Finance Bill wins approval for reforms and telecom incentives

The Committee on Public Finance (CoPF) has approved a series of tax and fiscal policy reforms, including a five-year tax exemption for newly constructed telecommunications towers, while rejecting a proposal that would have allowed telecom operators to claim tax relief on unpaid customer bills.

The approval was granted when the Finance (Amendment) Bill, which seeks to amend the Finance Act No. 35 of 2018, was taken up before the Committee in Parliament under the chairmanship of MP Dr. Harsha de Silva.

The proposed legislation is part of the 2026 Budget measures aimed at accelerating the development of digital infrastructure and expanding nationwide connectivity.

Under the amendment, telecommunications towers that become operational on or after 1 January 2026 will be eligible for a five-year tax holiday. The government expects the incentive to boost investment in telecom infrastructure, particularly in underserved regions, and support the country’s broader digital transformation agenda.

The Committee also examined proposed amendments to the Telecommunications Tax Act No. 21 of 2011, which aim to streamline tax rates, address tax default issues, and improve transparency in tax administration.

While members supported efforts to modernise the tax framework, they rejected a provision that would have allowed telecom operators to deduct tax obligations linked to unpaid customer bills.

Officials had argued that existing law does not clearly address tax treatment in cases of customer default and proposed allowing operators a defined period of relief. However, CoPF members raised concerns over fairness, stating that such concessions would largely benefit major companies while similar relief is not available to smaller businesses.

Dr. de Silva emphasised that collecting taxes from consumers is the responsibility of service providers, adding that operational inefficiencies should not lead to reduced government revenue. The Committee decided to revisit the proposal after further clarification.

The meeting also highlighted concerns regarding the alleged misuse of the Sri Lankan State emblem by online gambling operators. Members questioned advertisements promoting online casinos as “licensed” using the official emblem.

Officials informed the Committee that no licenses have been issued for online gambling operations in Sri Lanka. The Committee instructed relevant authorities to immediately investigate the matter and report back.

The Committee also approved four Gazette notifications related to tax and economic policy. These include the introduction of new national subdivisions under the Harmonised System (HS) Codes for Port and Airport Development Tax and Excise Tax, aimed at improving import classification and taxation.

Lawmakers also reviewed reforms affecting the textile sector, including the removal of the cess levy on imported textiles and the introduction of an 18% Value Added Tax (VAT) effective from 1 April 2026. Officials noted that although this increases upfront import costs, VAT-registered businesses will be able to claim input tax credits, easing the long-term burden.

Another approved measure exempts payment receipts from stamp duty, offering immediate relief for individuals affected by natural disasters.

The meeting was attended by Deputy Minister Nishantha Jayaweera and MPs Ravi Karunanayake, Harshana Rajakaruna, Lakmali Hemachandra, and Wijesiri Basnayake.