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Tuesday February 27th, 2024

Inefficiency, corruption in Sri Lanka’s revenue collection bodies hit tax target – Aluthgamage

ECONOMYNEXT – Sri Lanka is struggling to meet its tax revenue target committed to the International Monetary Fund (IMF) this year due to inefficiency and corruption among the state officials at Inland Revenue Department (IRD), the Customs, and Excise Department, ruling party legislator Mahindananda Aluthgamage said.

Aluthgamage, the chair of the Parliament Sectoral Oversight Committee on National Economic and Physical Plans, said the government’s tax collection is far behind the target due to the lethargic attitude of the three main state revenue collecting institutions.

“The IMF is not happy about the government’s tax collection,” Aluthgamage told reporters at a media briefing in Colombo.

“So, the IMF has raised concern over this.”

The government has estimated a revenue target of 3.1 trillion rupees for this year, but as of September 26, the collection has been 1,64 trillion rupees.

Aluthgamage said the government is likely to face a 637-billion-rupee or 20.5 percent short fall in the revenue if the current collection trend continues.

“We believe that this is not an impossible target. Had we planned for this target with the Inland Revenue Department, The Customs, and Excise Department, we could have achieved this target,” he said.

The former cabinet minister for agriculture openly criticised the three-revenue collecting institution for the revenue short fall as they had failed to open new tax files, collect the overdue payments, and take necessary legal actions against defaulters.

The official data showed that only 161 Company Income Tax (CIT) files, 8,533 Individual Income Tax (IIT) files, 14 Partnership files, 104 Value Added Tax (VAT) files, and 2,094 Social Security Contribution Levy (SSCL) files have been opened in the eight month period through August 31 this year.

Aluthgamage said President Ranil Wickremesinghe had expected at least 1 million new tax files be opened by end of this year.

“Sadly, we have to state that the Inland Revenue Department with a capacity of 2,500 employees only collect taxes from 494 institutions. If we can address the irregularities, we can raise the tax by 500 billion rupees,” Aluthgamage said.

“We have identified the daily loss at the Customs is 1 billion rupees and 360 billion per annum. In the Inland Revenue Department, we lose 500 million rupees per day and 180 billion rupees annually. We lose this due to inefficiency and corruption.”

“If you take the Excise Department, the annual liquor production is around 540-600 million bottles. However, out of the total production, 40% of the bottles go out in a different way without being subject to excise tax. No government taxes paid on these bottles. The manufacturers sell these bottles in an illegal way and the government does not get taxes.”

He criticized Excise Department officials for the current counterfeit sticker scam.

“The government introduced a sticker in 2018 and in was properly implemented from 2022. When the implementation was started, we saw an increase in the taxes on liquor. But now, there are counterfeit stickers and the tax on liquor has fallen by 40 percent again,” he said.

“Until the Parliament Sectoral Oversight Committee asked the Excise Department officials, for one-and-half years, they did not do anything to stop these counterfeit stickers. Only after we advised the Excise Department, they have arrested 40,000 liquor bottles with counterfeit stickers.”

“So, if we can stop irregularities and corruption in these (three) state institutions, we can increase the tax revenue by 500 billion rupees.”

“Every time people find fault with the government and ministers. But the reality is that, this is due to the fault of the state officials in these institutions. This is due to inefficiency in the Inland Revenue Department, inefficiency in the Customs, and inefficiency in the Excise Department.”

Parliament Sectoral Oversight Committee led by Aluthgamage now recommended to establish a body to monitor and regulate all three state revenue collecting institutions.

“If we can have a proper monitoring mechanism of these institutions, we can raise the government revenue,” he said.

Citing the lethargic attitude of the Inland Revenue Department (IRD), the legislator said the IRD is struggling to recover defaulted tax of 904 billion rupees due to longer appeal process.

The appeal process for tax default involved for stages and each stage could take at least three years.

“This (IRD) is the only institution in the world where you can appeal four times and not pay the taxes for 15 years,” Aluthgamage said.

“This is a mafia by government officials. All accuse minsters and politicians. But the biggest corruption is among the government officials.”

Out of 904 billion rupees, 437 billion rupees has to be recovered from dispute cases and another 330 billion rupees could be easily recovered, but IRD officials are not recovering the money.

“If we collect them, we can get the 600-billion-rupee revenue deficit for this year,” he said.

“We urge the government and the President to establish a new unit to regulate these institutions.”

“We have only16 IRD branches in Sri Lanka. But Colombo itself needs 15 offices for each Colombo area,” he said addling that there is resistance within the IRD to open new tax offices.

“We have a voluntary tax payment system. In other countries, people receive the money after the tax deductions. So, we are considering enacting laws (to deduct tax before payments).” (Colombo/September 26/2023)

Comments (2)

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  1. sacre blieu says:

    They have an organisation that allows tax dodgers to go free, at a price of course. Those who pay taxes are hunted down in show of official handling and work, driving genuine businesses to the ground. The corrupt officials should be held accountable and a new court established to mete out punishment without delay.

  2. Gona says:

    Black is calling black

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  1. sacre blieu says:

    They have an organisation that allows tax dodgers to go free, at a price of course. Those who pay taxes are hunted down in show of official handling and work, driving genuine businesses to the ground. The corrupt officials should be held accountable and a new court established to mete out punishment without delay.

  2. Gona says:

    Black is calling black

Sri Lanka parliamentary committee says electricity tariffs should be reduced by 20 pct

ECONOMYNEXT — A parliamentary Sectoral Oversight Committee on Alleviating the Impact of the Economic Crisis has recommended to the Public Utilities Commission of Sri Lanka (PUCSL) that electricity tariffs be reduced by at least 20 percent.

A statement from parliament said on Monday February 26 that, following an analytical review of the figures presented by the Electricity Board, Public Utilities Commission, etc. and taking into consideration all other factors affecting the price of electricity, including considering the opinion given by experts that the existing electricity price can be reduced by about 33%, price of electricity should be reduced by at least 20% in the year 2024 so that the state-run Ceylon Electricity Board (CEB) will not suffer any loss.

PUCSL officials have informed the Committee that by the end of this month, they can submit the necessary recommendations to reduce the electricity bill, according to the statement.

The matter was taken up for discussion when the committee, chaired by MP Gamini Waleboda, met in the Parliament on February 22.

Officials from the Ministry of Industry, Ministry of Finance, Central Bank of Sri Lanka, Public Utilities Commission, Industry Development Board, Enterprise Development Authority, Department of Population and Statistics, Department of Inland Revenue and from government institutions including the Micro, Small and Medium Scale Industries Board and a group of industrialists had also been called for the meeting.

“The Committee gave several directives to the relevant institutions and officials to identify the micro, small and medium scale industries that are directly affected by the economic crisis and to activate the local economy and increase the foreign exchange earnings by reviving the industry sector.

“The Committee pointed out that due to the increase in electricity bills, the number of electricity connection cuts reported across the island has exceeded one million. It was also emphasised that in order to alleviate the pressure on the industry and the society, it should be arranged to provide electricity connections again by charging only 50 percent of the outstanding charges at the initial stage with the concessional basis of payment of outstanding electricity charges on installment basis,” the statement said.

The committee was also of the view to allow the customer to pay the connection fee in installments so as to avoid discouraging new entrepreneurs to start micro, small and financial industries due to high charges for getting fixed electricity connection and instructed to review the new connection fee and work to reduce it as much as possible.

The committee chair has instructed the PUCSL to conduct an audit on the electricity consumption in the public sector as an approach to ensure energy security.

“The Committee recommended to the Ministry of Finance and the Central Bank to start a loan scheme at subsidised interest for the purchase of solar panel systems with a view to promoting solar energy as a source of energy supply to industries. The Ministry of Finance expressed its agreement to provide refinancing facilities subject to a maximum as per the proposal made by the Committee to implement a loan scheme targeting micro, small and medium scale industrialists under subsidized interest rates.

The committee has also recommended that raw materials that must be imported from abroad and impose tax concessions on such raw materials be identified to ensure the supply of raw materials required for the smooth running of micro, small and medium scale industries. Copper, lead, aluminum and other industrial scraps used as raw materials in various domestic industries currently being sold by the CEB to external buyers and other entities should also be issued to micro, small and medium scale industrialists recommended by the Ministry of Industry and the Industrial Development Board, the committee has recommended.

The definition used by the Department of Population and Statistics for micro, small and medium industries and the definition used by other institutions such as the Industrial Development Board and the Central Bank for those industries are different from each other, which is an obstacle in making policy decisions, the committee had noted, directing the Department of Population and Statistics to support to the policymakers by releasing statistical data based on a common definition.

“The committee also recommended that the Credit Information Bureau should take prompt action to remove their credit information from the blacklists so as to facilitate access to credit facilities for micro, small and medium scale industries facing financial crisis to activate their balance sheets and to review all existing laws and procedures for registration of micro, small and medium scale industries as well as to obtain licenses and introduce a simple system.

“The committee informed all the parties to establish a steering Committee headed by the Ministry of Industry to implement the recommendations given by the Committee and to report its progress within a week,” the statement said. (Colombo/Feb27/2024)

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Sri Lanka sets up fund to help children of Gaza

The United Nations Relief and Works Agency for Palestine Refugees in the Near East is mandated to provide education, health, relief and social services, and emergency assistance to refugees. (Pic courtesy UNWRA)

ECONOMYNEXT – Sri Lanka’s cabinet of ministers have approved a proposal by President Ranil Wickremesinghe to set up a fund to help children caught in the war in Gaza, a statement said.

The government will contribute a million US dollars and use funds allocated by state agencies for Ifthar celebrations.

Public contributions are also called.

The Presidential Secretariat is requesting public donations citizens for the “Children of Gaza Fund” to be contributed to account number 7040016 at Bank of Ceylon (7010), Taprobane Branch (747) by 11th April.

Deposit receipts should to be forwarded to 0779730396 via WhatsApp. (Colombo/Feb27/2024)

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Top US official calls for inclusive reforms, deeper defence ties with Sri Lanka

ECONOMYNEXT — United States Deputy Secretary of State for Management and Resources Richard Verma in discussions with Sri Lanka officials had called for inclusive reforms and stronger human rights and also discussed deeper defence and maritime cooperation.

The United States remains committed to the economic growth and prosperity of Sri Lanka, statement from the US Embassy in Colombo quoted the official as telling government, civil society and economic leaders during his February 23-24 visit to Sri Lanka.

“Verma met with President Ranil Wickremesinghe and Foreign Minister Ali Sabry to discuss progress on Sri Lanka’s IMF program, including inclusive economic and governance reforms aimed at keeping Sri Lanka on the path to sustainable economic growth.  Deputy Secretary Verma stressed the vital need to protect human rights and fundamental freedoms, including freedom of expression. They also explored opportunities to deepen defence and maritime cooperation between the United States and Sri Lanka, including strengthening the Sri Lanka Navy’s capabilities to safeguard national security and promote a more stable Indo-Pacific region,” the statement said.

 On February 23, aboard the SLNS Vijayabahu, one of three former U.S. Coast Guard cutters transferred by the United States to Sri Lanka, Deputy Secretary Verma said: “I am pleased to announce that the Department of State has notified Congress of our intent to transfer a fourth medium endurance cutter to Sri Lanka.  The Department obligated $9 million in Foreign Military Financing to support this effort.  We look forward to offering the cutter, pending the completion of Congress’ notification period.  If completed, this transfer would further strengthen defense cooperation between the United States and Sri Lanka.  The ship would increase Sri Lanka’s ability to patrol its Exclusive Economic Zone, monitor its search and rescue area, and provide additional security for ships from all nations that transit the busy sea lanes of the Indian Ocean.” 

 Participating in the announcement at Colombo Port were Sri Lanka State Minister of Defense Premitha Bandara Tennakoon, Commander of the Sri Lanka Navy Vice Admiral Priyantha Perera, and U.S. Ambassador to Sri Lanka Julie Chung, who remarked, according to the statement: “The United States has previously transferred three cutters to the Sri Lankan Navy, which deploys these ships for maritime operations and law enforcement missions, countering human trafficking and drug trafficking, while supporting humanitarian assistance and disaster response efforts. The eventual transfer of a fourth vessel would be just one more point in a long history of cooperation between Sri Lanka and the United States in preserving a free and open Indo-Pacific region.” 

Verma also visited the site of the West Container Terminal (WCT), a deepwater shipping container terminal in the Port of Colombo. The WCT, currently being constructed by Colombo West International Terminal (CWIT) Private Limited with 553 million US dollars in financing from the U.S. International Development Finance Corporation, will provide critical infrastructure for the South Asian region, the embassy said.

“Operating near capacity since 2021, the Port of Colombo’s new addition will be the port’s deepest terminal and aims to boost Colombo’s shipping capacity, expanding its role as a premiere logistics hub connecting major routes and markets, boosting prosperity for Sri Lanka without adding to its sovereign debt,” it said. (Colombo/Feb27/2024)

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