Sri Lanka imposes tax on online bookings

Sri Lanka last week introduced a tax for online accommodation bookings, increased its airport embarkation tax to US$50 from the current US$35 and announced plans to launch a budget domestic carrier.

These proposals were made during the government’s budget speech for fiscal 2017, presented by finance minister Ravi Karunanayake on November 10.

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The minister said a common platform will be established for the country’s hotels to integrate portals like Agoda, Airbnb and, and through which taxes would be applied per booking.

Karunanayake stated that the move addresses concerns from hoteliers regarding OTAs expanding their operations without paying any tax.

Meanwhile, the increased embarkation tax replaces an earlier proposal by the government to impose a 15 per cent tax on all air tickets. The latter proposal was objected to by local travel agents.

No schedules were given on the implementation of these tax schemes. However, the government stated that a new domestic airline, formed jointly by the authorities and the private sector, is slated to launch before March 31, 2017.

The airline, still unnamed, will operate using Sri Lankan Air Force planes to destinations within the country. An initial investment of 50 million rupees (US$340,000) will be injected, according to  Mr. Karunanayake.

Currently, while the privately-owned Cinnamon Air operates flights to a few domestic destinations, the government wants a daily, more affordable LCC to help ease travel from the capital Colombo to popular tourist spots that take a long time to travel to by road.


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