By: Staff Writer
April 28, Colombo (LNW): Sri Lanka’s Inland Revenue Department (IRD) is poised to integrate operations with the Excise and Customs Departments as a crucial first step toward creating a single, unified tax authority. This move aims to maintain one centralised digital system, streamlining tax records and ensuring seamless transaction tracking across sectors.
President Anura Kumara Dissanayake has instructed officials from both the Excise and Customs Departments to collaborate closely with the IRD, with a particular focus on regulating the alcohol and tobacco industries. The integration prioritises strengthening public health, enforcing compliance, and enhancing overall governance.
The government has emphasised that more effective regulation of alcohol and other legal intoxicants is essential to promote economic growth. Authorities plan to boost state revenue through tighter control of these industries, ensuring lawful revenue generation and strict adherence to regulations.
A major component of this strategy includes robust public awareness campaigns aimed at curbing illegal alcohol distribution, the spread of hazardous drugs, and the misuse of psychoactive substances. These efforts are designed to protect public health and ensure national safety by targeting the risks associated with unregulated alcohol consumption.
According to a senior Finance Ministry official, the initiative also involves setting up a strong, strategic management and decision-making framework for integrated operations. Discussions have already begun on developing a comprehensive human resource and technological advancement plan to strengthen the operational capacity of the Excise Department.
Currently, Sri Lanka Customs is responsible for collecting import duties, while the Excise Department manages taxes on alcohol, tobacco, and similar products. The Inland Revenue Department oversees corporate and personal income taxes. Although all three agencies theoretically aim to fund government operations, they function largely in isolation, creating loopholes that enable tax evasion and inefficiencies.
The siloed structure of these departments means that critical information is not shared between them. For instance, the IRD may not know the exact quantity of alcohol imported or sold by companies, while Customs has no mechanism to verify if importers accurately report their sales for income tax purposes. Such fragmentation opens doors for tax evaders to exploit gaps in the system.
Recognising these vulnerabilities, the government is determined to merge these departments into a single authority. Officials estimate that a successful merger could boost tax revenue collection by at least 65 percent — a critical necessity given Sri Lanka’s alarming budget deficit, which currently stands at Rs. 2.2 trillion.
Without coordination, the current system facilitates manipulation, where smugglers bypass excise duties and alcohol distributors pay excise taxes but underreport corporate earnings. These loopholes result in substantial losses for the government and undermine fair taxation.
The integration of the IRD, Customs, and Excise operations is therefore seen as an urgent reform to seal revenue leaks, strengthen compliance, and build a more sustainable fiscal foundation for Sri Lanka’s future.
