Reforming interest deductibility in Sri Lanka’s tax policy By Charmaine Tillekeratne, Partner, Head of Tax, Deloitte Sri Lanka and Maldives FEATURE View(s): View(s):Sri Lanka’s economy stands at a crossroad, recovering from a profound crisis that exposed vulnerabilities in fiscal management, external debt, and growth strategies. Amid these challenges, one often-overlooked aspect of tax policy is the limitation on interest deductibility under Section 18 of the Inland Revenue Act No. The origins of this shift trace back to Sri Lanka’s engagement with the International Monetary Fund (IMF). However, these templates, designed largely for advanced economies or multinational-heavy contexts, were adopted without sufficient customisation to Sri Lanka’s domestic realities. ConclusionSri Lanka’s tax policymakers must act decisively to resolve the conflict between fiscal caution and economic ambition.

Source: Sunday Times February 15, 2026 11:33 UTC