Jul 05, 2017

Online transactions to be taxed as govt plans to tap e-commerce

As the Sri Lankan e commerce sector blossoms from infancy to maturity, the government is gearing up to regularise the sector and impose taxation on online transactions.

A common platform is to be created to facilitate online firms such as amazon ,ebay etc to collect taxes on behalf of the government for transactions carried out within Sri Lanka , official sources said.

Information Communication Agency (ICTA) will create a common platform to facilitate online firms such as amazon, ebay, etc to be able to collect taxes on behalf of the government for transactions carried out within Sri Lanka . This common platform will be monitored by the Treasury.

According to Central Bank annual report 2016, IT related activities have seen a significant growth. A major portion of this growth can be attributed to E-Commerce.

This has resulted in the flooding of websites and mobile apps in the market, basically engaging in commercial transactions.

It has also become a method to bypass the formal taxes and charges that are otherwise applicable in trade and financial transactions, a senior finance ministry official said adding that this results in significant revenue leakages to the government.

Due taxes are not properly charged at the points of port, airport and the post office and courier services when such goods enter the country via on line transactions, he pointed out.

The problem is arising due to the absence of any special provisions to regulate taxation in this sector, he said pointing out that the finance ministry is now considering thee formulation of necessary tax provisions for the purpose of assessment and collection of taxes.

Taxation of E commerce or online transactions creates a lot of practical problems since it is difficult to establish the trade or business carried out in Sri Lanka by the relevant foreign parties, senior Inland Revenue Department official said

A tax could be levied on the local recipient of goods but that may also create problems. Many countries still watch the situation since it is a complicated matter, he said.

Local firms engaged in E commerce were of the view that the efforts to introduce a state-linked e-commerce and online payments platform appear misguided as it can stifle entrepreneurship in the burgeoning digital economy.

This Government is thinking that every e-commerce provider in the world including Amazon and e-Bay will go through some platform that is yet to be designed and is to be operated by the ICT agency, a top official of an E commerce firm said.