The digital economy is experiencing remarkable growth globally, and Sri Lanka is no exception. Wattegama (2021) valued Sri Lanka’s digital economy at approximately USD 3.47 billion, accounting for 4.37% of its GDP. However, the current tax statutes in Sri Lanka fail to capture the full spectrum of digital transactions that cross borders with ease, as they rely on traditional taxation models based on physical presence. 
The digital economy is experiencing remarkable growth globally, and Sri Lanka is no exception. Wattegama (2021) valued Sri Lanka’s digital economy at approximately USD 3.47 billion, accounting for 4.37% of its GDP. However, the current tax statutes in Sri Lanka fail to capture the full spectrum of digital transactions that cross borders with ease, as they rely on traditional taxation models based on physical presence. 
Taxation is a critical tool for sustainable development, playing a vital role in reducing poverty, ensuring food security, and enhancing social protection. In light of these important issues, the Institute of Charted Accountants of Sri Lanka hosted its Annual Economic and Tax Symposium under the theme “Shaping Fiscal Foundations: Tax Policy as a Catalyst for Sustainable Economic Growth,” on 1st and 2nd of August, 2024. Gayani Hurulle, Senior Research Manager at LIRNEasia, was a panellist at a session titled “Taxation on Environmental, Social and Governance (ESG) Factors: Achieving the United Nations’ Sustainable Development Goals (SDGs) and International Trade and Tax Policies” at the symposium. Other panellists included M. Ravindrakumar, Customs Management Expert; Ayesha Ashanthi, Commissioner, Department of Inland Revenue; and Dr. 
Senior Research Manager Gayani Hurulle, in an interview with Echelon for their May issue, discussed Sri Lanka’s readiness for a digital economy. Six experts were interviewed regarding Sri Lanka’s innovation landscape, providing insights into essential components for economic transformation, challenges in digital readiness, parallels with regional models, the intersection of law and technology, climate financing opportunities, and hurdles within the startup ecosystem. Gayani focused on Sri Lanka’s preparedness to embrace a digital economy, emphasising the urgent need to address challenges such as low digital literacy, inadequate infrastructure, and limited female workforce participation. She also highlighted the findings of LIRNEasia’s 2021 nationally representative survey, conducted against the backdrop of the COVID-19 pandemic. “According to LIRNEasia’s 2021 nationally representative survey, Sri Lanka grapples with a stark reality: only a fraction of the population possesses the ability to independently perform basic online tasks. 
Gayani Hurulle, Senior Research Manager at LIRNEasia, recently discussed the challenges facing Sri Lanka’s digital economy in an interview with Yarl TV. Gayani highlighted various policy challenges and opportunities pertaining to the digital economy, drawing on LIRNEasia’s research. She also highlighted the need for policy reforms to align with the rapidly evolving digital landscape. One of the pressing issues she addressed was digital taxation. She underlined that the current tax laws are not designed to/being used to collect taxes from large technology multinationals that don’t have a local physical presence, creating an uneven playing field. 
During the annual conference of the ICRIER Prosus Centre for Internet and Digital Economy (IPCIDE), which held in New Delhi on February 16, LIRNEasia CEO Helani Galpaya stressed on the need to address both demand and supply sides of internet use, advocating for education reform and digital literacy initiatives to bridge access gaps. Helani Galpaya is a member of the Advisory Board of IPCIDE. The focus of the event was the launch of the “State of India’s Digital Economy (SIDE) 2024” report, a comprehensive analysis of India’s digital transformation journey. Co-founded by the Indian Council for Research on International Economic Relations (ICRIER) and Prosus, a global consumer internet group, IPCIDE aims to shape policy by providing empirical evidence to guide India’s digital evolution. The 2024 report highlights that India’s digital economy is only second to that of the USA when viewed as a whole, but it falls behind when digital dividends are considered on a per capita basis. 
LIRNEasia has, over recent years, challenged the outdated and inadequate definition of computer literacy used by the Department of Census and Statistics of Sri Lanka (DCS). In a welcome move, DCS and the ICT Agency have collaborated to refine the definition of digital literacy and update assessment criteria. This decision was made by a 13-member consultative committee jointly headed by LIRNEasia Chair, and former ICT Agency (Sri Lanka) Chair, Professor Rohan Samarajiva, and Associate Chief Digital Economy Officer, ICT Agency of Sri Lanka Sameera Jayawardena. According to the annual literacy statistics for 2021 released by the Department of Census and Statistics, one out of two Sri Lankans aged 5-69 is digitally literate, accounting for a digital literacy rate of 57.2%. 
In an era marked by the rapid growth of the digital economy, the issue of taxation on technology multinationals has taken centre stage. However, many countries in the Global South find themselves unequipped to harness tax revenue from these digital giants. Several policy options are available to countries. The Organisation for Economic Co-operation and Development (OECD) and the United Nations (UN) have proposed treaty-based solutions, but questions have emerged about the revenue potential of these multilateral proposals, the feasibility of their timely implementation, as well as whose interests they serve. Meanwhile, several countries — including some in the Global South — have implemented their own domestic solutions. 
A new Bill on Online Safety was recently published in the Gazzette and has now been presented to the Parliament of Sri Lanka. The Bill has drawn widespread commentary and criticism; the analysis done by LIRNEasia on the Bill can be found here. One issue the Bill attempts to address is the takedown of ‘harmful’ content. Online platforms enable the very rapid dissemination of user generated content (UGC), including potentially harmful content. Laws such as the Online Safety Bill attempt to address this through administrative actions or court orders. 
LIRNEasia together with the South Centre hosted an expert forum on Policy Options for Digital Taxation in South and Southeast Asia on 19 September 2023. The event was a closed-door event, attended by over 110 tax officials, with participants registered from Global South 40 countries. The event, based on research conducted jointly by LIRNEasia and the South Centre, looked to provide a forum for the organizers and participants to share their experiences and weigh relative merits of different policy options for providing new taxing rights to capture revenues of large technology multinationals in local tax nets. The policy options included (i) domestic measures such as digital services taxes and withholding taxes (ii) OECD/G20’s Amount A Multilateral Convention and (iii) Article 12B of the UN Model Tax Convention.LA SC Digital Tax Forum_Panel 2_Implementation considerations. 
UNCTAD (UN Commission on Trade and Development) is increasingly creating interesting spaces for discussing the digital economy. Their first meeting of the Intergovernmental Group of Experts was convened 4-6 October 2017 in Geneva. Our CEO Helani Galpaya was invited to speak on the specific challenges faced by developing countries in attempting to measure eCommerce activities. The meeting coincided with the 2017 Information Economy Report, the annual publication by UNCTAD, which this year had the theme of “Digitisation, Trade and Development”. Helani’s talk also mentioned the upcoming nationally representative surveys in 17 global south countries (including 6 in Asia) as being a good source of data on ICT use by households and individuals as well as (in Africa) informal enterprises.