Inland Revenue, Excise Departments integrate to streamline tax collection
The Inland Revenue Department (IRD) is set to integrate with the Excise Department operations as the first step towards merging all tax-related functions under one department, maintaining one set of records, and a digitalised, centralised system that tracks all transactions seamlessly.
President Anura Kumara Dissanayake has directed officials from the two departments to work on integrating operations and regulating alcohol and tobacco industries with the IRD, prioritising public health and compliance.
Attention has been drawn to the efficient and effective regulation of alcohol and other approved intoxicants within the country to support economic growth.
Measures will be taken in increasing state revenue through proper regulation of the alcohol and tobacco industries, facilitating legal revenue generation and enforcing compliance with laws and regulations.
The Excise Department will be implementing strong awareness programmes against illegal alcohol, hazardous drugs, and psychoactive substances, preventing health risks associated with unregulated alcohol consumption, and ensuring public safety.
An effective decision-making and management mechanism in strategic and operational activities will be devised in collaboration with the IRD, a senior official of the Finance Ministry said.
The necessity of formulating a human resource and technological development plan to enhance the efficiency of the Excise Department was also discussed.
While the Sri Lanka Customs collects import duties, the Excise Department handles alcohol, tobacco, and other special product taxes’ collections.
The IRD oversees corporate and personal income taxes. In theory, they all serve the same purpose: funding the government.
But in practice, these three departments operate in silos, leaving loopholes, inefficiencies, and opportunities for tax evasion.
Each department collects its own data without sharing it. The IRD finds it difficult to know how much alcohol a company imported or sold. Customs doesn’t track whether an importer is under-reporting sales to dodge income taxes. This lack of integration creates loopholes that tax evaders exploit, he added.
The government is considering to merge these departments into one unified tax authority to increase tax revenue collection by at least 65 per cent and with the country’s budget deficit standing at a staggering Rs. 2.2 trillion, the government can no longer afford inefficiency, he added.
The present system of tax collection by the two departments without coordination will help manipulators to evade tax payments, he explained
Smugglers move products without excise duties being paid. Meanwhile, alcohol distributors who pay excise taxes might still under-report their profits to avoid corporate taxes, he added.
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