July 09, Colombo (LNW): The IT and BPM sector in Sri Lanka has collectively appealed to the government to reconsider recent tax measures affecting export services.
Key industry groups, including the Sri Lanka Association of Software and Services Companies (SLASSCOM), the Federation of Information Technology Industry Sri Lanka (FITIS), the BCS Sri Lanka Section (BCS), and the Computer Society of Sri Lanka (CSSL), have issued a joint statement expressing their concerns.
The sector has demonstrated significant resilience and growth despite numerous challenges. In 2023, the industry generated approximately $2 billion in export revenue and employed over 144,000 IT-BPM professionals. Global companies like EY GDS, Virtusa, and HSBC have reaffirmed their commitment to Sri Lanka, significantly contributing to the economy.
The industry is troubled by the prospect of becoming one of the highest-taxed sectors in the region, which could deter growth and expansion plans. High employee costs, particularly due to a 36% personal income tax, already burden companies. This makes retaining top talent and countering brain drain increasingly challenging, leading to higher compensation demands.
The joint statement highlights several potential negative impacts of the new tax measures: includingiIncreased operational costs could stifle innovation and reduce global competitiveness against countries offering tax incentives.
Higher taxes could limit investments in training, affecting employment opportunities, especially for underprivileged groups.
Additional taxes on the knowledge sector could slow economic recovery and reduce its contribution to the national economy.: Taxing housing could exacerbate the talent exodus, hindering sector growth.
The new tax measures could undermine Sri Lanka’s Digital Economy Strategy 2030, which aims to position the country as a leading digital economy in the region. The IT and BPM sectors are pivotal for innovation and growth, and increased taxes could hinder these industries, leading to missed opportunities and reduced global competitiveness.
The industry groups propose continuing the current tax exemption until 2026 to allow the sector to recover and ensure sustainability.
They suggest a phased implementation of new tax measures with provisions to offset training and internship costs to mitigate the impact. Additionally, they recommend establishing continuous consultation with industry representatives to develop sustainable tax policies.
SLASSCOM, FITIS, BCS Sri Lanka Chapter, and CSSL remain dedicated to supporting the growth and development of Sri Lanka’s knowledge and innovation sector. They believe that careful policy adjustments can balance economic stability with fostering a thriving, innovative industry.
By addressing these concerns and adopting the proposed measures, the government can help ensure the continued growth and success of the IT and BPM sectors, contributing significantly to the country’s economy and global standing.
