Sri Lanka Finance Minister moves to stifle e commerce innovation

Posted on September 5, 2016  /  0 Comments

According to the Daily Mirror, the Finance Minister has said ““They (e-commerce operators) are just operating here. Where is the regulation for that? We will make them bring money earned here back to the country.” He appears to be responding to non-e commerce businesses who are complaining as below.

Meanwhile during the 9th Ease of Doing Business Forum the Rent-A-Car Association representative Milinda Mallawarachchi called for e-commerce regulations. “(We) call for a national policy on regulating e-commerce and sharing economy,” he had said. He noted that while digital companies disrupting traditional businesses through efficiency, better service and quick customer response, is great, it could also be illegal, since such companies operate abroad with credit card payments. “It is an issue of a fair playing field because Sri Lankan companies can’t legally do the same thing with a foreign account and do business here. So a foreign company has an advantage of placing their operation on a tax haven and doing business here,” he noted. He said that e-commerce companies may be operating beyond the local monetary policy regulations, the import/export regulations and the policy requirements of the country. Karunanayake said that Mallawarachchi’s arguments are valid, and asked him to consult the Central Bank to formulate solutions.

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What does the Finance Minister’s proposal entail? Amazon will have to open a Sri Lanka office and maintain bank accounts here to which all earnings from Sri Lanka customers would have to be deposited. Then that entity would be taxed like any Sri Lankan business. Sounds fair.

But will all e commerce businesses be willing to go through the cumbersome processes of involved? For a big market such as India or China, yes. But for the minuscule Sri Lanka market? Unlikely. So what is the likely outcome? Blocking of e commerce sites? Way to go, Finance Minister.

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