Indirect taxes have overtaken direct taxes in the country
Taxation is an important aspect of Sri Lanka’s economy as its economy largely depends on the revenue received from taxes. “One of the major problems that we have was that traditional revenue collection of taxes has fared badly for a variety of reasons,” said the Minister of Special Assignments Dr. Sarath Amunugama, Chief Guest at the 2017 Convocation of the Sri Lanka Institute of Taxation held at the Sri Lanka Foundation Institute (SLFI) last week.
The minister said income revenue from exports have fallen badly while the demand for welfare measures such as education, health, social welfare and infrastructure have grown due to the fast growth of the population of the country, creating many problems. How do “we” resolve this problem, he queried. “We have to do this by taxing the people, particularly those who are in a position to pay taxes. One of the distortions in our economy was that indirect taxes were higher than direct taxes.”
He said the ratio should be where 60 per cent of revenue should come from direct taxes while 40 per cent must come from indirect taxes. However the situation today is that 80 per cent of revenue comes from indirect taxes.
The growth of GDP also indicates the country was getting richer and rich people therefore should pay more taxes. The Minister said the tax system was in a default state as there is a gap between what the state gets from taxes (exports, etc) and what the state gets from tax revenue, because there aren’t enough trained professionals in tax collection. He said tax collection was being made easier today with the advances made in the technological development. Referring to the past few years, he said tax collection was based on revenue collected by the government mainly from the Inland Revenue, Customs and the Excise Departments. The Minister said that he had the privilege of being the Minister of Finance for some time many years ago where he had the opportunity to work with tax officials.
Former Commissioner of Inland Revenue D.T.M. Waidyasekera delivering the keynote address said the Sri Lanka Institute of Taxation is in its 25th year following its inauguration in 1992. He said taxation has become an important issue in the current context of the country. Sri Lanka’s public debt including foreign debt has gone up along with inflation. Therefore it was necessary for the government to find revenue to bridge this gap. He said he was one of the first members of the Sri Lanka Institute of Taxation.
The welcome address was made by the Vice President of the Institute T. Prasanga Ranwatte while the Commissioner General of Inland Revenue Ivan Dassanayake distributed certificates awarding membership to new Fellow and Associate members.