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Tax revenue falls short; Treasury takes tough action
Officers of the Inland Revenue Department (IRD) have been warned against offering undue concessions to politically influential persons and could lose their jobs, pension and even end up in jail if they don’t comply, a senior Treasury official said.The warning comes amidst frantic efforts by the Finance Ministry to lift its revenue collections through various agencies ahead of the November 8 budget. The senior Treasury official said revenue collections were far below 2012 targets and might not even now reach the revised targets.
The original 2012 tax revenue target of Rs. 400 billion has been revised to Rs. 376 billion with Rs. 316 billion collected in the first nine months and the October-December period collections not in line with expectations.
“Officials have been told not to go beyond their mandate and provide concessions to some selected taxpayers with high political connections based on requests of powerful persons. If something goes wrong they will not only lose their jobs and pensions but may also end up in prison after court action is taken,” the official said. Other sources said, however, that such pressure to provide these concessions also came from powerful officials themselves, in some cases the very same persons who were issuing these tough instructions.
As a measure to raise revenue collections, a one-stop shop was set up recently at the IRD head office in Colombo to meet the needs of taxpayers. In another development, teams of tax collectors will visit the offices of taxpayers to find on-the-spot solutions to their tax problems, in a bid to ramp up collections.
In the meantime, with days ticking for the November budget, all revenue collectors of the government have been asked to double their efforts in collecting the Rs. 1 trillion tax revenue projected in the 2012 budget.Expenditure for 2013 has been estimated at Rs. 2,520 billion, the government announced recently, while the projected revenue will be around Rs. 2,020 billion.
Treasury secretary P.B. Jayasundera has given frantic directions to improve collection and meet the targets, the official said. The Customs Department was expected to collect Rs. 570 billion in 2012 but might fall short by a fraction of this target, he said. The official, referring to spending, said higher interest payments and the increase in non-interest expenditure on wages and welfare spending this year had caused fiscal problems.
“Next year, steps to reduce current expenditure, broaden the revenue base, and improve the efficiency of state-owned enterprises will be needed to reduce public debt and keep the fiscal deficit within our forecast of 6.5 per cent of GDP,” he said.Meanwhile, legal proceedings against nearly 350 income tax defaulters have been abandoned owing to various deficiencies in the court cases filed by the department. Among those who had defaulted millions of rupees of tax payments are several politicians.
The official said the department incurred big losses due to the abandonment of cases in that manner.The Auditor General, in his 2010 report, has pointed out serious shortcomings in the collection of taxes by the department.A ‘Tax Week’ will be conducted annually in a bid to encourage the public to comply with the country’s taxation system. The proposed week to be held every year from November 1-8 is aimed at educating the public on the available tax relief and tax holidays, which they can benefit from.
The ‘Tax Week” will focus on building public confidence in the country’s tax administration and also create awareness on tax related activities carried out by the IRD and Customs.
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