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IRD requests allowing tax appeals after paying 50%

21 Nov 2021

  • Appeals by taxpayers main reason for uncollected tax
  • Proposes amendment to IRD Act
    By Imesh Ranasinghe  The Inland Revenue Department (IRD) has proposed an amendment to its Act to allow taxpayers to appeal their tax assessments provided by the Department after paying 50% of the total assessment, thereby reducing uncollected tax, The Sunday Morning Business learns. Speaking to us, IRD Commissioner General H.M.W.C. Bandara said that the majority of the uncollected tax, as mentioned by Finance Minister Basil Rajapaksa at the Budget Speech, was not collected as a result of ongoing appeals by taxpayers. “The majority of the uncollected tax revenues mentioned by the Finance Minister are appeal cases which are still ongoing. When this happens, there are deficits in our books, as we cannot collect the tax revenue until a final decision is given on the cases,” he said. “So we have proposed an amendment to the Act where the taxpayer can appeal after paying 50% of the total tax assessment,” Bandara added. In his maiden Budget Speech on 12 November, Finance Minister Rajapaksa said that Treasury records indicate uncollected tax revenue of over Rs. 200 billion, which amounts to around 1.5% of GDP. He said that although tax evaders are sent a notice of tax assessment by the IRD, they evade said payment of due taxes by resorting to various mechanisms, owing to the belief that this payment can be avoided by paying a certain penalty to the Department. “In order to change these practices, I expect to establish legal provisions to apply technological processes to tax administration,” Rajapaksa had said. According to the Inland Revenue Act, No. 24 of 2017, if a taxpayer is not satisfied with the tax assessment provided by the IRD, they can make an administrative appeal, which should be solved within two years. If the taxpayer is still not satisfied, they could appeal to the Commissioner General of the IRD, who will appoint a special commissioner to look into the matter. Similarly, if the taxpayer continues to be unhappy with the decision, they could go to the Tax Appeal Commission, and then to the Court of Appeal. Finally, if the taxpayer is dissatisfied with the decision of the Court of Appeal, they could go to the Supreme Court. The 2022 Budget Speech presented several revenue proposals for the IRD. These included an estimated revenue of Rs. 100 billion from the one-time tax surcharge of 25% from persons or companies with annual taxable income of over Rs. 2,000 million; estimated revenue of Rs. 140 billion from the Social Security Contribution tax that will be charged, at 2.5% on the annual threshold turnover exceeding Rs. 120 million; and Rs. 14 billion from the 3% increase in VAT on financial services from 15% to 18%. According to the annual report of the IRD for 2020, Sri Lanka had a total of 1,133,445 registered taxpayers by the end of 2020, where 1,036,014 were income tax payers. The report stated that the tax revenue for the IRD had decreased by 49% when compared to 2019, which the IRD said was “...due to the direct effects of the Covid-19 crisis as well as tax policy actions during the crisis”. Speaking to us in October, Bandara said that the IRD earned a tax revenue of Rs. 226.8 billion in the first six months of 2021, achieving 39.4% of the annual revenue target, which is Rs. 576 billion.


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