CoPF questions tax coverage, revenue collection gaps

Monday, 24 March 2025 04:21 - - {{hitsCtrl.values.hits}}

Highlights taxpayer disparity, with only 800,000 taxpayers existing despite 8 m workforce
Identifies discrepancies in existing PAYE tax data, with potential reporting flaws
Orders IRD officials to properly implement and report on TIN amid system failure
Criticises lack of regulatory framework for casinos despite plans to increase income tax on betting and gaming to 45%, with no accurate revenue data for five years
Raises concerns over 25% deposit rule for filing tax appeal
Deputy Finance Minister Dr. Harshana Suriyapperuma claims individuals misuse appeals process to evade tax
CoPF calls for detailed analysis of appeal cases to make informed decision

The Committee on Public Finance (CoPF) last week raised serious concerns over the country’s tax system, questioning the disparity of taxpayers against the total workforce.

During the session chaired by MP Dr. Harsha de Silva on 18 March, it was revealed that only 800,000 individuals fall under the tax net when the workforce is estimated to be around 8 million.

Officials from the Finance Ministry, along with Deputy Minister Dr. Harshana Suriyapperuma, explained that the existing system only captures individuals who meet the tax threshold, resulting in a significantly lower number of taxpayers.

The Committee convened to discuss the Inland Revenue (Amendment) Bill, sought to revise the Inland Revenue Act, No. 24 of 2017. One key proposal in the Bill is to increase the Personal Income Tax (PIT) relief from Rs. 1.2 million per annum to Rs. 1.8 million per annum. Additionally, the Bill proposes a tax hike on the betting and gaming, tobacco, and liquor industries from 40% to 45%, while the export of services would be subject to a 15% income tax. Furthermore, it includes an increase in the Withholding Tax (WHT) rate on interest from 5% to 10%.

During discussions, the Committee identified discrepancies in the existing PAYE tax data, suggesting potential flaws in the current reporting system.

Committee Chair Dr. de Silva directed officials to provide an accurate analysis of taxpayer data for further review.

Another major issue raised was the failure to implement the Taxpayer Identification Number (TIN) system, which is supposed to be mandatory for tax payments, imports, exports, and Inland Revenue services. The Committee instructed officials to ensure its proper implementation and report on the progress.

The Committee also criticised the Government’s lack of a proper regulatory framework for casinos despite plans to increase income tax on betting and gaming to 45%.

Dr. de Silva expressed dissatisfaction over the Inland Revenue Department’s (IRD) failure to provide accurate revenue data from casinos over the past five years.

Further scrutiny was directed at the requirement for taxpayers to deposit 25% of the disputed amount when filing a tax appeal.

Members of the CoPF also questioned whether it was ethical to demand a cash deposit instead of a bank guarantee.

Deputy Minister Dr. Suriyapperuma argued that some individuals misuse the appeals process to evade tax payments, justifying the proposed requirement.

However, the CoPF called for a detailed analysis of appeal cases to make a more informed decision.

The meeting was attended by MPs Ravi Karunanayake, Wijesiri Basnayake, and Nimal Palihena.

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