The Federation of Information Technology in Sri Lanka (FITIS) has written to Finance Minister Mangala Samaraweera to reconsider the imposition of the 3.5 percent Nation Building Tax (NBT) on all foreign payments using credit and debit cards.
Budget 2019 presented by Samaraweera early this month proposed to do away with the 2.5 percent stamp duty applied hitherto and impose the 3.5 percent NBT on foreign payments using credit and debit cards.
The apex body of the country’s ICT industry, the FITIS said the enactment of the proposal would affect the majority small and medium operators in the country’s ICT industry.
“With the enactment of this proposal, both the ICT industry and country will be affected.
The majority of the ICT industry, consisting of SMEs, uses digital services for their business operations. Therefore, the 3.5 percent NBT would seriously impact their businesses.
As far as the country is concerned, if this is imposed, the users will be encouraged to use online money wallets through which these payments can be made. This will result in reduction of foreign currency inflows into the country,” FITIS
said in its letter.
According to the Finance Ministry officials, the rationale for coming up with this was companies like Uber and AliExpress are not subject to any taxes operating in Sri Lanka, whereas their domestic competitors pay corporate tax, VAT, etc. resulting in an uneven playing field.
However, by doing this, the government is discouraging cashless payments—a key ingredient for a digital economy—and is introducing a new para-tariff contrary to its claim of phasing out of such, which impede free trade.