Tax department to overhaul revenue collection system
View(s):Sri Lanka’s main tax collection authority, the Inland Revenue Department (IRD) has been directed to put in place an efficient mechanism to accelerate the collection of taxes and held-over taxes amidst increasing tax defaults.
The tax amount in default this year as at 30.06.2023 was approximately Rs.7.72 billion while the total outstanding taxes, penalties, and interest of the IRD amounted to Rs.904 billion as at 31.12.2022.
The Finance Ministry is considering several recommendations made by the Parliamentary Committee on Ways and Means towards streamlining tax administration and tackling the issue of default.
It is recommended to carry out the assessment done online without the subjective involvement of assessors of the IRD and introduce a unique identification number to capture all financial transactions aimed at regulating the informal economy and increasing the tax revenue.
A unique identification number is to be made mandatory for the registration of businesses and all businesses including health services, educational services and law firms have to be registered with relevant authorities at the time of commencing their businesses.
Another recommendation of the committee to introduce an automated invoice system by interlinking with the banks would eventually benefit the government, taxpayers and the economy as a whole. It can improve the compliance with tax laws by making it easier for taxpayers to track and manage their tax liabilities.
It is recommended to fully implement the regulation of the unregulated market by making compulsory to conduct all sales through a final invoice and receipt to track all economic activities
Measures will be taken to implement a mechanism island-wide through an online platform to update the information of any citizen born in Sri Lanka and received education in Sri Lanka when such a person attains the age of 18 years.
The department’s Revenue Administration Management Information System, or RAMIS, currently doesn’t function properly.
Back in 2014, the IRD invested Rs. 10 billion towards the setting up of RAMIS.
The idea was to modernise and improve the tax collection process. It has been recommended to introduce a Public-Private Partnership (PPP) arrangement changing the business model of RAMIS by involving a private entity to run the back office and maintain the system by creating a mutually beneficial arrangement.
The agreement with the Singaporean company to develop and maintain the RAMIS 2.0 will expire on January 31, 2024 but the internal capacity including the human resources of the Department has not been developed to take over the full responsibility of the RAMIS 2.0 by that time.
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