Finance Ministry orders IRD CG to submit report on failure to collect staggering Rs.774bn in tax arrears

State Minister of Finance Ranjith Siyambalapitiya has ordered the Commissioner General of Inland Revenue (IRD) to submit a report on the department’s failure to collect Rs.773.96 billion in taxes, penalties and interest.

It was revealed that the total arrears of taxes, penalties and interest due to IRD as at June 30, 2022 stood at a staggering Rs.773.96 billion, when the IRD was summoned before the Committee on Public Accounts (COPA) this week.

According to COPA, Rs.201.4 billion of these arrears could be collected without legal barriers while the remaining Rs.527.56 billion has been flagged as income that has been temporarily suspended due to certain reasons.

In addition, it was revealed that 4, 831 cheques to the tune of Rs.2.48 billion have bounced back including cheques worth Rs.1.43 billion, which are over three years old. When questioned on the lack of legal action taken in recovering these funds, the IRD officials had said that their department does not have the authority to pursue legal action.

Meanwhile, the Auditor General pointed out that the RAMIS system is still not functioning properly, though over Rs.10 billion has been spent on the reparation of this system.
The Auditor General also noted that the IRD failed to provide the required information on the agreement and payments related to the RAMIS system.

As there are problems in many aspects of the RAMIS system, including the procurement, COPA recommended a report to be given within a month with dates on the implementation of this system in a manner suitable for the country. 

COPA Chairman Kabir Hashim said that if the report is not sufficient, an audit is needed to be conducted on this transaction.

The government is expecting Rs.1.85 trillion in tax revenue for this year with plans to increase it by 69 percent to Rs.3.13 trillion in 2023. Hence, COPA members, including Chairman Hashim raised questions whether IRD is able to reach these targets with the staggering tax arrears already in existence.