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IRD failed to recover staggering Rs. 369 billion in tax arrears, says National Audit Office report
View(s):The Inland Revenue Department (IRD) had accumulated a staggering Rs 369 billion as tax arrears by December 2022, of which the recovery of Rs 255 billion had been suspended due to various reasons, an audit revealed.
The audit report, compiled by the National Audit Office, said that the Legacy and RAMIS computer systems maintained by the department showed a recoverable tax arrears balance of Rs 114 billion that had remained uncollected for about 13 years.
While pointing out that the Value Added Tax was being collected by private and government institutions from the people, the audit report observed that those amounts, which could also be considered “public property, had been retained in the possession of those parties without remitting them to the government.”
Therefore, the audit found that the government had lost the opportunity to recover the tax arrears and the penalty amounting to Rs. 22 billion as the Department of Inland Revenue had not functioned properly within five and a half years in terms of the relevant Act.
The audit report also noted that IRD, as a major institution that has been assigned the task of collecting revenue for the government, “had not functioned efficiently and responsibly by taking time in a manner that nearly twenty percent of the revenue related to VAT identified as the amounts to be collected and that could be collected had become totally unrecoverable.”
It was also observed in the audit that 1,603 appeals worth Rs. 9 billion, which had exceeded the additional period of two years subsequent to receiving them by the Department, had not been resolved accordingly.
Noting that IRD had not taken action to collect revenue in a manner that was more advantageous to the government, the audit revealed that even though 46 cases had been conducted for the recovery of tax arrears worth Rs. 296 million, the existence of such arrears balances had not been indicated in the Legacy system, a computerised taxation programme run by the department.
While encouraging authorities to conduct a comprehensive inquiry based on his audit report for reasons that led to billions of rupees in tax arrears, Auditor General W.P.C. Wickramaratne also recommended investigating “whether there are officers who have fraudulently, negligently, or willfully not taken measures to recover the tax arrears and penalty that could be recovered and had interfered with the efficiency of the recovery” as well.
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