Sept 12, Colombo: Sri Lanka Tuesday (11) opened a special counter at the departure terminal of the Bandaranaike International Airport to return the 15% VAT charged from foreign tourists for the goods purchased by them during their stay in Sri Lanka.
Minister of Finance and Mass Media Mangala Samaraweera declared open the special Tourist VAT Refund Scheme (TVRS) counter at the Bandaranaike International Airport yesterday (11).
The objective of this program is to attract more foreign tourists to shop in Sri Lanka transforming the country into a Trading Hub of Asia, in line with Budget Proposal 2018.
Speaking at the opening of the TVRS counter, the Finance Minister said the government has made important improvements in tax collection and compliance which will the government's objectives of servicing outstanding debt repayments. However, the Minister said lot more needs to be done.
He said the government will always give priority to the development of strategic industries, but it will be done in a rules based manner, as opposed to ad-hoc incentives that have led to corruption and tax leakage in the past.
According to Minister Samaraweera, the TVRS is a 2018 Budget proposal which will provide a significant boost for the tourism sector and the retail sector. The TVRS will enable Sri Lankan goods to have greater exposure to the global market, bringing with it several positive economic spill overs. By introducing a TVR scheme, Sri Lanka will be aligning itself with international best practices, he said.
The Minister explained that the TVRS has a particular importance for enhancing the attraction of Colombo as a destination.
"Today most tourists tend to bypass Colombo for attractions outside of the capital city. But with the opportunity for VAT free shopping, tourists will have more reason to spend time in Colombo. Trends in other cities show that tourists that visit destinations for the sole purpose of shopping tend to spend significantly more than their counterparts that visit the rest of the country and they tend to stay at the destination longer than traditional tourists. Therefore, I believe that this would be the first step in unlocking a major potential for Sri Lanka."
The TVRS could also have benefits in terms of enhancing tax compliance. More firms will be incentivized to register to claim the privileges, thus improving formalization of the economy.
He said the scheme would also give the tax administration a greater insight to retail and tourism sectors and provide a significant incentive for luxury retail operators in Sri Lanka.
"There are already a number of shopping destinations with major global brands beginning to establish in Sri Lanka - and this trend can only benefit and further expand with the tourist VAT refund mechanism. We look forward to seeing enhanced investments from this sector," the Finance Minister said.
Cautioning that the new TVRS may have some "teething issues" in implementing, the Minister expected the system will be brought up to global standards within a very short period of time by adopting the best available technology and expertise.
"Improving the environment for Sri Lankan businesses has always been a priority for the government of Sri Lanka. By implementing policies such as this, we expect material benefits to accrue to the tourism industry, the retail sector, and the wider economy through indirect benefits," Minister Samaraweera said.