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The Asian Development Bank (ADB) and the Government of Sri Lanka last week signed an agreement for a study to improve public sector resource management including support for the establishment of the Revenue Authority.

The study will be financed by a technical assistance grant of US$ 500,000 from ADB's Japan Special Fund.

Sri Lanka's fiscal deficits are unsustainable, with the prevailing inefficiencies in both tax collection and expenditure management affecting the Government's efforts to reduce poverty and fund priority investments, said ADB Country Director John Cooney.

He added that revenue mobilisation has fallen far below the potential collection levels for the country's present stage of development, reflecting inadequacies in the tax structure and deficiencies in tax administration.

In the 2002 Budget speech, the Government put improved revenue management at the top of its reform agenda. A milestone of these reforms is the establishment of an autonomous Revenue Authority.

The study will support government policy reform to establish an autonomous revenue authority to streamline tax administration and improve its efficiency. This will raise Government revenue while eliminating distortions in the tax system. The study may lead to an ADB-financed project to implement policy reforms and undertake the necessary investments, said Mr Cooney.

Established in 1988, the Japan Special Fund provides grants to ADB's developing member countries to help prepare projects and undertake technical or policy studies. As a special fund that consists of resources entirely contributed by the Government of Japan, it supports ADB operations to reduce poverty and such activities as environmental protection, gender and empowerment, private sector promotion and finance sector reform. Japan's contributions to the fund have amounted to nearly US$ 850 million.

Ambassador Seiichiro Otsuka said that Japan the single largest donor to Sri Lanka will continue to remain an active partner in assisting the socio-economic development of the country.

Treasury Secretary Charitha Ratwatte said that economic reform is a major priority of the UNF government, therefore the establishment of the Revenue Authority is a necessity and a need of the country at this point of time.

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