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Sri Lanka in Talks with IMF to Remove VAT for Travel Firms

  • Sri Lanka is discussing with the IMF about exempting destination management companies (DMCs) from value added tax (VAT) to prevent cancellation of bookings.
  • Hotels in Colombo and outstations are booked up to 80-85% capacity until April, with bookings going up to October.
  • There is concern that DMCs may do transactions externally or open offshore accounts to avoid the tax.
  • Sri Lanka is lobbying with the IMF to ensure that remittances come into the country and transactions are not done elsewhere.
  • If the tax hike can be pushed back, Sri Lanka can avoid cancellation of already made bookings.
  • Sri Lanka is trying to raise taxes after defaulting in peacetime due to inflationist macro-economists printing money and facing currency crises.
  • Sri Lanka and Pakistan have the worst bad-money central banks in South Asia, leading to frequent crises and IMF programs.
  • Taxes are being hiked to boost state incomes after cuts were made in 2020 to boost potential output.

Source: economynext.com

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.

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