Eran takes tax amnesty bill to Supreme Court

• Declares several clauses in bill as inconsistent with Constitution
• Action comes after bill was presented to House on Tuesday
• Says bill encourages further tax evasion and will not secure a net benefit to the State
• Would be discriminatory of taxpayers/citizens who have already paid relevant taxes
• Some clauses in bill are arbitrary, irrational, grossly unreasonable, contrary to rule of law, Public Trust Doctrine and sovereignty of the people

Main Opposition Samagi Jana Balawegaya (SJB) Parliamentarian Eran Wickramaratne yesterday filed a petition in the Supreme Court challenging the constitutionality of the Finance bill which seeks to authorise tax amnesties and write-offs default taxes.

Wickramaratne, a former State Minister of Finance, in his Petition stated that several provisions in the bill are inconsistent with the Constitution and would require to be passed with a special majority in Parliament as well as get the approval of the people at a referendum to become law.

The Finance Bill was presented to the House on Tuesday by Leader of the House Dinesh Gunawardena. It can be challenged in the Supreme Court within seven days after its tabling in the House.

The Petitioner stated that the grant of the tax amnesty would legitimise fraud on the revenue perpetrated by those to whom the amnesty is granted and would be discriminatory of taxpayers/citizens who have already made payment of the relevant taxes.

The Petitioner also stated that some clauses in the bill are arbitrary, irrational, and grossly unreasonable, contrary to the rule of law, the Public Trust Doctrine and the sovereignty of the people and will encourage further tax evasion and will not secure a net benefit to the State.

It also states that the sum to be collected as a ‘Tax on Voluntary Disclosure’ of 1% of the sum disclosed is far lower than the tax liability of the persons who have already paid tax in terms of applicable existing law.

The bill applies to any person who has not disclosed any amount of taxable supply, income, or assets, which were required to be disclosed under the provisions of any law in a value-added tax return for any taxable period ended on or prior to 31 March 2020, or in a return of income for any year of assessment ended on or prior to 31 March 2020.

It also makes provision for a person who intends to invest an amount equivalent to the undisclosed taxable supply, income, or assets, immediately, to invest such amount in the purchase of shares issued by a resident company; Treasury bills or Treasury bonds issued by the Central Bank on behalf of the Government; any quoted debt securities issued by a resident company in the country; or any movable or immovable property.

If a person to whom the law applies intends to disclose any undisclosed taxable supply, income, or assets, other than immovable or movable property, he is liable to pay the Tax on Voluntary Disclosure at the rate of 1% of such amount or income, or on the cost of such asset, invested or deposited, or any immovable or movable property.

The bill also states the Commissioner-General shall write off any penalty or interest, calculated in terms of the provisions of any law specified in relation to a taxpayer, in respect of which the payment due date was 31 December 2020, or a date prior to that date, if the taxpayer settles the full amount of the tax outstanding, under the provisions of said laws, on or prior to 31 March 2022.

The Petitioner has sought relief from the Supreme Court to declare several clauses in the bill as inconsistent with the Constitution.