IRD Strengthens Tax Collection with Compliance of Wealthy Individuals
September 04, Colombo (LNW): Sri Lanka’s Inland Revenue Department (IRD) has made significant strides in tax collection and compliance by the end of June 2024.
The IRD collected 55% of defaulted taxes, amounting to Rs. 104 billion, from a total of Rs. 188 billion owed outside the appeals process as of 2023. Additionally, the IRD surpassed its target by collecting Rs. 902 billion in the first half of 2024, exceeding the goal of Rs. 826 billion.
The Ministry of Finance announced that while Rs. 1,066 billion in taxes were defaulted by the end of 2023, Rs. 878 billion of these are still in various stages of the appeals process.
To expedite the collection of these taxes, judicial reforms are being implemented, focusing on making the appeals process more efficient.
The Treasury emphasized that Sri Lanka’s democratic system ensures checks and balances, allowing citizens to appeal tax assessments they find unfair.
The government acknowledges the necessity for a faster appeals process but rejects the idea of bypassing due process to collect taxes unilaterally.
In a broader effort to ensure tax fairness, the IRD launched the High Wealth Individuals Unit (HWIU) on March 7, 2024.
This specialized unit within the Large Taxpayer Office is designed to enhance tax compliance among the country’s wealthiest individuals and associated entities, such as corporations, private trusts, and family members.
The goal is to ensure that high wealth individuals (HWIs) contribute their fair share to the country’s revenue.
The HWIU’s scrutiny is not just limited to HWIs but extends to their related groups to ensure a comprehensive assessment of their tax obligations.
HWIs are advised to review their tax filings meticulously, especially for complex and offshore investments, to avoid any compliance issues. Professional tax advice is recommended for navigating the complexities of tax legislation.
The IRD has identified higher-risk cases based on complex financial arrangements and offshore investments, which are more susceptible to tax evasion and avoidance.
Despite public concerns about potential political influence, the IRD has assured that the HWIU operates impartially, without political interference, ensuring fairness and integrity in the tax system.
The establishment of the HWIU and the IRD’s focus on tax compliance among high wealth individuals are crucial steps towards creating a more equitable tax system in Sri Lanka.
By promoting transparency and adherence to tax laws, these initiatives are expected to enhance government revenue for socio-economic development while building trust in the integrity of the tax system.
