Revamping Sri Lanka’s Tax Revenue: A Call for Systematic Oversight and Decisive Action

Revamping Sri Lanka’s Tax Revenue: A Call for Systematic Oversight and Decisive Action

Overseeing Tax Revenue-Generating Institutions

In a recent call to action, MP Mahindananda Aluthgamage, Chair of the Sectoral Oversight Committee on National Economic and Physical Plans, underscored the need for a designated unit to supervise tax revenue-generating institutions such as the Inland Revenue Department. Aluthgamage emphasized the urgency of addressing officials who are not contributing to tax revenue growth. This call for action highlights the pressing need for systemic change and stronger oversight in Sri Lanka’s tax system.

Government Commitments and Revenue Targets

Speaking on a meeting between the International Monetary Fund (IMF) and President Ranil Wickremesinghe, Aluthgamage reported “remarkable results”. The government committed to reducing inflation to single digits, strengthening foreign reserves, and increasing tax revenue. However, the government’s ambitious revenue targets for the Inland Revenue Department, Sri Lanka Customs, and the Excise Department are currently unmet, indicating a need for more effective tax collection plans.

Underpaid Taxes and Inefficiencies

Aluthgamage revealed alarming figures concerning uncollected taxes. In 2022, a mere 10% of eligible taxes were paid, and only 15% of registered companies contributed to tax revenue. A staggering 86% of the government’s revenue was sourced from just 494 companies. Aluthgamage suggested that by addressing inefficiencies and irregularities in these institutions, revenue could potentially be boosted by 500 billion.

Losses in Customs Department

Significant financial losses are also occurring in the Customs Department and Sri Lanka Customs due to inefficiencies and irregularities. The liquor industry was highlighted as an example, with 40% of production reportedly evading state tax. These issues further underscore the importance of implementing efficient and effective systems to ensure tax compliance in all sectors.

Reconsidering Tax Revenue Approach

Aluthgamage stressed the need to monitor and implement effective programs to enhance government revenue. He urged the Inland Revenue Department to reconsider its approach to boosting tax revenue, emphasizing the crucial role of government revenue in providing subsidies, funding development activities, and paying government employee salaries. The call for decisive action and systemic change in Sri Lanka’s tax system is clear.