Uncollected Taxes Cast Shadow on SL’s Financial Outlook

January 05, Colombo (LNW): A significant session unfolded in Parliament, presided over by Dr. Wijeyadasa Rajapakshe, Minister of Justice, Prisons Affairs, and Constitutional Reforms, aimed at brainstorming legal modifications to augment state revenue. The focus revolved around potential amendments to regulate the Inland Revenue Department, Sri Lanka Customs, and Excise Department.

During the meeting, Mahindananda Aluthgamage, Chair of the Sectoral Oversight Committee on National Economic and Physical Plans, highlighted issues encountered with the Inland Revenue Department. Notably, he brought attention to instances where individuals managed to evade taxes for up to 15 years, shedding light on systemic challenges.

One prominent issue highlighted was the prolonged duration within the Inland Revenue Department, where tax files linger for over 54 months, including the subsequent appeal processes. Officials revealed staggering figures, indicating 943 billion rupees in arrears tax revenue, with 767 billion rupees remaining unrecoverable due to assorted reasons, while 175 billion rupees were identified as recoverable.

Officials elucidated the hindrances faced during the tax assessment process, citing deliberate delays by taxpayers in providing necessary information. In response, discussions veered toward amending the existing Act, proposing changes that would require taxpayers to pay 50% of the assessed amount upon appealing to the Tax Commission.

The committee examined the timeframe allotted for various stages in the appeals process, expressing the need for expedited resolutions. Suggestions were made to streamline the process, reducing the Commissioner’s appeal hearing duration from 2 years to 6 months, with provisions for assumed finality if decisions exceeded the stipulated period.

Emphasis was placed on empowering the Tax Appeals Commission to focus solely on existing assessment calculations, relegating fundamental issues to the Court of Appeal. Further deliberations endorsed the establishment of a specialized court complex within the judicial system dedicated to hearing tax appeals.

Consequently, the committee proposed amendments to the Inland Revenue Department Act, incorporating the discussed reforms. These amendments, to be drafted by the Attorney General and the legal draftsman, are set to be reviewed in the Parliament’s upcoming meeting.