Sri Lanka’s revenue collection target of Rs.1 trillion by 2019/2020 through the expansion of the tax payer base in the country, while adjusting indirect and direct tax has become a distant dream owing to weak tax administration at present, official forecast revealed.
In a damning exposure, the Auditor General’s Department disclosed that as a result of non-issuance of assessment reports on a timely requirement, it has become impossible to recover, in year 2017 with the taxes in arrears and penalty charges at Rs. 17.8 billion for the year 2016/2017.
Tax administration has been weakened due to the failure in necessary development of the Revenue Administration Management Information System (RAMIS) on time in 2017/2018 spending more than Rs. 4 billion, the audit inspection unearthed.
Non-adherence of the Inland Revenue Department (IRD) officers to the system in the performance of their works and several weaknesses has been revealed in relation to the administration of taxes. It was confirmed that 312,507 tax reports relevant to the tax categories of value added tax, income tax, pay as you earn tax, and nation building tax, have not been submitted to the IRD by end December 2017.
The objective of the establishment of a computer system has not been gained due to non-completion of 34 per cent of work subjects numbering 346,645, referred to the officers during the year under review.
Due to non-performance of works subjects, the functions of the computer systems have also not been carried out in a timely manner.
Assessment Reports have not been submitted in 2016 and 2017 relevant to the taxes governed under new tax administration system and assessment reports for those years have been issued in 2018.
However the IRD has assured that all penalty calculations are done by the RAMIS in accordance with the relevant provisions of the Inland Revenue Act, No 10 of 2006.
The limited number of active income tax files bear witness to the fact that the system is broken, a veteran tax expert told the Business Times adding that IRD capacity must be improved.
But political factors can stand in the way he noted pointing out that it was an open secret that professionals dodge income tax.
According to IRD data, tax revenue recorded an increase of 2.5 per cent to Rs. 1,712.3 billion in 2018 from Rs. 1,670.2 in 2017.
This was due to the combined effect of the marginal increase of tax revenue from VAT, Excise duty, PAL and SCL and the decline in revenue collected from withholding tax, Excise duty on petroleum products, CID, CESS and Telecommunications Levy.
However, a significant performance of revenue collection was witnessed in taxes such as corporate income tax, PAYE, ESC, Excise duty on motor vehicles and cigarettes, PAL, SCL which accounted for 89.2 per cent of total revenue in 2018, compared to 91.2 per cent in 2017.
(LI)