Government mulls seizing property of big tax defaulters
The government is contemplating to confiscate property of habitual tax defaulters if they fail to pay accumulated tax dues running up to billions of rupees within three years, informed official sources disclosed.
This action will be taken in accordance with the directive issued to the Finance Ministry and the Inland Revenue Department (IRD) by the Parliamentary Ways and Means Committee to boost tax revenue following its detection of total outstanding taxes, penalties, and interest of the tax payees to IRD amounted to Rs.904 billion as at 31.12.2022.
It has been observed that the tax amount in default as at 30.06.2023 since this year is approximately Rs. 7.72 billion. The IRD officials have informed the committee that only Rs. 175 billion out of Rs. 904 billion could be recovered but no action has been taken by the department so far.
Under this circumstance the Ministry is exploring the possibility of amending the IRD Act to enable the IRD to confiscate the property of big tax dodgers who fail to settle their arrears of taxes within three years.
Sri Lankans convicted of tax evasion can be liable to a fine not exceeding Rs. 10 million or imprisonment for up to two years, or to both under the new Inland Revenue Act.
The punishment is for those who wilfully evade or try to evade the assessment, payment or collection of tax or who wilfully and fraudulently claims a refund of tax to which they are not entitled.
Professionals and businesses are probably not paying a fair share as taxes because of loopholes in the law, a senior Ministry official said adding that the tax code deficiencies makes it easy to avoid taxes.
The total number of personal tax files stood at 292,000 that was only 10 per cent of the eligible taxes paid through these files.
On the other hand there are 105,000 registered companies, but only 15 per cent of them are contributing to tax revenue.
Surprisingly, a significant 86 per cent of the government’s revenue is receiving from a mere 494 companies, Ministry data showed,
The target of IRD is in the process of opening up of 1.2 million tax files whilst the target of tax files given by the Budget 2023 is 1.5 million.
However, IRD has not yet identified a mechanism to achieve the target of opening 1.2 million tax files which was set by the IRD itself. It has been revealed that it would take a number of years to fulfil this task.
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