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Accountant challenges constitutionality of new tax bill
View(s):A petition was filed in the Supreme Court on Friday challenging the constitutionality of the Inland Revenue Bill which was tabled in Parliament this week.
Raja Nihal Hettiarachchi, a Chartered Accountant and Fellow Member of the Institute of Chartered Accountants of Sri Lanka (ICASL), in his petition says that some of the fundamental features of the present legal regime under the Inland Revenue Act No 10 of 2006 have been omitted in the new Bill and that this is in direct contravention with Articles 3 and/or 4(c) or 4(d) or 12(1) and/or 14 (1)(a) and/ or 148 of the Constitution.
The petitioner claimed that Section 163(3) of the Inland Revenue Act No. 10 of 2006 makes it a mandatory requirement for the Commissioner General of Inland Revenue to give reasons for the rejection of a return filed by the taxpayer. This fundamental requirement has been omitted in the impugned Bill thus rendering the said Bill inconsistent with the Constitution. His petition states that the disclosure of reasons for rejection of the return is a mandatory precondition for taxpayers to determine whether an appeal should be lodged.
Clause 135(2) and or 135(3) of the Bill which extends the time bar for the assessment against the returns of income and computation of tax liability filed by a taxpayer from one and a half years to four years is arbitrary, unreasonable and unconstitutional, the petitioner states. He notes that the four-year extended time bar contemplated in the impugned Bill is made applicable to both a taxpayer who has filed a return under self-assessment and those who do not file a return, which is discriminatory.
He noted that the new Bill has omitted some sections of the Inland Revenue Act No. 10 of 2006 (as amended) — sections which conferred exemptions on the sources of income such as; interest gained on money lying as credits in foreign currency in any commercial bank accounts, or any interests on money lying in foreign currency in a bank account in Sri Lanka or profits and income earned in foreign currency from outside Sri Lanka, by any resident individual, resident company or any partnership of Sri Lanka from services rendered outside Sri Lanka.
The proposed Bill fails to impose time limits on the Inland Revenue Commissioner General to exercise certain powers, the petition says. It also claims that there is an encroachment of certain judicial powers vested with courts and is a violation of the principles of Separation of Powers. The petition goes on to explain that there is a possibility of non-remittance of foreign exchange to Sri Lanka as a result of the ambiguity and uncertainty of the provisions in the proposed law.
While claiming that certain clauses of the bill violate the rights of taxpayers under the Constitution, the petitioner notes that in addition to the serious prejudice to tax payers, it will have an adverse effect on the country’s tax framework by causing ambiguity and uncertainty. “Some clauses of the said bill are not referable and are in violation and or in excess of the provisions of Article 15 (7) of the Constitution,”
The petitioner states that he learned from media reports and information available in the public domain that the bill is based on a similar model introduced by the International Monetary Fund (IMF) in Ghana in 2015 and now the same lending institution wants it introduced in Sri Lanka.