August 27, Colombo (LNW): The Inland Revenue Department (IRD) has clarified that as of 31 December 2023, tax arrears totalled 1,066 billion rupees.
However, due to ongoing taxpayer appeals amounting to 878 billion rupees, only 188 billion rupees can be actively pursued.
The department emphasised that, while some claim disputed taxes could be swiftly recovered, it remains committed to legally mandated procedures.
Between January and June 2024, 47 billion rupees were recovered through methods like asset seizures and legal actions.
Additionally, 57 billion rupees were settled through refunds and appeals.
The IRD highlighted its 2024 target of reducing tax arrears by 104 billion rupees, while stressing that fully eliminating arrears is unrealistic given continuous assessments and legal complexities.
Full Statement:
This announcement is issued to provide accurate information to the public about the outstanding tax amount at the Inland Revenue Department as of December 31, 2023
Under the Inland Revenue Department’s self-assessment system, taxpayers are responsible for submitting their Tax Returns and paying the corresponding taxes. If a taxpayer fails to pay the tax amount indicated on the Return, it is considered as tax arrears.
Additionally, the department may issue additional or estimated assessments if the submitted reports are not accepted or if the taxpayer neglects to file a Return. If a taxpayer disagrees with an assessment issued by the department, they may file an appeal within one month.
If the appeal cannot be resolved internally, the taxpayer has the option to refer the matter to the Tax Appeals Commission. If no agreement is reached at the Commission, the case can be further escalated to the Court of Appeal, and ultimately to the Supreme Court.
During the tax appeal process, the Inland Revenue Department cannot take collection action until the appeal is finalized and a decision is rendered by the relevant institution (Tax Appeals Commission, Court of Appeal, or Supreme Court). Collection efforts will be based on the outcome of the final ruling.
As of December 31, 2023, balance of 1,066 billion rupees has reported as taxes in default as per the assessments made by the Inland Revenue Department. However, due to pending tax appeals from taxpayers, a portion of this amount, totaling 878 billion rupees, is currently held over. Consequently, it is inaccurate to assume that the entire 1,066 billion rupees can be collected in full by the department. The actual amount of tax the department could reasonably expect to collect on December 31, 2023, was 188 billion rupees.
From January 1st to June 30th, 2024, the department collected 47 billion rupees in tax arrears from the outstanding balance as of December 31, 2023. This was achieved through various methods, including seizing bank accounts of 900 taxpayers, offering installment payment plans, and taking other legal actions. Additionally, another 57 billion rupees were recovered or reduced due to settled refunds and objections. Therefore, the total reduction in tax arrears for the year 2024 was 104 billion rupees.
It’s important to note that completely eliminating tax arrears through the department’s collection processes is practically impossible. This is primarily due to the ongoing issuance of new assessments, which can contribute to increasing the arrears balance.
Therefore, achieving a zero tax arrears balance is not a realistic goal for any tax administration. The department’s primary role should be to maintain efficient tax arrears collection processes within the existing legal framework. This commitment is demonstrated by the department’s efforts to reduce tax arrears by 104 billion rupees in the year 2024.
Arrears Tax Collection Performance for 2024
| Description | Amount (Billion Rupees) |
| Outstanding taxes as per the IRD assessments as at 31 .12.2023 | 1,066 |
| Held over Tax (Appeals Pending) | (878) |
| Arrears Collectible (as of December 31, 2023) | 188 |
| Amount Collected (January 1 -June 30, 2024) | (104) |
| Arrears Collectible as of June 30, 2024 | 84 |
Accordingly, out of the Rs. 188 billion as on 31.12.2023, Rs. 84 billion have to be collected.
IRD has taken all steps feasible within the country’s legal framework to recover disputed taxes. Any claims that the disputed taxes undergoing the due legal process can be recovered instantly insinuates that measures outside the legal framework are to be adopted. A responsible government institution cannot associate itself with such measures, and accordingly, due legal process will always be followed by the IRD.
Chairman
Media Committee
inland Revenue Department
