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Rs. 139 b in unpaid taxes: 4,000 companies, individuals warned to pay up or face action
More than 4,000 private companies and individuals who failed to pay their taxes to the Inland Revenue Department (IRD) have been ordered to pay up or face legal action, a senior officer said. The findings about the outstanding tax payments were made during a two month long countrywide survey carried out by the department, Senior Commissioner P.L.S. Liyanage told the Sunday Times.
The warning came after a special unit was set up to recover outstanding taxes including those due by the end of 2011. The unpaid taxes at that time amounted to as much as Rs. 139 billion. “We identified 1,406 companies which opened tax files, but failed to pay taxes on the grounds that their institutions were making losses. But we have found the companies were making profits,” he said.
Mr. Liyanage said restaurants, hotels, liquor shops, software developers and importers were among the defaulters. He said some of the companies had to pay arrears for as many as three years. Some 26 companies involved in buying and selling had also been identified as tax defaulters and were warned to pay the arrears.
The senior commissioner said the unit had identified 2,972 individuals who also had failed to pay their taxes. They had been sent warning letters.
More than 300 companies had also been found to have failed to pay the Value Added Tax (VAT) recovered from customers. Meanwhile the department has introduced several steps to curb VAT frauds. The steps include:
Onsite inspection to ascertain whether the relevant business address and the entity are correct before making refunds.
Ensuring facts such as directors, accounts section of the company, etc. are accurate.
Officers involved in the inspection certifying that they are satisfied with the details of the company.
Claims for refunds exceeding Rs. 5 million to be referred to a committee comprising senior officers named by the Commissioner General.
Maximum period of service to be allowed for an officer to serve in the VAT unit to be two years.
VAT refund cheques, instead of being hand delivered to the persons concerned, to be credited to the respective bank accounts.
In May, the Colombo High Court imposed a 102-year suspended jail term to be served for 3 years and a Rs. 12 billion fine on former Deputy Commissioner Gnanasiri de Soyza Jayatillake, who pleaded guilty to 34 charges in Sri Lanka’s biggest VAT scam, amounting to Rs 3.9 billion. However some of the main suspects in the case are evading arrest.