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Sunday, 17 July 2005    
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Govt unable to achieve set revenue target

by Gamini Warushamana

A mafia of senior officers are sabotaging the proposed reforms in the Inland Revenue Department (IRD), the Inland Revenue Service Union said. Due to the delay in the proposed reforms of the department the government will not be able to achieve the set revenue target, Secretary of the Union H.A.L. Udayasiri said.

The Government has set a 15% of GDP or Rs.203 billion revenue target for the IRD this year against the actual Rs. 156 billion revenue last year.

At a meeting at the Finance Ministry last month, it was decided to increase the number of top level officers and middle level tax assessors of the department. Accordingly, it was proposed to appoint five Deputy Commissioner-Generals, increase the number of Commissioners to 22, increase the number of Deputy Commissioners from 42 to 85, increase the number of Tax Assessors to 750 and Tax Officers to 1,000. However, the implementation of this proposal has been delayed because certain sections of assessors are plotting on the sly.

This is not the first time these officers sabotaged the reforms of the department for their personal gains. All attempts made by the governments in 1985, 1990 and in 1994 to reform the department were sabotaged by these Assessors.

Today some Assessors are reluctant to get even promotions because they feel they will lose their bribes. These few officers are earning millions of rupees in bribes and the government is losing billions of rupees in revenue.

The shortage of tax collecting officers is the main reason for lower tax revenue. There are only 931 officers in the Inland Revenue Department. Tax Assessors have all administrative powers in tax collection.

Tax Officers recruited with the same academic qualifications perform clerical work. Today there are only 351 Tax Assessors in the department and the number has remained unchanged since the 1970s and this tax mafia does not allow to increase the Assessors cadre.

Today the department audits only 4% of tax files due to the shortage of assessors. Under the present set up one assessor will have to audit over 2,000 files per year. This cannot be done and the maximum number of files that an assessor can audit is less than 100.

The government loses billions of rupees in tax revenue annually due to the internal inefficiency and bureaucracy of the department.

The Department is unable to expand its tax net and only 200,000 people are paying personal income tax. There should be over one million personal tax payers.

Only 25,000 have registered for VAT, but the number should be around 50,000. Some of them are collecting VAT but this does not reach the IRD. Due to the absence of proper tax auditing these VAT collectors hold much money fraudulently as VAT on inputs.

The Department is inefficient in every respect. It has no direct link with any important government institution. The IRD has no direct IT link with the Customs Department, Department of Company Registration, RMV, BOI or 13 regional branches of the department.

Modern IT and communication technology is not used in the department's work. The obsolete computer system is not functioning properly. Part of the work is computerised while a part is done manually. The delay in computerisation is also an act of sabotage of this mafia because this complex situation is ideal for corruption. The Department does not have a proper methodology to audit VAT, Withholding Tax and Debit Tax.

If all these tax files are audited 95% additional revenue can be earned. The Union officials said that they will take strong union action if the government fails to go ahead with the proposed reforms of the IRD.

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