Revenue collection challenges for IRD as targets lag in 2H of 2023

Saturday, 18 November 2023 00:47 - - {{hitsCtrl.values.hits}}

Says 82% or Rs. 740 b from projected revenue of Rs. 980 b collected during first 10 months
Claims corporate tax inflow slowed from August with Central Bank’s interest rate policy
Explores mechanisms to address collectable defaults

By Charumini de Silva

The Inland Revenue Department (IRD) Acting Commissioner General Upul Jayawardhana highlighted the challenges faced in tax collection, citing a noticeable drop in the second half compared to the monthly forecast.

“As of 30 October, the expected revenue for income tax in 2023 is Rs. 908 billion, with Rs. 740 billion, or 82%, already collected. However, we have seen a slowdown since August,” he said at the CA Sri Lanka post-Budget forum on Tuesday.

Noting that financial institutions are identified as the primary contributors to corporate taxes, he said they have noticed a significant impact on Government revenue following the Central Bank’s interest rate policy directive in August.

The IRD has set ambitious targets of Rs. 603 billion for corporate taxes and Rs. 305 billion for non-corporate taxes. “By October, 77% of the corporate taxes target amounting to Rs. 461 billion has been achieved, while non-corporate taxes have seen 91% collection totalling Rs. 279 billion,” Jayawardhana said.

Despite the challenges, the IRD Acting Commissioner General remains optimistic, citing strategies in place to address the revenue shortfall.

He explained the importance of implementing measures such as addressing collectable defaults, stating: «These outstanding amounts are big.»

The 2024 Budget plans to increase tax revenue to Rs. 4 trillion up from Rs. 3 trillion in 2023. Of the expected revenue in 2024, Rs. 3.8 trillion is expected from taxes, while over Rs. 1 trillion is expected from taxes on income and profit.