Sri Lanka’s state coffers face severe annual revenue leakages of up to Rs. 1 trillion due to persistent gaps in customs oversight across Board of Investment companies, according to an International Monetary Fund (IMF) diagnostic report.
It revealed that despite a bilateral agreement signed in 2025, Sri Lanka Customs has made minimal progress in asserting authority over more than 1,700 tax-exempt enterprises operating within and outside special economic zones.
Under the current framework, responsibility for monitoring duty-exempt inputs has remained largely with the investment board, which lacks the procedural capacity to conduct physical inspections, audit inventories, or penalise infractions.
This regulatory vacuum allows imported raw materials to be illegally diverted into the local market without the payment of required taxes, creating an uneven playing field for compliant domestic producers.
Although an initial phase was designed to place 83 selected firms under strict customs surveillance, corporate resistance to heightened scrutiny and staff shortages at Sri Lanka Customs have stalled implementation.
To track cargo movements, authorities are procuring a satellite tracking system supported by the Asian Development Bank, while plans remain underway to transition all importers to a fully paperless processing system by 1 January 2027.
Border control efficiency also remains burdened by excessively high physical container examination rates of nearly 38 per cent, which yield poor revenue returns across several major terminals.
Post-clearance audit teams generated Rs. 2.75 billion in penalties and adjustments during the first five months of 2026, yet the unit continues to operate under severe manpower constraints.
Decisive enforcement of unified customs controls across all tax-exempt economic zones remains critical to securing national revenue targets and restoring regulatory integrity.
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