Tax staff shortages cause cash flow problems for businesses

Staff and resource shortages at the Inland Revenue Department are delaying VAT refunds to businesses.

The Inland Revenue Department says the long delays in VAT refunds to exporters are due to lack of properly trained staff and a mounting backlog of files.

"Verifying the correctness of the claims takes time," said VAT Commissioner Mallika Samarasekera. "Some people still do not understand the gravity of sending returns that are incomplete. We have to verify these claims manually. This is the problem," said Samarasekera. Samarasekera said the Inland Revenue is facing a lot of arrears due to a lack of staff up until January 2007.
Meanwhile many companies are stuck for cash because the promised VAT refunds are still on the way.

“Companies suffer immensely because the VAT refunds are delayed by months,” said President of the National Chamber of Commerce, D Eassuwaren.

However, the Chamber notes that recent government moves have improved the situation at least for some companies.

“There are two categories of exporters. Those that have registered under the 15 day scheme and those that have not registered under this scheme. Companies that have registered under the 15 day scheme have seen an improvement in the time taken to refund the VAT. These companies have been refunded within 2 to 3 months. So this is a definite improvement. But the companies that are not registered under the 15 day scheme still experience huge delays of over 8 to 9 months. For these companies this is still a severe problem,” said Eassuwaren.

The Inland Revenue office says that it has now started hiring new staff and will be able to process VAT refund claims faster.

"We have employed three times more staff than what we had in January. But we were only able to recruit tax officers from 1 April 2007,” said Samarasekera.

Samarasekera expressed confidence that all VAT claims will be paid in the coming 3 to 4 months. However, there is no stipulated time frame for Inland Revenue officers to authenticate individual VAT claims and authorize the refunds. Training of recently hired new officers will also take some time.

"They (the officers) are answerable and accountable for carelessness. Even after recruiting new staff, it still takes a few months for them to understand how the system works and what the proper procedures are+” said Samarasekera.