Proposed Inland Revenue Bill taken to Court

• Petition filed against Clause 47 and Clause 40 of amended Bill
• To be taken up for hearing today 

The proposed Inland Revenue Amendment Bill, for which the gazette was issued in mid-March to amend the Inland Revenue Act No. 24 has been challenged by a senior tax professional, and the petition is listed to be taken up for hearing at the Supreme Court today.

Petitioned by senior tax, audit, and financial consultant Raja Nihal Hettiarachchi, the chartered accountant challenged that the amendment to the Inland Revenue Act No. 24 of 2017 is contrary to and inconsistent with what was proposed in the 2021 budget.

According to the proposed Bill, the Clause 47 imposes a ‘professional duty’ on any ‘auditor, tax practitioner, tax advisor or approved accountant’ vis-à-vis the Commissioner General of Inland Revenue.

The proposed Bill, if passed will hold the auditor, practitioner, and advisor criminally liable for any disclosures found after the filing. An offence under the Act, and on conviction after summary trial before a Magistrate, will be liable to a fine not exceeding Rs.1 million or to imprisonment of either description for a term not exceeding six months or for a prohibition order preventing him from practicing in such capacity.

As Clause 47 seeks to impose on such professionals a purported ‘professional duty’ towards the Commissioner General of Inland Revenue, the petition stated there can be no doubt that, often, the interests of the taxpayer will run counter to the interests of the Commissioner General of Inland Revenue, in as much as the Commissioner General will seek to maximise the tax payable by a taxpayer, while a taxpayer will try to minimise his tax exposure. 

“Thus, a professional cannot have a professional duty to both the taxpayer and to the Commissioner General at the same time as both are mutually exclusive,” Hettiarachchi stated in his petition.

Furthermore, Clause 47 empowers the Commissioner General to institute action before the Magistrate Court against any person who in the opinion of the Commissioner General ‘deliberately misinterprets any provision of this Act. 

“There cannot be any ‘deliberate’ misinterpretation of a provision of a statute. Interpretation is to convey one’s idea of the meaning of any word or conduct or event. There can be no doubt whatsoever that legal provisions by their very nature are subject to interpretation vis-à-vis their scope, applicability, relevance, and consequence,” the petition stated. 

“Two honest, independent, competent and objective individuals may very well have differing and extreme views on a particular provision of a Statute,” he added.

Another area of concern is the Clause 40, where the proposed amendment permits a full-time employee of the taxpayer to disclaim, evade all responsibility, and liability for the contents of the return, whilst imposing on every other person who ‘prepared, filled or assisted to prepare or fill for a payment’ the return or part of the return responsibility for same. 

The petition stressed that those preparing the filing will necessarily have to rely on the facts and information provided by the taxpayer and/or his employee. However only the taxpayer’s employee is exempted.