Sri Lanka to provide online tax filing; help from Singapore

ECONOMYEXT – Sri Lanka is working on an online facility for people to file tax returns with support from Singapore, which will simplify tax payments, Central Bank Governor Arjuna Mahendran said.

"Already I think the Singapore government’s inland revenue department is working with our tax department here in Sri Lanka to implement these types of computer based systems," Mahendran told reporters.

Online filing will make it more convenient to pay tax, he said.

Sri Lanka is run by a high spending elected ruling class with a bloated state sector which requires more taxes to be collected from the people to run it.

The current administration has also ratcheted up state salaries and increased subsidies, increasing the burden of the state on people.

Sri Lanka’s revenue to gross domestic product is about 13 percent, with the value added system systematically undermined by exemptions to special interest groups, multiple rates, as well as long tax holidays.

Mahendran said the value added tax code had more than seven pages of exemptions. Though VAT was extended to wholesale and retail trade by the last administration, Lak Sathosa a state-run retail chain, which has 300 stores are climbing has been exempted.

Despite being able to rake in the VAT for itself it is running losses and the new administration is pumping 7.5 billion rupees of people’s money to the state chain, which they is riddled with corruption and procurement fraud.

He said experts from the International Monetary Fund were helping Sri Lanka close loopholes in the VAT system.

More than a decade ago Sri Lanka had a revenue to GDP ratio of about 19 percent and Mahendran said it would be possible to push up tax collections.

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However there have been concerns that Sri Lanka has an inflated GDP number and the low revenue-to-GDP number may be a result of that as visible tax levels of most goods are high.

 

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