Is the IMF deciding Sri Lanka’s tax policy – Ajith Galhena

 

The country has several tax collecting institutions – Inland Revenue, Excise And Customs Departments. The IRD collects around 32 per cent of the total income tax. These institutions are being administered as per provisions in the act of 2006/10.

 

This act has considerable shortcomings, the biggest being on tax exemptions. If those exemptions are removed, the IRD will be able to achieve its targeted income. The IRD employees union has told the government to rectify it by making certain amendments to the act.

Taxpayers or institutions getting directly involved in taxes or any other party has not asked for a new IRD act. It is only a proposal by former finance minister Ravi Karunanayake. His successor Mangala Samaraweera too, supports it, said secretary of the union Ajith Galhena to Lanka News Web.

To introduce this act, the government has obtained loans from the IMF, which lays down certain conditions when granting comprehensive credit. On July 19, it provided the 167.2 million US dollar third installment of that loan. One condition was that a new IRD act was required. A newspaper announcement by the Central Bank on 18 July 2017 says the IMF is happy that the new act is already before parliament.

Galhena said it is clear to them that this process is being brought not to the wants of tax professionals or the department officials, but as the fulfillment of a condition to obtain a loan. We see this as an act forced on the IRD, he said.

Harm from the new act

The existing act distributes powers under two methods to the assistant commissioner, deputy commissioner general and the commissioner general. The first is the act empowers the officials to use power on specific occasions. The other is that the commissioner general can transfer his/her powers to the subordinates.

 A new computer software system was introduced for the IRD through a Singaporean company, for which Rs. five billion has so far been spent. Also, a human resources and programme administration project is also being implemented.

Galhena said both these have contributed to an increase in revenue. However, the new act will suspend these projects and the money already spent will go waste. Maximum results can be reaped if these projects continue in the next two years too, he said.

Galhena said the president admitted a small problem here and promised orally on two occasions to meet and discuss the matter. But, that has not materialized. The prime minister is yet to respond to a request for a meeting.

In the meantime, he said, three cases have been filed in the Supreme Court. Those cases continued to be heard until the 25th. At courts, we saw certain concessionary aspects. The chief justice ordered on the 24th to refer the draft to the speaker. We expect relief from courts. It is more likely parliament will adopt this. But, we will not abandon our struggle. We will go forward with professionals and all others who will be affected by this, he added.

When we telephoned Karunanayake for a comment, he cut the line saying, “I have done saying what has to be said. I cannot say anything.”

Attempts to reach Samaraweera and his media secretary Asitha were unsuccessful.

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