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IRD to set up new unit to audit big-time taxpayers
The Inland Revenue Department (IRD) is to set up a new tax unit dedicated solely to auditing tax files of about 600 companies that bring in the largest amount of annual tax revenue to the department, after revelations that the estimated tax revenue was not coming from these companies.
The IRD currently has tax files on about 3,000 of these companies, known as Large Taxpayer Units (LTUs). The newly established unit will be looking at the topmost 600 of these LTUs, which account for as much as 75% of the IRD’s tax revenue, a Treasury official said.
The new unit will have 68 dedicated staff members and will come directly under the Commissioner General of Inland Revenue. It is to begin operations from July.
The unit is being set up on the direction of President’s Secretary Dr P B Jayasundara. Its formation has also been pushed by the International Monetary Fund (IMF) as one of the conditions the country must meet to be eligible for the latest tranche of its loan programme to Sri Lanka.
The main objective in setting up the new unit is to increase tax revenue and efficiency by ensuring that numerous tax files of the same company that were being audited at different departments are transferred to one unit.
“Normally, tax officers have a large number of tax files to handle, including as much as 25 files of LTUs. This is far too big a burden for many officers, and they are unable to properly finish auditing the files, resulting in the department losing tax revenue at the end of the year,” a Treasury official said. LTUs are also using various techniques to hide their revenue, resulting in the IRD losing out on billions of rupees in tax revenue, he said.
A dedicated unit will see far more scrutiny on the topmost LTUs, and detailed audit reports will make it harder for companies to hide taxable revenue, the official added.