Opposition Leader Sajith Premadasa on Monday accused the government of “extraction” rather than reform, warning that the VAT amendments taking effect July 1 will suffocate small and medium enterprises rather than spur growth.
“Sri Lanka widens the VAT net, raises rates, and tightens enforcement all at once. SMEs dragged in. Financial services taxed higher. Digital economy captured. And compliance burden increased,” Premadasa wrote on X. “This isn’t reform. It’s extraction. You cannot tax an economy into growth.”
“If businesses can’t breathe, they won’t survive or thrive,” he added. “And if they don’t survive, what exactly will be left to tax?”
The VAT Amendment Bill released on April 29 cuts the registration threshold from annual turnover of Rs. 60 million to Rs. 36 million, raises VAT on financial services from 18 percent to 20.5 percent, imposes VAT on digital services supplied by non-resident companies to Sri Lankan consumers, and makes Inland Revenue Department-approved point-of-sale systems mandatory for real-time transaction reporting. Maximum fines for VAT offences will rise to Rs. 1 million with possible imprisonment of up to six months.
Strategic-importance businesses operating under the Colombo Port City framework will receive exemptions, alongside non-resident online education and telemedicine services. Both Newswire and Ada Derana carried the SJB leader’s statement on Monday, with Ada Derana headlining the criticism as Premadasa calling the policy “extraction.”
The government has said the package is needed to meet 2026 fiscal targets committed under the IMF programme after last year’s record vehicle-import-driven revenue surge — a position Deputy Finance Minister Anil Jayantha Fernando has reiterated at parliamentary committee level. The Bill becomes legally enforceable only after Parliament completes the constitutional process; opposition pushback now sharpens the political track ahead of the floor debate.
Sources: Newswire, Ada Derana.
