Imagine a train or bus that never arrives, a Police patrol with no fuel, or a hospital unable to offer urgent medicine or surgery. These moments might seem like bad luck, but they reveal a deeper problem: the Government lacks sufficient revenue to sustain essential services.
In Sri Lanka, millions of individuals fulfil their tax obligations in good faith. However, a considerable share of projected tax revenue is failing to reach Government coffers, leading to a hidden fiscal deficit.
This systemic issue directly hinders the provision of essential public services including education, transportation, public safety, and health, thereby diminishing the overall well-being of our communities.
This shortfall, known as the ‘tax gap,’ represents the difference between what should be collected and what is actually received. It is not just a technical concern for economists or policymakers; it is a real challenge with human consequences.
The gap is caused by a mix of factors: weak enforcement on tax non-compliance, the size of the informal economy, and limited public awareness of tax responsibilities and benefits. When taxes go unpaid, roads remain broken, Government schools remain malfunctioning, and emergency services such as health and fire brigades fall short.
Addressing this issue isn’t just about increasing revenue; it’s about restoring fairness, building trust, and ensuring that all citizens can access the public services they both need and deserve.
Digital push
Facing a persistent deficiency in anticipated tax revenue, Sri Lanka is increasingly turning to digital technology to bridge this crucial gap. The Government’s comprehensive strategy centres on modernising its tax system by digitalising filing, implementing electronic payment systems, and leveraging data analytics to pinpoint non-compliance.
A cornerstone of this effort is the Revenue Administration Management Information System (RAMIS), an impactful innovation that allows taxpayers to seamlessly register, file returns, and pay taxes online.
By automating these processes and significantly reducing human interaction, RAMIS is designed to curb underreporting, flag discrepancies, and ensure more timely payments, directly contributing to a narrower tax gap while simultaneously fostering public trust and broadening the tax base across the island.
Complementing the RAMIS system, Sri Lanka’s Inland Revenue Department (IRD) is aggressively expanding its digital presence to cultivate voluntary tax compliance. The widespread availability of e-services and online banking has made tax obligations significantly more convenient for businesses, large and small.
This enhanced accessibility is proving vital, as it removes common physical and psychological hurdles, leading to a noticeable increase in compliance. A particularly impactful innovation is the new QR code and online e-service for Taxpayer Identification Number (TIN) registration and tax return submission. This ensures unique taxpayer identification across all systems – a critical step in revenue collection.
Ultimately, this strategic digital push is not only curbing duplication and uncovering hidden income but also successfully bringing previously unregistered individuals and entities into the formal tax system, thereby expanding Sri Lanka’s tax base.
Beyond mere taxpayer convenience, Sri Lanka is strategically integrating its tax system into a powerful digital network. By linking the tax authority with crucial national databases including Customs, the Land Registry, Registrar of Companies, and even private and public financial institutions, a far clearer picture of financial activity is emerging. This seamless data sharing acts as a sophisticated digital detective, significantly boosting the taxpayer’s ability to spot inconsistencies and ensure every entity contributes its fair share.
What’s more, Sri Lanka’s proactive embrace of cutting-edge data analytics is poised to unlock even greater potential. These intelligent tools empower the IRD to swiftly identify high-risk audit and refund cases, uncover complex patterns of tax avoidance, and precisely focus enforcement efforts where they are most impactful.
Collectively, these technological leaps are more than just modern upgrades; they are strategic pillars in the fight against revenue leakage, forging a more equitable and robust financial future for the entire nation.
Beyond technology
However, a critical reality remains: technology alone cannot fully bridge Sri Lanka’s tax gap. Even the most sophisticated digital system only proves effective if citizens can reliably access and confidently utilise it.
A significant challenge lies in many rural and underserved areas, where internet connectivity is often unreliable and digital literacy remains low. For a substantial portion of the population, a smartphone’s primary use is for basic communication or social media, not for navigating what can often feel like complex tax portals.
When digital platforms are laden with technical jargon or ambiguous instructions, even the most compliant taxpayers can become frustrated and abandon their efforts. Mistakes, whether stemming from slow systems, unclear regulations, or simple user error can breed frustration, fear, and ultimately, avoidance.
It is vital to remember that behind every online form is a real person, often genuinely attempting to adhere to the rules without inadvertently making an error. For these digital tools to truly succeed, they must be seamlessly paired with accessible, empathetic human support at every level.
A collective endeavour
At its core, Sri Lanka faces a double whammy: a substantial deficit in tax revenue, exacerbated by an increasing divide of mistrust between the populace and the State. When citizens doubt their tax money is spent wisely or fairly, they become less willing to pay, even if legally obligated. This deep scepticism directly feeds the tax shortfall, making tax payment feel like an unwelcome burden.
To fix one, we absolutely must fix the other. That is why Sri Lanka’s digital leap in tax reform can’t just be about fancy tech upgrades; it has to be about clear transparency, unwavering accountability, and a genuine human touch.
Citizens are far more likely to open their wallets when they can actually see their contributions at work – simple, easy-to-understand reports showing how taxes build schools, fix roads, or fund hospitals can transform scepticism into engagement.
Just as vital is visible and fair enforcement: when everyone, from the powerful to the everyday citizen, is seen to play by the same rules, public confidence soars. In this crucial way, technology isn’t just a gadget for efficiency; it becomes a powerful bridge, reconnecting people with a system they can finally believe in.
Ultimately, forging a truly equitable and robust tax system in Sri Lanka isn’t just the Government’s task; it’s a collective endeavour, a national imperative. The Government must exhibit total openness, making it abundantly clear how every single rupee collected is invested, while also rigorously ensuring that tax regulations are applied equally to all, with no hint of favouritism. This directness helps to narrow the inherent trust gap between citizens and the State, fostering greater willingness to comply.
Tax administrators must transform into compassionate facilitators, extending a guiding hand to those navigating the digital frontier or feeling overwhelmed by the process. Citizens, for their part, bear a sacred civic duty to engage honestly and champion accountability from their institutions. Meanwhile, civil society and media stand as vigilant guardians, illuminating public understanding and keeping the entire framework honest.
When every player steps up with rock-solid integrity and a common purpose, our tax system becomes so much more than just a money machine. It transforms into the true foundation of our democracy, a fresh spring of trust that directly helps plug that persistent tax hole, and the unstoppable engine driving our shared national success.
(The writer is a Deputy Commissioner General of the Inland Revenue Department)