Efforts underway to firm up tax administration

• Digitalisation to be at centre of tax revenue collection efforts

As Sri Lanka continues to fall short in fetching tax revenues, the government yesterday announced several measures to firm up the tax administration.

The 2022 budget proposed by Finance Minister Basil Rajapaksa had strong emphasis on the tax collection aspect, with the proposal of implementing fresh measures to patch the ongoing revenue bleed.

Efforts will be directed towards fully implementing the Revenue Administration Management Information System (RAMIS) that was initiated in 2013, during the regime of Mahinda Rajapaksa. While the roll-out of the system, which was launched in 2018, has been slow, Rajapaksa affirmed arrangements are being made to implement the system by “expeditiously” attending to matters that were delayed in the recent past, due to COVID-19. 

To push the effort through, the 2022 budget called for the integration of all banks and financial institutions with national payment network infrastructure provider Lanka Clear, by using the online tax payment platform. Finance Minister Rajapaksa said this effort should be made the element of tax administration.

As the government treasury records indicate that over Rs.200 billion tax revenue is yet to be collected, the 2022 budget proposed to introduce amendments to the tax law in relation to the use of digital identification numbers and other legal requirements. 

At present, tax revenue amounting to 1.5 percent of GDP does not reach the government treasury, due to many taxpayers resorting to various mechanisms to evade tax payments. The budget speech highlighted that there is a belief that the payment of due taxes can be evaded by paying a certain penalty to the department. 

“In order to change these practices, I expect to establish legal provisions to apply technological processes to tax administration,” Rajapaksa said. 

The implementation of the digital revenue collection system of the Excise Department will also be expedited alongside simplifying the excise licensing process.

The digital revenue collection system will also see the introduction of a mechanism to examine the accuracy of the tax documents filed through it and measures will be taken to allow at every possibility to present digital invoices and documents as valid documents.

Furthermore, to firm the tax administration and improve revenue collection from large taxpayers, a proposal was also made to further strengthen the Large Tax Payers Unit (LTU) and Upper Corporate Unit (UCU) of the Inland Revenue Department. The objective of this move is to integrate administration of all the units connected to the 80 percent of the government tax revenue, which is derived from 20 percent of the taxpayers.