Willingness to pay taxes only if used positively
While Sri Lanka’s tax revenue is far behind the ambitious targets stipulated by the International Monetary Fund for the year 2024, Sri Lanka’s first taxpayer perception study points out that people are willing to pay taxes only as long as they value what they gain from it. This underscores the importance of addressing perceptions, structural deficiencies, misinformation, and misconduct in order to boost tax morale.
Last Wednesday the United Nations Development Programme (UNDP) in Sri Lanka, in collaboration with the Ministry of Finance, Inland Revenue Department, University of Moratuwa, and the National Innovation Agency of Sri Lanka co-convened the first-ever National Tax Dialogue at the Galadari Hotel in Colombo to address contemporary issues surrounding taxation and fiscal policies in the island. The dialogue launched research findings from the first ‘Taxpayer Perception Study’ in Sri Lanka, collaboratively conducted by the Ceylon Chamber of Commerce and UNDP in Sri Lanka.
UNDP Sri Lanka, Resident Representative, Azusa Kubota during her address stressed, “The effectiveness of tax collection is fundamentally tied to the people’s willingness to comply with tax obligations. The survey points out that people are willing to pay taxes only as long as they value what they gain from it. This underscores the importance of addressing perceptions, structural deficiencies, misinformation, and misconduct in order to boost tax morale.”
For Sri Lanka’s journey to sustainably recover from its economic crisis, optimising financing streams across the private and public sectors is key, noted Ms. Kubota. “Speaking of public financing, as evident from the revenue-based fiscal consolidation measures put forth by the IMF reform programme, the government is strongly encouraged to bolster tax revenue.”
She also highlighted that developing countries are faced with a US$4 trillion investment gap in achieving the sustainable development goals (SDGs), and they require increased funding and effective policy solutions. The finance needed to bridge this gap is only one per cent of the global wealth. “And another problem is that available financing is not directed to the areas most needed for attaining SDGs. Domestic resource mobilisation and targeted investments must be at the front and centre of our development efforts,” noted Ms. Kubota.
Meanwhile State Minister of Finance, Shehan Semasinghe stated, “Measures are taken to help broaden the tax base and ensure that all those who ought to be paying tax, are indeed paying tax. Following these measures there has been a significant improvement in tax compliance. The total number of registered tax payers increased by 130 per cent in the year 2023, albeit from a low base.”
“It is clear that governments must pay significant attention to taxpayer perceptions and use the learnings from such findings towards improving tax administration and tax compliance measures. The UNDP’s work in this regard is indeed commendable and will be of great value to improving tax policy and tax administration practices in Sri Lanka,” he added.
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