In the effort to streamline and structure the Government’s taxing mechanism, the Tourist VAT Refund Scheme (TVRS) at the Bandaranaike International Airport (BIA) was launched last week. Speaking at the event, Minister of Finance and Mass Media, Mangala Samaraweera said, the Government is taking every step to ensure that taxation is fair, convenient, and as non distortive as possible.
Speaking further he went on to say, the government is already giving priority to the development of strategic industries under a rule based system and not ad-hoc incentives that have led to corruption and tax leakage in the past.
“In the Inland Revenue Act itself we have provided significant concessions to sectors including tourism, exports, IT, education, and agriculture, all of which are taxed at 14% corporate income tax. This is in addition to the attractive capital allowances which provide a major tax break for new investments,” the Minister said.
The Tourist VAT refund scheme is a 2018 Budget proposal which will provide a significant boost for the tourism sector and the retail sector. The TVRS will enable Sri Lankan goods to have greater exposure to the global market, bringing with it several positive economic spillovers.
By introducing such a TVR scheme, Sri Lanka will be aligning itself with international best practices.
The TVRS could also have benefits in terms of enhancing tax compliance. More firms will be encouraged to register to claim the privileges, thus improving formalisation of the economy. This scheme would also give tax administration a greater insight into the retail and tourism sectors.
“I expect the TVRS to provide a significant incentive for luxury retail operators in Sri Lanka. There are already a number of shopping destinations with major global brands beginning to establish in Sri Lanka – and this trend can only benefit and further expand with the tourist VAT refund mechanism. We look forward to seeing enhanced investments from this sector,” the Minister said.