By: Staff Writer
April 27, Colombo (LNW): The Inland Revenue Department (IRD) is facing a critical challenge in broadening its taxpayer base, as it works toward an ambitious revenue target of Rs. 2,195 billion for the year 2025.
Despite having issued Taxpayer Identification Numbers (TINs) to nearly 10 million individuals, the IRD estimates that only around 1.7 to 1.8 million of these are adults aged 18 years and older.
This leaves a staggering gap of approximately 7 million eligible individuals who remain outside the formal tax system.
Addressing the media, Deputy Commissioner General B.K.S. Shantha admitted that significant gaps persist, even after the introduction of a law in May 2023 mandating all adults over 18 to register for a TIN.
“We have made commendable progress, but there is a long road ahead. Capturing these missing millions into the tax system is essential not just for legal compliance but also for ensuring long-term fiscal stability,” Shantha stressed.
The Government’s move to make TIN registration compulsory was aimed at linking it to a broad array of financial and legal activities—from banking transactions and credit card issuance to property and vehicle registrations.
To facilitate this, the IRD developed an online portal enabling easy TIN registration without the need for physical visits to their offices.
Despite these measures, the IRD continues to encounter hurdles, particularly with low-income earners. Although they are required to register for a TIN, many fall below the taxable income threshold and are often disengaged from the formal tax system.
Exemptions such as the withholding tax (WHT) concession on interest income further complicate the situation. Individuals earning under Rs. 1.8 million per year can claim exemption by submitting a self-declaration form to their banks.
In a bid to bolster revenue, the IRD recently increased the WHT rate from 5% to 10% on interest income. However, Shantha noted that nearly Rs. 60 billion in potential revenue is lost annually due to such concessions.
He highlighted that many eligible individuals either remain unaware of the declaration process or are reluctant to interact with the tax system, particularly those without an existing TIN.
To address this, the IRD has temporarily allowed banks to accept self-declaration forms even from individuals without TINs. The IRD will then process these forms, assign TINs, and inform the respective banks.
Shantha emphasized the seriousness of this initiative, warning that providing false information is a punishable offence under the IRD Act.
Expanding the tax base is critical for Sri Lanka’s economic recovery, especially as the country remains under IMF scrutiny and is still managing the repercussions of the 2022 financial crisis. With fiscal consolidation as a major policy goal, improving tax compliance and collection is not optional—it is vital.
The Deputy Commissioner General concluded by underlining the urgent need for collective participation. Whether individuals ultimately pay taxes or fall under exemptions, being formally registered in the system is essential. “We must build a strong culture of compliance if we are to meet our revenue targets and secure the nation’s financial future,” he said.
Clearly, broadening the taxpayer base and enhancing tax revenue collection are indispensable if Sri Lanka is to achieve its 2025 revenue target and ensure sustainable economic growth.
