Digital ID can help Sri Lanka expand tax base: Deloitte

Sri Lanka seems to be caught in a chicken-and-egg situation regarding its development of digital ID as its ministry sets out an agenda for its ongoing digital transformation.

Sri Lanka has faced major economic and political challenges for the past five years, in what has been described as its worst economic crisis since its independence in 1948. The island country has faced severe shortages of critical supplies such as fuel, soaring inflation, and crippling debts.

The country’s government simply doesn’t have a lot of money to go around. But building digital public infrastructure, which officials see as key to economic growth, requires funds. Sri Lanka has had help from neighboring India which has given grant support for the development of the Unique Digital Identity project in addition to providing models for DPI development.

President Anura Dissanayake appointed Dr. Hans Wijayasuriya, Group Executive Director and CEO Telecommunications Business of Axiata Group, as chief advisor on digital economy last month, and set out an 18-month timeframe for when he expects the national digital ID to be implemented.

Eranga Weeraratna, Sri Lanka’s deputy minister of digital economy, said recently that it is prioritizing digital ID, digitizing bus and train tickets, and the government cloud. Weeraratna outlined the four key areas upon which the Ministry of Digital Economy will focus over the next six years: implementing e-governance to reduce corruption; increasing cashless transactions from $3.45 billion to $15 billion; increasing the IT workforce from 85,000 to 200,000; and turning the IT industry into a US $5 billion industry.

In a conversation with experts in AI, government, technology and transformation from Deloitte, EconomyNext got a sense of the challenges facing Sri Lanka. Nishan Mendis, Technology and Transformation Leader at Deloitte Sri Lanka and Maldives was asked what the country can learn from India. “Sri Lanka faces challenges with increasing government revenue,” he said.

Mendis argued that the chosen solution, which has been to raise taxes, is “impractical and unsustainable” in the long term. “Instead of increasing tax rates, Sri Lanka should focus on expanding the tax base, and digital ID can play a crucial role in this,” he suggested.

“By linking various systems like the land registry, immigration, and banking, a digital ID would allow the Inland Revenue to track financial activities more efficiently, helping identify who should pay taxes,” he continued.

Mendis pointed to the efficiencies India’s Aadhaar provided for welfare payments, and how that country’s biometric-based ID system enabled small-scale farmers to access microloans. In addition, he suggested that Sri Lanka could even jump ahead of India’s development of DPI. “A specific example is how India is now evolving Aadhaar to allow citizens to share only part of their data, such as redacting birth dates to protect privacy,” he said, pointing out that Sri Lanka could learn from “mistakes” made in the early stages of India’s development of its digital identity system.

Sri Lanka also has some built-in advantages that its giant neighbor had to create from scratch, the Deloitte consultants pointed out. These include the NIC databases and biometric data for a significant portion of the population who have passports. The conversation also focused on AI use, in a lengthy interview, which can be read here.

Article Topics

Deloitte  |  digital economy  |  digital ID  |  digital public infrastructure  |  government services  |  India  |  SL-UDI  |  Sri Lanka