IRD strengthens all systems aimed at reversing two decades of falling tax collection
With the Government struggling to raise revenue for state expenditure and the International Monetary Fund calling for broader tax reforms in return for the Extended Fund Facility (EFF) of US$1.5 billion, the Inland Revenue Department (IRD) has been strengthening all its systems to reverse a two-decade decline in tax revenues, Treasury and IRD officials said. A comprehensive set of reforms will be introduced to Sri Lanka’s tax system—eliminating exemptions, holidays, and special rates to broaden the tax base and create a simple, efficient and more equitable tax system, a senior Treasury official who wished to remain anonymous told the Business Times adding that it would be a major task to raise the tax-to-GDP ratio to nearly 15 per cent by 2020, the target set by the IMF.
The implementation of a new Inland Revenue Act, reforming the VAT and the customs code were the other tasks of the government. The IMF has called for observations of the IRD and the Treasury on capacity building and reform in revenue administration —making full use of automated systems and information technology to bolster tax collection. IRD Commissioner General Kalyani Dahanayake told the Business Times that tax administration and revenue collection have been streamlined delegating specific functions to respective commissioners and divisions functioning under their purview. All the functions of the IRD are to be automated in a phased out manner under the Revenue Administration Management Information System (RAMIS), she disclosed.
The department expects to collect over 95 per cent of the total tax revenue through the first phase of this project which covers large and corporate tax payers in the island. “Improvement in the tax administration with the introduction of an information technology environment and related human resource development activities facilitating efficient management of the new systems may result in higher revenue growth in the future,” she added. The tax files auditing and investigation activities of the IRD have been streamlined and strengthened and there were no restrictions against tax officers in assessing and recovering of from the top management, she said adding that allegations of certain trade unions in the department were unfounded.
A proper procedure has been followed in granting promotions and transfers of employees in accordance with the Establishments Code, she said pointing out that a few frustrated officers attached to trade unions were making allegations to gain their petty objectives. She was responding to a question raised by the Business Times relating to a letter sent by the IRD Joint committee of Trade Unions to the President, Prime Minister and Finance Minister making allegations over the failure to comply with the Constitution and regulation requirements in tax administration and revenue management by the top management of the IRD. The letter was signed by Chairmen and Secretaries of IRD commissioner’s Association, Staff Officer’s Association, Executive Officers Union, Service Union and Employees’ General Union. She said that she has taken all necessary action for the progress of revenue collection in accordance with administrative and financial regulations.
Ms. Dahanayake noted that despite internal and external pressure, the IRD has been able to collect record revenue of Rs. 205.1 billion up to June 30 this year compared to Rs.168.3 billion during the same period last year. This was an increase of 122 per cent, she said adding that their full year target is Rs.512.7 billion. “Improvement in the tax administration with the introduction of an information technology environment and related human resource development activities facilitating efficient management of the new systems may result in higher revenue growth in the future,” she opined. She disclosed that the opening of new files would also increase substantially in line with the implementation of the RAMIS. The IRD has strengthened its operations to recover taxes from defaulters while providing benefits for regular tax payers, she revealed.