31 January 2024 01:07 am Views - 296
The Central Bank gave a warning to businesses using personal accounts for financial transactions and said the practice is considered a deliberate action to evade taxes.
Banks have brought to the attention of the Central Bank that many parties are currently engaged in this practice although they have separate corporate accounts.
Officials between various ministries and institutions are discussing how this should be tackled and what legal recourse they have.
To this end, the Central Bank’s Financial Intelligence Unit issued a public announcement about a fortnight ago to both discourage them and create awareness about the possible legal and regulatory issues that might have to be confronted when using personal accounts for business transactions.
When the matter was raised at a recent media briefing, the Central Bank explained the underlying reasons behind why they had to issue such an announcement.
“What caused this was that banks have presented examples where people use their accounts for their business transactions despite them having a separate business account which they set up after registering their business. What we thought was the reason behind doing this is to avoid paying one’s taxes”, said Enoka Mohotty, Director of the Financial Intelligence Unit.
She said they had already written to the Ministry of Finance regarding this and the discussions are underway between the Inland Revenue Department and the Registrar of Companies on what possible legal action could be taken to prevent this happening.
Sri Lanka has lost large amounts of tax revenue for years due to tax evasion by some businesses as they in most cases clandestinely keep two sets of books of accounts – one to mislead tax authorities and another to understand the true financial standing of the business.
But, it appears that the officials are now beginning to come after such people and businesses as such practices have remained for years for evading taxes.
Minimising room for tax evasion and improving tax administration have been recurring items for years but little to nothing has been done to bring those who are liable for taxes but have been dodging through
various means.
“Commingling funds can lead to legal and tax complications, making it challenging to track and manage business finances effectively,” the announcement titled, ‘Misuse of Personal Accounts For Illegal Activities”, released a fortnight ago said.
“Mixing personal and business funds may raise suspicions of money laundering, a serious crime that can result in criminal charges and investigations,” it added.