Income tax revenue falls to unexpected level
Income tax revenue of the country is going down to unexpected levels despite the Inland Revenue Department’s (IRD) efforts to improve tax administration to commensurate the tax reforms introduced in 2019 and also in response to the disruptions caused by the COVID-19 crisis, IRD official sources said.
Revenue from income taxes declined in 2020 with the drop in tax receipts from corporate and non-corporate taxes together with the abolition of taxes such as PAYE, ESC and WHT.
The income tax revenue is expected to decline to Rs 94.2 billion in the first half of this year compared to Rs.134.1 billion during the same period in 2020, provisional estimates showed.
The drop is due to the unexpected impact of the COVID-19 third wave on income of corporates and taxpayers with other tax exemptions provided for the revival of economic activities such on IT and enabling services, agro processing and gem and jewellery sectors.
However limited liability companies have been facilitated at the IRD to file their tax returns in or outside Sri Lanka electronically (e-filing) effective from April 1, 2021.
The Tax Identification Number (TIN) in all tax related source documents or underlying documents of the taxpayer has become mandatory.
The second phase of the Revenue Administration Management and the Information System (RAMIS) is about to be implemented at the IRD after the initiation of its first phase in 2007.
Large Tax Payers Unit (LTU), Upper Corporate Unit (UCU), Medium Corporate Unit (MCU) and Regional Corporate Unit (RCU) have been established to make the tax administration efficient and taxpayer friendly.
But the payment of taxes was irregular due to poor adaptability of taxpayers for the online system and the easing of the department’s strict low enforcement procedures by considering their present economic situation, a high official of the department said.
However, the realisation of income tax collection was not up to expectations amidst the multiple disturbances that occurred due to the COVID-19 pandemic.