Pay your taxes or else

The Inland Revenue Department (IRD) is planning to nail night clubs, karaoke bars and the casinos who are evading taxes.

Its Commissioner-General A. A. Wijepala told The Sunday Times FT that he expects to collect between Rs 1 million and Rs 5 million in taxes by getting the night clubs and the karaoke bars into the tax net.

The department has been carrying out raids at these clubs where many of the city party goers hang out in the night. According to Wijepala, an average customer’s bill here is about Rs 30,000 to Rs 40,000 a night.

He said around 25 clubs have a turnover of about Rs 300,000 to Rs 400,000 rupees per night per club. “Most of them didn’t pay taxes, a few casinos do pay. Most clubs don’t pay. I want them to pay. If they don’t pay we can take action immediately,” said Wijepala warning that the department would issue orders to close down such businesses.

Speaking about the tax base in the country the commissioner pointed out for a country with a population of 20 million the current base of 322,000 tax payers is a far cry from what it should be. Thus the IRD is planning to expand its tax base to increase this number to 500,000 by next year.

“According to a survey done in 2002 by the statistics department, there are 760 000 people with an income of Rs 25,000 or more per month.

The number should be about 1 million by now. All these people should be paying taxes. We have opened about 25,000 new files this year alone,” he said.

Wijepala is confident that the department will be able to meet its target collection of Rs 260 million by the end of the year.

However he admitted that collecting the outstanding taxes which is at a staggering 93 billion would be a rather difficult task. “In books the outstanding tax amount is Rs. 93 billion but out of this nearly half is penalties. Penalties are very difficult to be collect. Collectible amount (what we can recover) is only about Rs 5 billion,” said Wijepala.

The delay in VAT refunds is also being cleared up at present and according to Wijepala the back log would be cleared out by the end of the year and the process would run smoothly with a new system in place where the cheques are sent only by post.

In order to collect the dues from the broadening tax base the IRD has been rallying its forces and will double its numbers very soon. “After 74 years the staff will be doubled. Now we have 1500 employees.

It will be 2500 within a few weeks.

The interviews are almost over,” said Wijepala. The department is planning to recruit 539 new assessors to fill the requirements of the department. Out of this 260 will be recruited from the public and internally 122 officers have been appointed under merit basis and another 129 based on the successful performance at the limited exams which were held for the internal employees.

Not only is the Inland Revenue spreading its wings but it is also going in for a face lift as well. The department, one of three revenue collecting agencies the public fears the most, is trying hard to change the image into a more client friendly one. Various measures are being taken to achieve what seems a rather uphill journey for a government department.

The department on Friday opened a new, all in one branch at Jawatta Road with a branch from Bank of Ceylon with full facility where the tax payer would be able to operate even their business accounts.

The department is also planning to move one of its internal departments which handles the private sector employee tax files to a wing of the State Trading building in Nawam Mawatha which was acquired by the IRD recently.

It is not only the locations and the buildings that are undergoing rapid change, the department staff is also being trained to develop new skills.

Among this computer literacy is a key factor. More than 200 of the staff have been sent to India for computer skills training and the department has set up its own computer training branch. Almost every officer will be given basic computer training, Wijepala said.