Integrity to be restored to Inland Revenue

In one of his first public speaking engagements after taking over as Commissioner General of the Inland Revenue (IR) a few weeks ago, S. Angammana vowed to restore integrity to the institution. Speaking at a seminar on taxation organized by the International Fiscal Association (IFA)Sri Lanka Branch this week, the Commissioner said that IR employees and the public both have a responsibility to adhere to integrity and honesty standards.

Furthermore, the IR will focus on educating taxpayers on their rights and obligations in addition to educating and monitoring IR employees in order to develop a good organizational structure. Any breach of conduct of the establishment code for IR employees must be dealt effectively through an establishment mechanism. Citing India as an example, Angammana said there should be enhanced transparency in tax administration which restricts the discretionary process of officers. He also said the IR is trying to reduce interface with its employees through the creation of e-delivery tax services which would allow taxpayers to file their return electronically, thereby limiting any interference in the process by IR officials.

Angammana further vowed to simplify tax laws, provide the public with the right to information on any decisions taken by the IR and offer regular training to upgrade the skills of IR employees.

Chairman of the IFA, N.R. Gajendran said the IR administration has gone through its most challenging period but that hopes, aspirations and expectations were running high with the appointment of Angammana in bringing real and effective changes to the institution. He said the revenue targets set forth by the government since 2005 have been growing by 25 to 30 percent year on year. The revenue target for 2008 has been laid out at Rs.410 billion, a significant increase of Rs.329 billion, the target for 2007 which fell short by approximately Rs.20 billion. In 2006, the target was Rs.260 billion, an increase of Rs.60 billion from the 2005 target.

Gajendran said the revenue targeting brings several challenges in the current economic state of the country. High interest rates and growing inflation which is possibly the highest ever that the country has seen are adding to the difficulties faced by the IR.

If targets are not achieved, critics will invariably point to the Commissioner and the administration but Gajendran explained that it is not feasible to expect revenue growth at such a high percentage year on year. He said the Commissioner should focus on restoring public trust and confidence by simplifying the laws. Moreover, in order to take the 'demon face' of the IR out of the public's perception, justice and fairness should be established. Gajendran also urged the Commissioner to reactivate the communication channel and interactive process with professional bodies and the chambers.

Lakmali Nanayakkara, Partner at Ernst & Young, said several reforms should be adopted by the IR such as rationalizing the base of all taxes and reducing the compliance burden. She also asked for the removal or minimization of transaction taxes such as stamp duty and debits tax. Furthermore, the entire appeal process up to the Courts should be improved with tribunals and tax courts established to expedite dispute resolution. Nanayakkara also said the Value Added Tax (VAT) system should be simplified and called for an enhanced role of the independent Tax Ombudsman. She also commended the commitment to ongoing reforms and modernization attempts by the tax administration but said the existing computer system requires changes. Co-ordination with other revenue authorities, training of revenue officers in complex areas such as transfer pricing, industry knowledge and methods to increase the tax net should be prioritized.