Sri Lanka’s tourism recovery is being enthusiastically narrated through rising arrivals, improving occupancy rates and the comforting optics of a sector returning to life.
Hotels are fuller, beaches are busier and policymakers are understandably eager to point to tourism as a pillar of economic recovery. Yet beneath that visible resurgence lies a far more uncomfortable and largely under-examined question: who is actually capturing the economic value generated by this recovery?
Because while Sri Lanka provides the product – the rooms, the hospitality, the experiences and the destination itself – a significant portion of the transactional value increasingly flows through global digital intermediaries such as Booking.com and Agoda.
These platforms have become the primary gateway through which international travellers discover, compare and ultimately book accommodation. In doing so, they have also positioned themselves at the most lucrative point of the value chain: the transaction itself.
The contrast with Thailand is instructive and, frankly, sobering. Thailand has taken deliberate and structured steps to bring foreign digital platforms squarely within its tax framework. These platforms are required to register, collect and remit value-added tax on services consumed within Thailand. The commission earned on each booking is not an abstract offshore figure – it is visible, taxable and captured within the domestic fiscal system. In effect, Thailand taxes not merely the hotel but the platform that monetises the transaction.
Sri Lanka, by contrast, appears to be operating within a fragmented and only partially enforced framework. While there have been policy attempts – including the introduction of a modest levy on online booking commissions – enforcement remains inconsistent and incomplete. VAT application at the platform level is not uniformly operationalised.
Thousands of accommodation providers operate through these platforms with varying degrees of declaration and compliance. The result is a system in which a substantial portion of revenue is effectively intermediated offshore, with only a fraction of that value returning to the domestic tax net.
This is not a marginal issue. It is a structural leakage.
Modern tourism is no longer defined solely by physical infrastructure or natural beauty. It is defined by digital intermediation. The platform determines visibility, influences pricing, aggregates demand and captures commissions at scale. When that layer of the ecosystem sits outside effective taxation, the state is left collecting revenue at the edges while the core transactional value escapes.
In a country navigating fiscal consolidation, external debt restructuring and the ongoing demands of macroeconomic stabilisation, such leakage is not merely inefficient – it is strategically damaging. Revenue that could be captured with clarity and consistency is instead diffused across jurisdictions, hidden within cross-border digital flows and only partially visible to regulators.
This is not an argument against global platforms. Their role in driving demand and connecting Sri Lanka to international markets is undeniable. The issue is not their presence. It is the absence of a coherent and enforceable framework governing how their economic activity is treated within Sri Lanka’s tax system.
Because the underlying reality remains stark. The tourist arrives in Sri Lanka. The service is delivered in Sri Lanka. The value is created in Sri Lanka. Yet a meaningful share of that value is monetised elsewhere, beyond the immediate reach of domestic taxation.
That is not a technological inevitability.
It is a policy choice – or perhaps more accurately, a policy gap.
Until Sri Lanka addresses this imbalance with clarity, consistency and enforcement, the country risks continuing a pattern where it hosts the activity but does not fully capture the income. And in an economy where every dollar matters, that is a luxury Sri Lanka can ill afford
