Telecom Taxes

Nov 23, 2010 (LBO) – Sri Lanka has imposed new taxes on telecommunication including a 20 percent tax removing some of the existing ones, a regulatory license fee equal to 2.0 percent of revenues and has also imposed a new tax on international calls. From July 2011 the minimum call rate of 2.0 rupees a minute will be reduced to 1.50, president Mahinda Rajapaksa said in the budget speech.

Rajapaksa said he had asked the Telecommunications Regulatory Commission to “regulate the broadband costs in order to increase broadband penetration.” The government removed valued added tax from telecoms and made it an exempt industry, further complicating the regime.

Exempt industries cannot claim back VAT, but the budget speech said imports of high tech telecom equipment will not be charged VAT.

The government has also imposed a 2.0 rupee a minute new tax on outgoing calls. The 20 percent fee replaces VAT, a nation building levy, a mobile subscriber levy and an economic service charge.

The change in taxes is expected to bring 15.5 billion rupees in extra revenues from the sector to finance state spending.

The telecom sector has been a key source of state revenues in recent years. However the sector went into the red with a price war and