Home » Govt to levy digital services tax from foreign e- commerce companies

Govt to levy digital services tax from foreign e- commerce companies


By: Staff Writer

January 16, Colombo (LNW): A new tax collection system and regulations are to be introduced to control and levy a digital services tax from foreign e- commerce companies such as Uber and Daraz, conducting business in Sri Lanka without contributing taxes to the government, official sources divulged.

Sectoral Oversight Committee on Increasing Export of Goods and Services has directed the Central Bank to implement a system ensuring that funds earned within the country are processed through local banks.

Additionally, the creation of an institution for consumer grievances associated with these foreign entities is recommended.

The government formulates new regulations to control a promising ‘gig economy’ and slap new taxes, according to discussions that had taken place at a parliamentary sectoral committee discussion.

A gig economy is a free market system in which temporary positions are common and organizations hire independent workers for short-term commitments.

The term “gig” is a slang word for a job that lasts a specified period of time. Traditionally, the term was used by musicians to define a performance engagement.

“The ‘gig economy’ is now expanding and it was proposed to introduce a legal framework to regulate the activity and also introduce a new digital services tax,” a statement issued by the Sectoral Oversight Committee on Increasing Export of Goods and Services revealed.

Ironically the new regulation and taxes had been proposed at a parliament’s sectoral committee on ease of doing business.

Sri Lanka also has a separate effort to deregulate the economy, where activities had already been subdued by the state.

In many countries all domestic activities are in general subject to value added tax, regardless of the jurisdiction of the country where goods or services are produced or made.

Sri Lanka had slammed a discriminatory tax on credit card transactions making it more expensive for domestic consumers to access e online services, and give an protectionist advantage to domestic firms by taxing payment flows.

The protectionist tax, introduced at the behest of some taxi and e-commerce firms to push up costs for consumers and reduce competition, had been deemed a multiple currency practice (MCP) by the International Monetary Fund.

The internet has increased the economic freedoms of individuals around the world and allowed them to directly transact with foreign companies and enhance free trade, reducing opportunities for businesses to oppress consumers through protectionism, analysts say.

Businesses in Sri Lanka generally try to promote the idea that consumers within a geographical region are fair game for oppression and exploitation through import taxes.

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