Financial Times

Call to eliminate permanent tax exemptions

 

Permanent tax exemptions for government servants and public officials and continuous tax holidays for Board of Investment (BOI) enterprises are a monumental tragedy in fiscal policy.

At a seminar on taxation organized by the Sri Lanka chapter of the Intrnational Fiscal Association (IFA) this week, its Chairman N.R. Gajendran said exemptions for government servants and public officials should be revised in addition to revising tax policy on exempting certain luxury items. Mr. Gajendran said retroactive amendments and inconsistencies in policy making should be done away with and suggested that there is too much focus on headline taxes (taxes on turnover) whereas the focus should be on bottom line taxes.

He said the Inland Revenue Department (IRD) is focusing on collections because the government needs revenue but said businesses are suffering and don’t have money. “It is a huge challenge to find new tax payers,” he said. Mr. Gajendran also suggested that the IRD administration needs to ‘put its act together’ and put in place a proper system of refunds. He further said the IRD needs separate officers for different functions to replace the current system where one officer performs all the functions and is a major cause for misconduct.

IRD Commissioner General E.M.M. Medagoda said the Department has a huge responsibility on its hands to ensure that the government receives the money it needs for development. The achievement of its revenue target is the main focus of the IRD in addition to increasing tax compliance. He urged tax payers to pay default taxes without delays and said the IRD will not probe into past taxes if people come in and pay voluntarily. Mr. Medagoda also said the IRD will launch a special project to find new tax payers.


 
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