Taxation and silent killing of local industries

TAXATION serves as one of the most powerful tools in shaping a nation’s economic destiny. Its purpose extends far beyond merely filling State coffers. A sound and just tax system is meant to foster economic growth, promote social equity, ensure fair distribution of wealth, and protect domestic industries from unfair foreign competition and dumping.

- By N.M.M. Mifly

Domestic enterprises, already struggling with limited access to finance, high production costs, and regulatory burdens, are forced to compete on an uneven playing field

However, when tax laws are misinterpreted, selectively applied, or exploited by powerful interests, the very objectives of taxation are defeated. Instead of promoting fairness and growth, the system begins to stifle local industries — slowly but silently killing the very enterprises that sustain employment, innovation, and national resilience.

Abuse of tax laws by multinational companies

In recent years, several multinational companies have increasingly taken advantage of loopholes in Sri Lanka’s tax laws to minimise or even avoid paying taxes. Armed with global expertise and vast financial resources, they employ high-profile tax consultants and auditors — spending hundreds of millions to save billions in potential tax liabilities.

When tax authorities fail to effectively detect or curb such practices, the outcome is devastating for local competitors. Domestic enterprises, already struggling with limited access to finance, high production costs, and regulatory burdens, are forced to compete on an uneven playing field. Over time, many are pushed to the brink of closure or compelled to relocate to more equitable tax jurisdictions.

This disparity not only deprives the Government of substantial revenue but also discourages entrepreneurship, deters compliant foreign direct investors, and erodes public confidence in the fairness of the tax system.