Industry leader warns of “digital isolation” as new VAT threatens to derail Sri Lanka’s ICT sector

With Sri Lanka’s new 18 percent Value Added Tax (VAT) on foreign digital services now a settled policy taking effect this October, focus has sharply shifted to its potential economic fallout.

- By NISHEL FERNANDO

A stark warning from Lanka Rating Head and former LankaPay Chairman Dr. Kenneth de Zilwa is now resonating through the tech community, highlighting the severe “downside risks” that he argues could stifle innovation, burden businesses and potentially lead to “digital isolation” for the island nation.

While the impending tax has been public knowledge for months, Dr. de Zilwa’s recent analysis has crystallised the anxieties of many within the country’s vital information and communication technology (ICT) sector. The levy is a key component of Sri Lanka’s fiscal strategy, under its agreement with the International Monetary Fund (IMF).