By: Staff Writer

June 29, Colombo (LNW): Sri Lanka’s stock market regulator is embarking on a major clean-up of inactive investor accounts, introducing tighter verification requirements designed to reduce fraud risks while modernising oversight of electronically held securities.

From June 30, the Colombo Stock Exchange (CSE), through the Central Depository System (CDS), will begin restricting trading activity in accounts that have remained inactive for extended periods. The initiative forms part of a phased investor protection programme targeting dormant securities accounts that have not recorded transactions for three years or more.

The first batch of restrictions will apply to accounts inactive for at least 15 years. Before trading can resume, affected investors will be required to update their Know Your Customer (KYC) details, ensuring account information reflects current identities and contact details.

Authorities stress that the measure should not be mistaken for asset seizure or account closure. Investors will continue to retain full legal ownership of every security held in their portfolios, while dividends, rights issues, bonus shares and all other corporate action benefits will continue uninterrupted.

The programme has been carefully structured to minimise disruption. After the June rollout, accounts dormant for between 10 and 15 years will be classified on September 30, followed by those inactive for five to 10 years on December 31. The final phase, covering accounts with inactivity ranging from three to five years, will take effect on January 31 next year.

Officials argue that dormant accounts can become attractive targets for fraudsters, particularly where account holders have changed addresses, phone numbers or identification documents over many years. Requiring updated customer information before permitting transactions significantly reduces opportunities for unauthorised access and identity-related financial crime.

Importantly, there is no expiry date for investors wishing to restore their accounts. Trading privileges can be reinstated at any time by submitting updated KYC documentation through the CDS online platform or the official CSE mobile application.

The initiative aligns Sri Lanka’s capital market with practices already adopted by numerous international securities depositories, where periodic customer verification has become a standard defence against financial crime. As securities ownership shifts almost entirely to digital platforms, maintaining accurate investor records has become a central component of market regulation.

Industry observers view the move as part of a broader effort to strengthen confidence in Sri Lanka’s capital markets by improving governance and protecting investors from increasingly sophisticated cyber and financial threats.

Rather than restricting ownership, the new framework focuses on ensuring that only verified account holders can access and trade securities, reinforcing the integrity of the country’s electronic trading infrastructure while preserving investor rights

By: Staff Writer

June 29, Colombo (LNW): As Sri Lanka advances its programme of fiscal reforms, the Government has launched a strong defence of recent tax amendments, arguing that widespread misinformation is distorting public understanding of measures designed to strengthen revenue collection rather than increase taxation.

The debate intensified following the presentation of the Fiscal Strategy Statement for 2027 in Parliament, where Finance and Planning Deputy Minister Dr. Anil Jayantha Fernando dismissed social media claims that new taxes had been imposed on software companies, digital businesses and small enterprises.

Government officials insist that many of the controversial amendments are administrative reforms intended to improve fairness within the tax system instead of introducing additional financial burdens.

One of the most debated issues concerns Value Added Tax (VAT). Critics have argued that expanding VAT registration would disproportionately affect small and medium-sized enterprises (SMEs). Dr. Fernando, however, maintains that VAT is fundamentally a consumer tax, with businesses acting only as intermediaries responsible for collecting and remitting payments to the Inland Revenue Department.

Officials say expanding the VAT registration network is intended to reduce tax leakages while enabling registered businesses to recover input tax credits on purchases, thereby creating a more equitable system across manufacturing, wholesale and retail sectors.

Acknowledging the difficulties many businesses continue to face following recent economic instability, Economic Development Deputy Minister Nishantha Jayaweera announced that the planned reduction of the compulsory VAT registration threshold from Rs.60 million to Rs.36 million has been temporarily postponed. The delay is intended to provide businesses with additional time to adjust to compliance requirements without disrupting ongoing recovery efforts.

The Government also rejected criticism surrounding so-called “digital taxes.” According to Dr. Fernando, no new tax has been introduced on Sri Lankan software developers or digital entrepreneurs. Instead, amendments require non-resident companies supplying digital services to Sri Lankan consumers through online platforms to comply with VAT obligations, placing overseas providers on equal footing with local businesses already subject to taxation.

Another contentious issue involves changes affecting financial institutions. The Government clarified that revisions relating to VAT and the Social Security Contribution Levy merely combine existing tax calculations into a single effective rate of 20.5 percent for administrative simplicity. Ministers insist this does not represent an increase in taxation but rather a streamlined method of collection.

Officials have accused critics of selectively interpreting the amendments and spreading misleading information that has fuelled unnecessary public concern. The Inland Revenue Department is expected to issue detailed implementation guidelines to clarify the practical application of the reforms.

The Government argues that these measures form part of a wider effort to rebuild Sri Lanka’s fiscal credibility through stronger revenue administration, digitalisation and improved governance. Whether the reforms succeed, however, will depend not only on legislative changes but also on public trust, transparent communication and effective implementation.

As the country prepares its 2027 Budget, the contest between fiscal reform and public perception may prove just as significant as the policies themselves.

By: Staff Writer

June 29, Colombo (LNW): The Government’s explanation for not reducing fuel prices despite falling international oil prices has triggered fresh questions over whether Sri Lanka is honouring its commitment to the International Monetary Fund (IMF) to maintain a transparent, cost-reflective fuel pricing mechanism.

Deputy Finance Minister Anil Jayantha recently stated that fuel prices cannot be reduced immediately because Sri Lanka imports petroleum through term tenders rather than spot purchases. According to him, fuel cargoes arriving today were contracted several weeks or months ago when international oil prices were considerably higher. Therefore, current global price reductions cannot be immediately reflected in local retail prices.

Technically, the Minister’s explanation is commercially valid. Term tenders are widely used by governments and large fuel importers because they guarantee uninterrupted supplies and reduce procurement risks. Prices under these contracts are generally linked to international benchmarks plus negotiated premiums. They also prevent sudden supply shortages that could cripple the economy.

However, the larger issue is not whether term tenders are appropriate procurement instruments. The real concern is whether this explanation contradicts Sri Lanka’s repeated assurances to the IMF that domestic fuel prices would be revised using a cost-reflective pricing formula based on prevailing international market prices.

Following the economic crisis, Sri Lanka pledged to eliminate politically determined fuel pricing and instead introduce an automatic formula ensuring consumers pay prices that accurately reflect international petroleum costs, exchange rate movements and operational expenses. This commitment became one of the key structural reforms under the IMF programme.

If procurement contracts signed months earlier now determine local fuel prices instead of current international market conditions, then an important question arises. Is the fuel pricing formula still functioning as originally promised, or has procurement policy effectively overridden the pricing mechanism?

The Government has consistently referred to the V= V1+V2+V3+V4 pricing formula. Although each component represents different cost variables including benchmark prices, freight, exchange rate fluctuations, taxes and distribution costs the public was led to believe that international price reductions would eventually result in corresponding reductions at the fuel pump.

Instead, consumers are now being told that contractual commitments under term tenders prevent immediate price adjustments. This explanation may satisfy procurement professionals, but it offers little comfort to millions of Sri Lankans already burdened by soaring transport costs, higher food prices and rising household expenses.

Transparency therefore becomes essential. The Government should clearly explain how term tender prices are incorporated into the official pricing formula and whether the formula continues to comply with IMF requirements. Without such clarity, public confidence in both the pricing mechanism and the Government’s economic reform programme may gradually erode.

Ultimately, the debate is no longer simply about fuel procurement. It is about accountability, policy consistency and whether ordinary citizens are receiving the benefits they were promised when global energy prices decline.

June 29, Colombo (LNW): Sri Lanka’s government revenue is projected to moderate in 2026 following a stronger-than-usual performance this year, with the Ministry of Finance attributing the expected decline largely to the fading impact of exceptional tax collections generated by the resumption of vehicle imports.

According to the Fiscal Strategy Statement 2027, total government revenue, including grants, is forecast to decrease from 16.7 per cent of Gross Domestic Product (GDP) in 2025 to 15.8 per cent in 2026. The Ministry noted that the anticipated reduction reflects a return to more typical revenue levels rather than a deterioration in tax collection.

Officials explained that the reopening of vehicle imports in 2025 resulted in a significant one-off increase in tax receipts, boosting government income beyond normal expectations. As this temporary effect subsides, revenue growth is expected to stabilise next year.

The report also highlighted the considerable progress made since the country’s economic crisis, recalling that government revenue had fallen to just 8.4 per cent of GDP in 2022—one of the lowest ratios recorded globally at the time. Since then, a series of tax reforms and improvements to revenue administration have helped broaden the tax base, strengthen compliance and curb tax evasion and revenue leakages.

Despite the positive trajectory, the Ministry warned that external developments could affect revenue performance in the coming years. It identified escalating geopolitical tensions in the Middle East, uncertainties surrounding global trade and possible volatility in international energy markets as key risks that could undermine economic activity and place pressure on government finances.

The Ministry stressed that maintaining fiscal discipline, improving tax administration and safeguarding economic stability would remain critical to achieving the country’s medium-term revenue and budgetary targets.