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Widening tax net to snare professionals

by Gamini Warushamana

The Inland Revenue Department (IRD) is planning to widen its tax base to apprehend the tax evaders, including professionals into the tax net.

IRD and Treasury officials pointed out that there are businessmen as well as professionals such as lawyers, doctors, engineers and tuition masters whose income is taxable but are evading payments.

"Most of their transactions are done in cash and therefore it is difficult to get exact information about their income," Commissioner General of IRD- K. Suseelar, said at the press conference held last week to announce the re-structuring programme of the IRD.

Government will re-structure the IRD to increase government tax revenue which has been declining considerably over the past few decades from 19% of GDP to 14%. The Government says it needs more revenue to meet its expenses.

The IRD has not been subjected to any reforms or modernisation in the past 30 years. Employees are appointed as per the cadre decided sometime in 1974 and still continues to use administrative and procedural practices adopted from that time.

Lack of technical training, utilization of modern technology as well as some policy decisions such as continuous tax concessions, long term tax holidays and the complexity of tax laws are contributing to the decline in tax revenue.

It is expected that income tax collection will be increased to 4 per cent and VAT to 70 percent of the GDP to raise revenue. Enhancing the productivity and professionalism of staff, use of modern technology, enhancing public confidence and improving voluntary compliance of tax payers are the objectives of the modernisation programme.

However, the government is not expecting to introduce new taxes or increase tax rates.

A Revenue Board has been appointed by the Cabinet to achieve the above objectives. Commissioner General of the IRD chairs the Board while the DG Customs, Commissioner General of Excise and Secretary to the Treasury are the other members. Two other members have to be appointed from experts in the services.

The Board is responsible and incharge of tax policy, inter-revenue departmental coordination and overall supervision of the IRD. A Steering committee has been appointed to implement the re-structuring programme consisting of ten members including senior management of the department and trade unions.

The Government has decided to scrap the revenue authority proposed by the previous government which has already wasted about Rs.50 million. Under the new policy of the government, IRD will be supreme in the government revenue-collection process. All trade unions of the department have agreed to the re-structuring programme and are participating actively. Officials say IRD itself can bear the cost of the project and therefore no foreign funds are required.

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