Sri Lanka rolls out new tax law with IMF help
Sri Lankan authorities and the International Monetary Fund (IMF) are actively engaged in the preparation of the implementation of the new Inland Revenue Act (IRA) with effect from April 1.
The new Act will make the tax system more efficient and equitable, and generate resources for social and development programs.
IMF is one of the service providers in the implementation of the IRA. It also provides technical assistance towards this end.
Several IMF experts are working hand in hand with Inland Revenue Department (IRD) officials in the roll out process of the act.
This was revealed at a media conference in Colombo recently where IMF Mission Chief Jaewoo Lee addressed a group of journalists via a Colombo video conferencing facility from Washington, D.C.
Answering a question raised by the Business Times journalist, IMF’s Resident Representative in Sri Lanka, Eteri Kvintradze noted that the rollout of the new IRA will be a ‘step by step’ process.
The Sri Lankan government is conducting public consultations and dissemination of information relating to IRA with a view to creating awareness among the people in Colombo and several other regions.
“The IRA manual explaining the provisions of the Act is being prepared and this was the first time that the IRA is accompanied with such a comprehensive explanatory manual,” she said adding that it will be published this month.
IRD staff is involved in lot of the preparatory work in terms of putting automation systems in proper perspective as well as devising necessary regulations and instructions to roll over the act, she revealed.
The IRD is well versed in the implementation of the Act, she said noting that lot of work should be done to create awareness on the legal aspects of it.
Ms. Kvintradze pointed out that “IMF found the legal framework was not sufficient and the business process, training and automation and had to support the IRA implementation”.
Modification of Revenue Administration Management Information System (RAMIS) should also be carried out towards this end, she said.
IMF Executive Board has completed the third review of Sri Lanka’s Extended Fund Facility arrangement, which enables the disbursement of about US$ 251.4 million to Sri Lanka.
Outlining the country’s economic performance under the EFF arrangement, IMF Mission Chief Jaewoo Lee told journalists that Sri Lanka should adhere to structural reforms to boost growth while tightening monetary policy for economic stability.
State-owned business enterprises including CPC and CEB should be restructured, he said while praising Sri Lanka’s economic performance under the IMF programme, curtailing of the budget deficit and foreign reserve collections.
He emphasised the need of continuing fiscal consolidation, effective tax administration and expenditure controls.
Macroeconomic and financial conditions have been stable, despite a series of weather-related supply shocks.
The authorities remain committed to the economic reforms under the programme and have undertaken measures to improve government revenue and accumulate international reserves.
Going forward, it is important to build on the progress made and accelerate reforms to further reduce fiscal and external vulnerabilities, he added.
Sri Lanka’s high debt burden, large gross financing needs, and weak financial performance of state-owned enterprises increases the importance of further fiscal consolidation, an IMF media release revealed.
Timely progress in structural reforms, including tax administration and energy pricing, will support fiscal consolidation, it pointed out.
Inflation and credit growth remain on the high side, the IMF said while recommending maintaining of a tightening of monetary policy until clear signs emerge that inflationary pressures and credit expansion have subsided.