Tax Bill provisions risk denting competitiveness, warns Ceylon Chamber of Commerce

• Says certain proposals risk undermining business continuity, taxpayer rights and overall competitiveness

The Ceylon Chamber of Commerce (CCC) has flagged key risks in the proposed Inland Revenue (Amendment) Bill of 2026 and cautioned that several provisions could strain financing, compliance and investor confidence at a delicate stage of economic recovery.

Following a review by its Tax Steering Committee, the CCC said while updating the tax framework is necessary, certain proposals risk undermining business continuity, taxpayer rights and overall competitiveness. 

The concerns were formally submitted to the Finance Ministry, after industry consultations, including a stakeholder forum with the policymakers and regulators on March 12.

Among the key issues raised are the proposed changes to the thin capitalisation rules, which the CCC said could tighten the financing conditions, if negative reserves are included in gearing calculations. It also called for the continued deductibility of finance costs on genuine commercial borrowings to avoid penalising the already stressed firms.The CCC further urged flexibility in the proposed six to nine-month deadline for submitting evidence to the Commissioner General, warning that rigid timelines could compromise fairness. 

It also pushed back against stringent penalties, including imprisonment, for minor compliance lapses, advocating proportionate enforcement instead.

Sector-specific concerns were flagged over the proposed tax changes affecting the insurers, with the CCC recommending that amendments be deferred pending further consultation, particularly in light of the IFRS 17 implementation.

It also called for clearer limits on the discretionary powers of the Commissioner General to ensure transparency and consistency in enforcement.

The CCC said it has engaged the policymakers to revise or defer provisions that could weigh on business sentiment, stressing the need for a stable and predictable tax regime, as Sri Lanka seeks to attract investment and sustain its recovery momentum.