The Inland Revenue Department (IRD) has suggested to the Finance Ministry to vest the responsibility of Telecommunication levy collection in the department replacing the present collector Telecommunication Regulatory Commission.

This proposal has been made as a solution to the present tax revenue loss of Rs. 600 million per annum due to removal of several taxes in 2019, a senior official of the IRD said. 

 The Board of Executive Directors of the IMF also suggested in their assessment report on Sri Lanka economy has suggested to increased taxation, including income tax and value added tax (VAT) and “revenue administration reform.  

 Implying that an economic implosion is imminent, the IMF Executive Board proposed a detailed list of austerity measures including:

 Restoring macroeconomic stability and debt sustainability, with “expenditure rationalisation, budget formulation and execution, and the fiscal rule” and the removal of state subsidies with meagre subsidies limited only to the “poorest of the poor.”

In the wake of IRD demand, the Finance Ministry is contemplating bringing an amendment to the Telecommunication Levy Act to change its present administration and revenue collection process.

The aim is to replace the present administrator and the collector of the levy Telecommunication Regulatory Commission (TRC) to introduce a uniform levy structure under the purview of Inland Revenue Department (IRD) while strengthening its functions, a senior official of the ministry said.

The levy imposed under Telecommunication Levy Act, No. 21 of 2011 shall be charged and levied from every person receiving any telecommunication service. This levy was reduced to 11.25 per cent in 2019 from the previous levy of 15 per cent.

The IRD has already made their representations in writing to the Treasury to hand over this levy collection to the department which will directly boost the consolidated fund, H .A.L. Udayasiri, Secretary of the Inland Revenue Service Union said.

Therefore instead of introducing a new tax like Special GST which was turned down by the Supreme Court, making use of systems that are already in place and amending the relevant act would be a more practical solution to the present revenue reduction, he said.

Further, the IRD has brought to the notice of the Treasury relating to several accounting deficiencies and irregularities of the TRC detected by the Auditor General’s Department in the administration of this levy, he disclosed.

One such deficiency is the certain omissions of the levy received directly into the TRC bank account and International Outgoing Call Levy receivable amount for the particular years under review.

Thus the income for the particular years had been understated in the balance sheet, the audit report revealed, adding that there were irregularities in transferring monies to the consolidated fund in some of the financial years.

Given the serious state of revenue collection in the country, the Ministry should focus on tackling issues in the existing tax system to ensure revenue is maximized, the report revealed.