IMF likely to lift VAT conditions on tourism

The International Monetary Fund (IMF) is said to be currently reconsidering conditions set on the imposition of the 18 per cent VAT on the tourism industry.

Concerns were raised by the Sri Lanka Association of Inbound Tour Operators (SLAITO) with the Tourism Ministry and the Finance Ministry on the sudden imposition of the 18 per cent VAT on Destination Management Companies (DMCs) for which a decision is being awaited from the IMF.

Unlike for many other sectors where the VAT is an increase from 15-18 per cent, for the DMCs it is a charge made on them for the first time.

Sri Lanka Tourism Development Authority (SLTDA) Chairman Priantha Fernando told the Business Times that this was not a decision that could be taken by the Finance Ministry and as a result they had held a meeting with the IMF concerning this situation.

During the meeting, Mr. Fernando said they had requested the IMF to reconsider this condition placed on the tourism industry due to which it could impact heavily on an industry that is just reviving.

He noted that the IMF was receptive to their request and had said that they would take up this concern.

It was pointed out that of the estimated forecast of 2.3 million tourists for this year they could possibly lose 200,000 as a result of the imposition of the 18 per cent VAT and revenue down by $400 million.

Mr. Fernando said that they had explained to the IMF that since rates given to the tour operators overseas had not included the 18 per cent VAT it would mean that the DMCs would be compelled to absorb this amount.

The IMF was also briefed on how the rates are announced at least a year in advance and that if this were to change then travellers will opt for other destinations.

SLAITO President Nishad Wijetunga had explained that the industry would not try to avoid this completely but would include this 18 per cent VAT from November onwards.

Mr. Wijetunga told the Business Times that all tours quoted for 2024 are carried out in the previous year and the imposition of the VAT would mean they would have to absorb the cost.

It was pointed out that of the estimated forecast of 2.3 million tourists for this year they could possibly lose 200,000 as a result of the imposition of the 18 per cent VAT and revenue down by $400 million.

He also said that they had given a breakdown on the losses that might occur if this not granted and obviously the impact on the revenues.

"We are going to face a serious issue and we will have to curtail promotions in order to manage the funds," Mr. Wijetunga said.

In addition, the removal of the exemption on VAT was announced by the end of December, he said noting that this was too late to change the rates on the tour packages.

Mr. Fernando, Mr. Wijetunga and Vice President of SLAITO Nalin Jayasundere participated in the meeting with the IMF.