Massive tax evasion aggravates economic stress
View(s):At a time of unprecedented economic stress, the Government is losing billions of rupees in revenue with the increase in tax evasion, the Parliamentary Committee on Public Accounts (COPA) has found.
Extension of tax holidays, tax exemption for investment in start–ups and concessions given to agriculture and tourism sectors were aimed at providing a much needed boost to the economy during post COVID-19 period, COPA reports revealed.
Although the government has made all efforts to make life much easier for tax payers and investors providing tax breaks and concessions with the easing of compliances and procedures, tax evasion continues unabated.
The Inland Revenue Department (IRD) has been deprived of around Rs. 144.5 billion in revenue last year owing to tax evasion, COPA disclosed.
Over 200 individuals, finance companies, casinos and state institutions were among the tax evaders, a member of COPA said adding that certain state institutions were under liquidation at present.
Under this set up tax evasion has been made a serious offence liable for imprisonment and heavy fines extending the range of civil penalties for taxpayers who avoid paying taxes.
The Inland Revenue Act (IRA) stipulated heavy punishment for those convicted of tax evasion, Finance Ministry sources revealed adding that the IRD has been directed to prosecute such offenders without delay. The IRD also announced recently that any informant providing information on tax evaders to the department will be offered a reward of 10 per cent of the additional surcharge and total fine recovered from the defaulter.
According to the new Act, a fine of Rs. 10 million and /or imprisonment for up to two years, compared to the previous punishment of six months shall be imposed for tax evaders if found guilty of charges by a court of law, a senior Ministry official said.
Meanwhile tax concessions and exemptions have been given to two Chinese companies involved in development activities at Colombo Port City and Hambantota port area under the Strategic Development Act.
Shangri-La Hotel has also secured several tax concessions including the extension of corporate tax holiday, exemption on dividend income and exemption on income tax for 20 expatriate staff, among others under a new Bill tabled in Parliament recently.
Issuing two special gazette notifications under the signature of Prime Minister and Finance Minister Mahinda Rajapaksa, two Chinese companies – Port City Colombo Pvt Ltd and Ceylon Tyre Manufacturing Company Pvt Ltd have been given these tax concessions recently.
Port City Colombo has been granted a 15 year tax holiday for the construction of five tower building at the Colombo Port City while Ceylon Tyre Manufacturing Company was given a 12 year tax holiday and exemption of Customs duty, VAT and PAL for the building and operating of a tyre factory at Hambatota Port Investment zone for export.
The government is now planning to build the country’s first special economic zone for services in Colombo Port City.
The Port City project “will have a significant impact on the national economy,” as it may generate 210,355 jobs, and add US$0.7 billion to the FDI, $11.8 billion to gross domestic product and $0.8 billion to government revenue every year, an official report revealed. (BS)