Raising the issue in Parliament, he said the COPF had not received a clear explanation from the government and stressed that the matter should be resolved before proceeding with the Bill’s second reading.
He pointed out that local digital service providers are taxed on the full value of transactions, while foreign-based providers are taxed only on their commission earnings, creating what he described as an economic imbalance.
MP de Silva noted that although the structure may be justifiable from an accounting perspective, it raises concerns regarding fairness and national development policy.
He also recalled that COPF had previously advocated for taxation based on the place of consumption rather than production, a principle now reflected in current proposals.
However, he cautioned that without ensuring tax neutrality, domestic digital service providers could be placed at a disadvantage.
The VAT Amendment Bill, which aims to broaden the tax base and improve compliance, is scheduled for debate in Parliament today (23).
