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New tax administration act to clear complications in tax recovery statutes

By: Staff Writer

June 11, Colombo (LNW): The government will enact new tax administration act soon in addition to existing statutes clearing complications in some sections of these acts in the recovery of tax dues and imposing penalties, finance ministry sources disclosed.

The new act has been devised in accordance with the International Monetary Fund’s governance assessment. Directives. 

The existing Inland Revenue Department (IRD) Act and the Default Taxes Special Provisions Act have stipulated conditions under which company officers, including directors, CEOs, and CFOs, can be personally held liable for the company’s tax defaults.

According to the section 149 of the Inland Revenue Act No. 24 of 2017 read with sections 164,165 and 166, managers of the entities liable to pay the taxes in default of the Company, W.A. Sepalika Chandrasekara, Commissioner General of Inland Revenue Department said.

In this section manager” of an entity includes a person purporting to act as a manager of the entity and, in the case of a company, includes a director, the chief executive officer, and the chief financial officer of the company, she confirmed.

This is not a new provision Ms Changrasekera noted adding that as per section 177A of the Inland Revenue Act No 10 of 2006 read with section 178 also had provision to recover the taxes in default from principal officers of the company.

Section 164, 165 and 166 of the Inland Revenue Act No. 24 of 2017, has explained the process of the recovery, he said.

However the new tax administration act  that applies to all taxes containing  provisions that effectively deter corruption by imposing stricter penalties (including criminal charges) on habitual tax dodgers  as well as on tax officials for taking bribes or aiding tax avoidance.

The recovery proceedings commenced under the old act regarding collection of taxes will continue as the new act had not come into force, a senior official of the finance ministry disclosed.

Instead, the Commissioner General of Inland Revenue may also recover such taxes in accordance with transitional provisions.

Sri Lankans convicted of tax evasion can be liable to a fine not exceeding Rs. 10 million or imprisonment for up to two years, or to both under the Inland Revenue Act  No. 24 of 2017.

The punishment is for those who wilfully evade or try to evade the assessment, payment or collection of tax or who wilfully and fraudulently claims a refund of tax to which they are not entitled.

In order to punish  defaulters, the Inland Revenue Chief  may place a legal claim against a taxpayer’s bank accounts by issuing a bank seizure notice, requesting the bank to remit money held in the taxpayer’s bank account to the Commissioner General (CGIR) of IRD, he  added.

The CGIR could commence court proceedings to recover amounts outstanding asa last resort.

Moreover the government is contemplating to confiscate property of habitual tax defaulters if they fail to pay accumulated tax dues running up to billions of rupees within three years, informed official sources disclosed.

 The government will enact a new tax administration act soon in addition to existing statutes clearing complications in some sections of these acts in the recovery of tax dues and imposing penalties, finance ministry sources disclosed.

The new act has been devised in accordance with the International Monetary Fund’s governance assessment. Directives. 

The existing Inland Revenue Department (IRD) Act and the Default Taxes Special Provisions Act have stipulated conditions under which company officers, including directors, CEOs, and CFOs, can be personally held liable for the company’s tax defaults.

According to the section 149 of the Inland Revenue Act No. 24 of 2017 read with sections 164,165 and 166, managers of the entities liable to pay the taxes in default of the Company, W.A. Sepalika Chandrasekara, Commissioner General of Inland Revenue Department said.

In this section manager” of an entity includes a person purporting to act as a manager of the entity and, in the case of a company, includes a director, the chief executive officer, and the chief financial officer of the company, she confirmed.

This is  not a new provision Ms Changrasekera noted adding that as per section 177A of the Inland Revenue Act No 10 of 2006 read with section 178 also had provision to recover the taxes in default from principal officers of the company.

Section 164, 165 and 166 of the Inland Revenue Act No. 24 of 2017, has explained the process of the recovery, he said.

 However the new tax administration act  that applies to all taxes containing  provisions that effectively deter corruption by imposing stricter penalties (including criminal charges) on habitual tax dodgers  as well as on tax officials for taking bribes or aiding tax avoidance.

The recovery proceedings commenced under the old act regarding collection of taxes will continue as the new act had not come into force, a senior official of the finance ministry disclosed.

Instead, the Commissioner General of Inland Revenue may also recover such taxes in accordance with transitional provisions.

Sri Lankans convicted of tax evasion can be liable to a fine not exceeding Rs. 10 million or imprisonment for up to two years, or to both under the Inland Revenue Act  No. 24 of 2017.

The punishment is for those who wilfully evade or try to evade the assessment, payment or collection of tax or who wilfully and fraudulently claims a refund of tax to which they are not entitled.

In order to punish  defaulters, the Inland Revenue Chief  may place a legal claim against a taxpayer’s bank accounts by issuing a bank seizure notice, requesting the bank to remit money held in the taxpayer’s bank account to the Commissioner General (CGIR) of IRD, he added.

The CGIR could commence court proceedings to recover amounts outstanding asa last resort.

Moreover the government is contemplating to confiscate property of habitual tax defaulters if they fail to pay accumulated tax dues running up to billions of rupees within three years, informed official sources disclosed.

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