IRD targets 500,000 taxpayers by 2008

by Gamini Warushamana

Tax experts have warned that the new system introduced by the Inland Revenue Department (IRD) giving all responsibilities of income tax, VAT, tax assessment and tax collection to one officer would breed corruption and malpractices in the system.

With the new system introduced under the restructuring of the IRD, all these powers are vested on Deputy Commissioners and these officers can have private deals with the taxpayers, said tax consultant N. R. Gajendran addressing a seminar organised by the International Fiscal Association (Sri Lanka Branch). He said that tax assessments carried out earlier by the assessors too have been taken away from them and given to deputy commissioners.

The Commissioner General of Inland Revenue A. A. Wijepala, however, denied the allegation and added that under the new system these duties will be handled by a group of three officers and not the deputy commissioners. Gajendran said that the power vested on one officer and building personal relationships over a period of time would lead to malpractices. It also runs contrary to checks and balances through division of work, he said.

The restructuring process of the IRD is now under way with the aim of widening the tax base to 500,000 taxpayers by the end of 2008 from 138,000 at present. After restructuring, the IRD would double the staff.

Pointing out the narrow tax base in the country, Wijepala said that Malaysia with a population of over 20 million and approximately equal to Sri Lanka has three million taxpayers. The tax base should be increased to one million and the three-year target is 500,000.

All countries in the region have reformed their tax administration and after the reforms they exceeded the targets. We follow these Asian systems especially the Malaysian and Thailand systems. The ADB provides only technical and financial assistance and the IRD is implementing its own plan in this restructuring.

Restructuring started with the modernisation of the computer system, training staff and enhancing taxpayer services. Accordingly, the existing Wide Area Network (WAN) of the IRD is being modernised and the Customs Department, Excise Department and the Department of the Registration of Motor Vehicles will be connected to the IRD. The e-filing system will also be launched and this would benefit big taxpayers, Wijepala said.

Under the staff training program the, IRD has organised exposure training programs in India and already 600 officers have been sent for training. In addition, a specific training program has been arranged for computer auditing in the Netherlands. The IRD has opened a service centre on the ground floor of its headquarters in Colombo to improve its services to taxpayers. Wijepala said that this is a one stop shop for the taxpayers.

The IRD will recruit 1,200 new officers to its cadre and there are 1,000 graduates among them. They will join the department by August this year. Two new offices have been opened in Maharagama and Matale.