Once regarded as a regional success story in human development, even if not in sustained economic growth, Sri Lanka has witnessed many of its hard-earned development gains erode in the wake of the recent economic crisis.

This paper has two purposes. One is to summarise the recent changes in tax policy and administration. The second is to sound a mild warning: that the IRD, having previously long been a conservative organisation that had fallen well behind most other countries in reforming its practices and adopting new technologies, is now at some risk of going to the opposite extreme.

Tax Ombudsmen exist in many countries. They are independent officials (or offices) whose role is to help taxpayers resolve disputes with tax authorities – fairly, quickly and without cost. In essence, they are intended to protect taxpayers from unfair treatment at the hands of tax authorities. The basis of the case for Tax Ombudsmen is the understanding that, in many countries, the balance of negotiating power between taxpayers and tax authorities is weighted too much in favo

Despite many challenges, the Inland Revenue Department (IRD) has made significant strides in digitalisation.

Over the last two decades, China has become a major financing source for Sri Lanka's infrastructure development.

China remains central to Sri Lanka’s economic and diplomatic landscape, particularly in the aftermath of its sovereign default. The debt restructuring process underscored China’s dual role as both a bilateral and commercial creditor, while trade and investment links highlight a structural asymmetry — Sri Lanka imports heavily from China but exports little in return.

Signals a mismatch between announced policy and revenue projections.

Prices should have reduced by 15%, but in reality only reduced by 6%.

In this issue, we unpack the Simplified VAT (SVAT) system and explore the new risk-based refund scheme.

Sri Lanka’s current Value Added Tax (VAT) framework has not kept pace with the growing volume of cross-border digital transactions. In response, the government is now moving forward with a proposal to extend the standard VAT rate of 18% to digital services provided from abroad to consumers in Sri Lanka. Arutha’s latest brief unpacks this new policy to better understand its implications.

As wealth inequality increases globally, sentiments in favour of taxing the wealthiest in society continue to gain momentum. Although Sri Lanka experimented with taxes on wealth shortly after its independence, many of these measures have since been abolished. There are only a few minor taxes on assets at present, and these contribute little to government revenue. This begs the question: What should taxing wealth look like for Sri Lanka? Arutha’s newest publication “Understand

Yolani Fernando and Umesh Moramudali from Arutha recently contributed to the report, The Political Economy of Debt, funded by The Asia Foundation. This publication focuses on the political economy of South Asian nations and its effects on public debt dynamics. The chapter on Sri Lanka delves into the structural issues that led to the country’s first ever sovereign default in 2022.