The Ceylon Chamber of Commerce, through its Tax Steering Committee, has been actively interacting with stakeholders regarding the proposed Inland Revenue (Amendment) Bill of 2026, acknowledging its significant implications for both businesses and the economy. While the Chamber values the necessity of updating the taxation framework, its focus has been primarily on evaluating the potential effects of the suggested amendments, identifying specific provisions that require further scrutiny.
The Tax Steering Committee conducted an in-depth analysis of the proposed changes, considering their impact on business sustainability, investment climate, taxpayer rights, and Sri Lanka’s competitive edge. The evaluation centered on aspects that could influence financing, compliance, and the overall business atmosphere.
Additionally, the Ceylon Chamber hosted a seminar on March 12, 2026, at its auditorium, which gathered members, industry representatives, policymakers, and regulatory authorities. This event provided a platform for a comprehensive overview of the proposed amendments, clarified essential provisions, and encouraged an open dialogue between the private sector and the government, particularly addressing concerns voiced by the membership.
Following these discussions, the Tax Steering Committee presented thorough recommendations to the Ministry of Finance, detailing the potential effects of the proposed amendments and their implications for the government’s broader policy strategy. Among the key recommendations were:
- Thin Capitalisation Rules Amendments: The Chamber advocated for the exclusion of negative reserves from gearing calculations to prevent additional tax burdens on financially struggling companies and emphasized the need for allowing finance costs on all legitimate commercial borrowings to safeguard proper financing.
- Evidence Submission Restrictions: It called for increased flexibility regarding the proposed 6 to 9 month deadline for submitting information to the Commissioner General, allowing taxpayers to submit verified evidence beyond this timeframe to balance administrative efficiency with fairness.
- Compliance Penalties: The Chamber urged that enforcement actions should remain reasonable, recommending against severe penalties, including imprisonment, for minor compliance issues. It suggested utilizing existing recovery mechanisms to maintain investment confidence and fairness for taxpayers.
- Insurance Business Taxation: The Chamber recommended postponing amendments to Section 67 until further discussions with the insurance sector and regulators occur. It emphasized avoiding the classification of policyholder distributions as taxable income for insurers and called for clearer application of adjustment provisions, especially in light of IFRS 17 implementation.
- Commissioner General’s Discretionary Powers: These powers should be clearly defined and governed by transparent rules to prevent ambiguity. While such authority is crucial for enforcement, it must be exercised equitably, with appropriate safeguards to ensure consistency and maintain taxpayer trust.
The Chamber has also been in direct communication with policymakers to ensure that provisions identified as potentially detrimental to business sentiment are either appropriately amended during the Committee Stage or postponed for further discussion before implementation.
The Ceylon Chamber underscores the necessity of sustaining a stable, predictable, and investment-friendly tax environment, particularly as Sri Lanka aims to enhance economic recovery and draw in private investment. It remains dedicated to a collaborative, solutions-focused approach with policymakers, working together to refine and enhance legislation that serves the public interest and ensures the timely support and effective enactment of reforms. The Chamber will persist in its close collaboration with the government and relevant authorities to foster the development of a balanced and effective tax policy that encourages growth while meeting revenue goals.
