reduce the problems found in tax payment procedures and make the operations of government agencies more efficient. The Deputy Minister said that changes will be made to gradually simplify the tax structure by eliminating some taxes in addition to customs duty.
It has long been discussed in the trade sector that various taxes and charges have to be calculated while importing a product or engaging in trade activities. As each tax has separate regulations, understanding them and paying them on time can be an administrative burden for some companies.
Simplifying the tax system would thus not only involve changing tax rates but also simplifying tax payment procedures, documentation and communication with government agencies.
Change in additional taxes in addition to customs duty
One of the key features of the new scheme is the removal of certain taxes in addition to customs duty. This is expected to gradually simplify the tax structure associated with import operations.
It is important for importers to correctly calculate applicable taxes and duties when bringing a product from abroad to Sri Lanka. When various tariffs are in effect at the same time, finally calculating the import cost of the product can be complicated.
This situation can create an administrative burden, especially for small and medium-sized enterprises. If the tax system is simplified, traders may be able to calculate their expenses in advance and prepare business plans.
Similarly, tax administration may become easier for government agencies. If the need to handle separate procedures for each line is reduced, the workload of officers is also likely to be reduced.
However, which taxes will be completely abolished, what changes will be introduced in their place, and what will be the impact on the government’s revenue will be clear based on the detailed policy and legislative measures that will be released in the next phase.
Taxes play an important role in Sri Lanka’s government revenue. Hence there is a need to strike a balance between protecting government revenue while simplifying the tax system and reducing unnecessary complications for taxpayers.
Digital transformation through paperless customs process
The Deputy Minister said that the steps to connect the information technology structures of the government institutions together with the effort to simplify the tax system will be accelerated.
Paperless customs declaration system has been introduced as an initial step. This creates an opportunity for digital handling of documents used in customs operations.
The practice of preparing paper documents, submitting them to various offices, and then waiting for approval is one that can cause delays in business operations. The speed of submission of documents can be increased by converting to digital mode.
Also, the ability to exchange information electronically may reduce the need to repeatedly submit the same information to different agencies. This will bring practical convenience to importers, exporters and customs officials.
Customs revenue is also a major factor associated with these changes. The Deputy Minister said that while the customs revenue target for 2026 was fixed at 2,207 billion rupees, the customs department is close to that target.
In such a scenario, it will be important for the government to simplify tax and customs procedures and stabilize government revenue.
It is also necessary that the rules are clearly communicated to the public and traders when making changes in the tax system. Information such as which tax is abolished, which tax continues, when the new procedure comes into effect, how applications and documents are to be submitted should be easily accessible.
Significant changes in Sri Lanka’s tax administration can be expected if the plan to gradually simplify the tax structure comes into effect from next year. There is an opportunity to speed up tax payment procedures and customs operations, especially through increased use of digital technology.
However, the actual impact of these changes depends on how the new regulations are implemented. Clear guidelines for taxpayers and better communication between government agencies can reduce some of the practical problems in tax administration.