The Committee on Public Finance (CoPF) recently raised significant concerns regarding the country’s tax structure, highlighting the stark disparity between the number of taxpayers and the overall workforce.
During a session led by MP Dr. Harsha de Silva on March 18, officials disclosed that out of an estimated 8 million workers, only 800,000 individuals are currently within the tax net. Representatives from the Finance Ministry, alongside Deputy Minister Dr. Harshana Suriyapperuma, explained that this gap exists because only those meeting the tax threshold are required to contribute.
The discussion primarily revolved around proposed amendments to the Inland Revenue Act, No. 24 of 2017. The Inland Revenue (Amendment) Bill aims to increase the Personal Income Tax (PIT) relief from Rs. 1.2 million to Rs. 1.8 million per year. Additionally, it proposes raising taxes on betting, gaming, tobacco, and liquor industries from 40% to 45%, while introducing a 15% income tax on service exports. The Bill also seeks to double the Withholding Tax (WHT) on interest from 5% to 10%.
A key issue identified during the session was inconsistencies in the Pay-As-You-Earn (PAYE) tax data, which raised questions about the accuracy of the current tax reporting system. The Committee instructed officials to conduct a thorough review and provide an updated analysis of taxpayer statistics.
Another critical concern was the failure to fully implement the Taxpayer Identification Number (TIN) system, which is meant to be mandatory for tax payments and trade-related transactions. The CoPF emphasized the urgency of enforcing this requirement and requested a progress report on its implementation.
The Committee also criticized the lack of a proper regulatory framework for casinos, particularly given the proposed tax increase on betting and gaming. Dr. de Silva expressed dissatisfaction with the Inland Revenue Department (IRD) for failing to provide precise revenue data from casinos over the past five years.
Further scrutiny was directed at the policy requiring taxpayers to deposit 25% of disputed amounts when filing a tax appeal. CoPF members questioned the fairness of demanding a cash deposit rather than accepting a bank guarantee. Deputy Minister Dr. Suriyapperuma defended the policy, stating that some individuals misuse the appeal process to evade taxes. However, the Committee called for a comprehensive review of appeal cases before finalizing any decision.
Beyond tax policies, the CoPF also highlighted the broader issue of revenue mobilization and the need for a more inclusive taxation system. They urged the government to explore ways to bring more individuals and businesses into the tax net without disproportionately burdening compliant taxpayers.The meeting was attended by MPs Ravi Karunanayake, Wijesiri Basnayake, and Nimal Palihena.
