Sri Lanka’s stronger tax revenue performance is beginning to expose a deeper weakness: the country has improved its ability to raise revenue, but not necessarily its ability to administer the tax system efficiently. That gap could become a serious obstacle to the Government’s fiscal reform agenda, while also creating uncertainty for foreign investors and businesses engaged in international trade.
The Parliamentary Committee on Ways and Means, chaired by MP Wijesiri Basnayake, has identified persistent weaknesses in the country’s tax administration while reviewing the Government’s 2026 tax plan and revenue collection up to June 30. Its concerns extend beyond tax rates and revenue targets to the machinery responsible for registering taxpayers, processing information, enforcing compliance and collecting what is legally due.
This distinction is critical. Sri Lanka’s recent fiscal consolidation has relied partly on tax policy measures that have increased government revenue. But a sustainable revenue system cannot depend indefinitely on higher rates, new levies or intensified collection. It requires an administration capable of identifying taxpayers, sharing information, reducing evasion and bringing previously untaxed economic activity into the formal system.
The Committee’s concerns over digital infrastructure and the Revenue Administration Management Information System (RAMIS) point to a potentially costly bottleneck. Without fully integrated systems, information held by different Government institutions may remain fragmented, limiting the authorities’ ability to identify discrepancies, assess risk and enforce compliance.
For legitimate businesses, particularly foreign investors, administrative fragmentation can be almost as damaging as high taxation. Investors value predictable rules, transparent procedures and efficient digital interactions with Government agencies. Where registration, filing, payment and verification systems remain cumbersome, the cost of compliance rises and investment decisions can be delayed.
The problem is equally significant for trade. Importers, exporters and businesses operating across multiple jurisdictions depend on accurate and timely data. Weak information-sharing mechanisms can complicate verification, increase administrative burdens and create uncertainty around tax obligations.
The Committee’s emphasis on expanding electronic registration, filing and payment facilities is therefore more than a technological upgrade. It is a competitiveness issue. A modern tax authority should make compliance easier for businesses while making non-compliance harder.
Bringing the informal economy into the tax net presents an even greater challenge. A narrow formal taxpayer base places disproportionate pressure on compliant businesses and can distort competition between firms operating within and outside the system.
Sri Lanka’s fiscal reforms will ultimately be judged not only by how much revenue the Treasury collects, but by how efficiently and fairly it collects it. Modernising RAMIS, integrating Government databases, strengthening specialised human resources and widening the formal tax base are therefore essential reforms.
Without them, higher revenue could mask an administration still struggling to support the investment, trade and economic formalisation Sri Lanka urgently needs.