The study highlights that the taxation of Small and Medium Enterprises (SMEs) present a critical challenge for policymakers in developing countries like Sri Lanka. While taxation provides a vital source of revenue for governments to provide fundamental social and economic services such as the provision of defense, healthcare, education, and infrastructure, both its direct and indirect effects influence the SME growth.

The report points out the the importance for developing countries like Sri Lanka, which has a relatively small and unsophisticated private sector, to get the right policy mix with regard to SMEs. The report takes a look at Sri Lanka’s contemporary tax regime with the aim analysing the effects to tax concessions on SMEs, effects of Value Added Tax on SME development and assessing the Impact of Property Tax on SMEs.

The study was a part of the a cross county  research on Tax Policy and Enterprise Development in South Asia, which was carried out by five leading think tanks in the South Asian region. The research examines the impacts of property tax, value-added taxes, and tax exemptions and concessions on small enterprise development in the region. IPS carried out the Sri Lankan country study, which was co-authored by Raveen Ekanayake and Anushka Wijesinha.   

The study was funded by the International Development Research Centre (IDRC), Canada, and was coordinated by the Governance Institutes Network International (GINI), Pakistan.


'Country Study Report on Sri Lanka - Tax Policy and Enterprise Development in South Asia’