Whistleblowers to check state corruption

PAC makes recomendations in interim report

The Public Accounts Committee (PAC) has recommended, in its interim report on the Management of Government Tax Revenue, that the Ministry of Finance encourage the kind of “whistle-blowing” practices found in other countries that help to expose corruption and malpractices in state institutions.

The committee proposes the enactment of a public interest disclosure act to enable and encourage public sector employees to expose corruption and malpractices in the public sector with a guarantee of absolute confidentiality and protection from any possible victimisation.

In fact, it was in this report that the PAC disclosed an Inland Revenue Department VAT scam to the tune of Rs 3.6 billion perpetrated in the period between November 2002 and August 2004. The scam is believed to be the country’s biggest tax fraud case. The full committee report was made public recently.

Besides disclosing details of how funds were paid out in the VAT scam, the PAC Report also noted cases of tax arrears over the past few years, and VAT arrears in particular. According to the report, there is no justification for a heavy accumulation of VAT arrears, because VAT is collected by third parties on behalf of the government and remitted to the IRD within 20 days after closure of the VAT period.

The Report has noted that VAT arrears have increased dramatically in recent times, and stood at Rs 74.4 billion at the end of 2006. The committee found that in the first quarter of 2007, VAT arrears had increased by another Rs12.2 billion to Rs86.6 billion.