The Hon. (Dr.) Harshana Suriyapperuma - Deputy Minister of Finance and Planning

¶ 01 Hon. Deputy Chairperson, it is very important for us to understand the approach of the Government to facilitate the activities, initiatives, and strategies of the Ministry of Science and Technology and the Ministry of Digital Economy, and the critical areas the Government has focused on.

¶ 02 First, connecting Sri Lanka to the world: Sri Lanka is no longer an isolated country or community. The Budget’s approach is to provide adequate resources to take the country forward and connect it to the global economy, with several initiatives started toward that objective.

¶ 03 Second, creating ease of doing business for local and foreign investors. Given our location, we can offer advantages, but we must facilitate investment through ease of doing business. Digitization is the platform to take Sri Lanka on that journey, and the Budget links digitalization with national requirements.

¶ 04 Third, efficient citizen service delivery—not just facilitating business, but delivering government services seamlessly through district and provincial offices so people in remote areas need not travel to Colombo. The Budget’s digitization map supports this.

¶ 05 Fourth, minimizing room for corruption by reducing person-to-person interaction and increasing efficiency, thus improving government revenue and speeding service delivery.

¶ 06 To move the economy to the next level, every citizen and business must contribute proportionately to government revenue. Many now evade paying their fair share. Digitization helps bridge this gap by seamlessly connecting citizens and businesses to the tax system, making compliance easier and transforming the informal economy into the formal.

¶ 07 In Budget 2025, Rs. 4,752 million is allocated for Recurrent and Rs. 4,351 million for Capital Expenditure of the Ministry of Digital Economy. Notably, the allocation to ICTA has increased from Rs. 355 million last year to Rs. 640 million this year. Recurrent expenditure across the sector rises from Rs. 5,345 million to Rs. 6,752 million; capital from Rs. 6,446 million to Rs. 6,871 million. Total support for digital infrastructure and the digital economy rises from Rs. 11,791 million to Rs. 13,623 million.

¶ 08 Through this Budget, we are strengthening the economy and planning cross-sector programs to support citizens, businesses, and investors. The Hon. Member earlier said the Digital Services Tax would reduce revenues. I believe such statements stem from misunderstanding or deliberate misinformation. Let me clarify: under the previous Government’s IMF engagement, the Digital Services Tax was increased up to 30 percent. This Government has reduced it to 15 percent—i.e., a 50 percent reduction—after discussions with the IMF, reflecting the strategic importance we place on the digital economy. Beyond cutting the rate, we are enabling seven additional areas of relief for youth and entrepreneurs delivering services through digital technologies.

¶ 09 First, relief through double taxation treaties: Sri Lanka has over 46 DTTs, enabling IT and services exporters to credit taxes paid abroad when paying in Sri Lanka.

¶ 10 Second, unlike PAYE where tax is on gross salary, for digital technology earners, deductible expenses are recognized—computers, laptops, media and lighting equipment, internet costs, and a proportion of electricity bills—so the tax applies to net income, not the whole amount.

¶ 11 Third, the tax is capped at 15 percent, whereas ordinary personal income tax goes through 6, 18, 24, 30, 36 percent slabs. For digital exports, the cap is 15 percent maximum.

¶ 12 Fourth, why 15 percent? We aligned this with the evolving global minimum taxation framework.

¶ 13 Also, when income is received into the bank, there is no withholding at bank level; the exporter receives the full amount and declares and pays quarterly and annually.

¶ 14 Hon. Namal Rajapaksa, you called for digitizing public procurement. Already, all institutions handling minor procurements are connected to A&E technology workflows. By end of this year, we expect to connect goods, services, works, and consultancy procurement to this system—ensuring digital processing and transparency.

¶ 15 On SVAT: some seek to create misconceptions. After digitizing and streamlining, the existing SVAT mechanism will transition to a refund system. The Government’s intent is to manage this so that no exporter is disadvantaged and working capital impacts are minimized. Utilization, monitoring, and implementation will be conducted with government oversight to ensure success.

¶ 16 Thank you for the opportunity, Hon. Deputy Chairperson.