Trust in tax-related institutions low among the public in Sri Lanka
Sri Lanka’s first ‘Taxpayer Perception Survey’ conducted by the UNDP in Sri Lanka and the Ceylon Chamber of Commerce reveals that trust in tax-related institutions is low in general. As the Ministry of Finance (MoF) and the Inland Revenue Department (IRD) are widely considered to be responsible for formulating tax policy, citizens’ trust is highest among IRD (40 per cent) and MoF, though distrust is higher than trust for all institutions. 84 per cent of respondents (tax identification number holders-TIN) say corruption affects willingness to pay tax.
Some of the key findings of the survey were discussed at the Sri Lanka’s first national dialogue on fair taxation and stronger contract for the sustainable development goals held at the Galadari Hotel in Colombo on Wednesday.
The survey was based on general knowledge and perceptions about taxes, knowledge and perceptions about the Sri Lankan tax policy, trust in tax-related institutions in Sri Lanka and utilisation of revenue and satisfaction with services offered by the IRD.
The study also exposes that knowledge on the Sri Lankan tax system and tax concepts is limited. Individuals who have registered with the TIN have a better understanding than the others. More than a third of respondents were unfamiliar with the tax concepts in general. Just over 20 per cent of respondents report having a good knowledge of the tax system in Sri Lanka.
Those with a TIN are more likely to perceive direct taxes as fair and indirect taxes as extremely unfair. Only 39 per cent of respondents see direct taxes as being fair.
The Sri Lankan tax system is perceived as complex, especially among those who have engaged with it. More than a fifth of respondents were unable to comment on the complexity of the system.
Some 74 per cent of TIN holders perceive a very heavy tax burden, the share is very much lower among the others. TIN registered individuals also perceive tax rates as more unreasonable compared to others.
Nearly half of all respondents consider indirect taxes when making purchasing decisions. TIN holders also are more likely to feel that consumers bear the brunt of higher indirect taxes.
Some 75 per cent of respondents see tax evasion as a significant issue. The lack of transparency in how tax revenue is used, misuse of revenue by government, and lack of trust in tax collectors are the top three perceived reasons for evading taxes. TIN holders are more likely to cite weaknesses in tax collection system than non-registered.
Nearly half of the respondents felt that Budget 2024 did not address the needs of the country. Education, health and defence are the top three choices for priority in the national budget.
Satisfaction with government services and transparency in budget and policy formulation are perceived to be low. There were no respondents who thought budgeting and policy processes were very transparent.
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