Tax evasion to be made a predicate offence under ML
Tax evasion will be a predicate offence under the money laundering offences going forward, a top official said.
They said that discussions about this are already ongoing with the top authorities such as the Financial Action Task Force, the global standard-setting authority and the Ministry of Finance. Now, law enforcement agencies do not have the power to access information held by the Inland Revenue Department when they investigate crimes related to money laundering. “Which is why we want this made a predicate offence,” an official said.
Predicate offences are those where money is earned through illegal profits. They are underlying crimes or primary offenses, which are the criminal activities that generate the proceeds that are then laundered. The designation of certain crimes as predicate offences means that a person can be charged with the offence of money laundering as well as with the predicate offence itself.
Making tax evasion a predicate offence will finally happen when the Financial Transaction Reporting Act and the Prevention of Money Laundering Act are amended, officials added. The country has a number of problems, including a dropping low-level tax ratio, a sluggish structural shift in the tax composition, poor results even after tax system changes, and low productivity and efficiency levels of value-added tax (VAT). The International Monetary Fund (IMF) was pushing a series of reforms involving a sharp rise in tax rates in countries like Sri Lanka. These reforms would also force changes in tax planning and legal profit-shifting strategies, and large companies were willing to spend millions on tax advice to shift profits as tax regimes changed.
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