Sri Lanka to capture 500,000 out of one million “evaders” into tax net: official


Tuesday January 9, 2024 11:15 am

ECONOMYNEXT — Sri Lanka plans to bring 500,000 out of some 1 million “tax evaders” who have the capacity to pay income tax into the tax net in a bid to increase direct taxation to 40 percent, according to State Minister of Finance Ranjith Siyambalapitiya.

Speaking at a media briefing on Monday January 08, the state minister said the government intends to shift the balance in direct versus indirect tax, which currently stands at 30 and 40 percent respectively.

“This adjustment aligns with the conditions of developed countries and promotes social justice. In a population of one million capable taxpayers, only 500,000 individuals are currently fulfilling this obligation. Identifying tax evaders and bringing them into the tax net is crucial to reduce indirect taxes,” he said.

In developed nations, he said, being a taxpayer is acknowledged as a sign of a robust citizen actively contributing to the nation’s stability. Siyambalapitiya expressed his confidence that Sri Lankans will undergo a “positive shift in attitude, fostering development within the nation”.

The Tax Identification Number (TIN) number is also to be implemented from February 01, he said.

“At the end of 2019, the number of tax files stood at 1,705,233, which decreased to 437,547 by the end of 2022. However, with the new policies of our government, we have successfully increased the number of tax files to 1,002,029 by December 31, 2023. Nevertheless, there is a need for further increase in that figure,” he said.

By the end of 2023, state revenue which stood at 8 percent as a percentage of the Gross Domestic Product (GDP) has increased to 10 percent. The government aims to further elevate it to 12 percent by the end of 2024 and set a target of reaching 15 percent by the year 2025 to establish a country with a stable economy, the state minister said.

According to Siyambalapitiya, the government also anticipates that the recent value added tax (VAT) revision will contribute an additional 2.07 percent to the state revenue as a percentage of the general gross domestic product, amounting to 645 billion rupees. The Economic Research Division of the Central Bank has analysed that the increase in tax rates may lead to a 2.5 percent rise in inflation. However, with the reduction in the electricity bill, inflation can be brought back to 5 percent within two or three months, he said citing the central bank.

The state minister further said that preparations are underway to implement the TIN system starting from the February 01. Registration issues are currently being encountered, he said, primarily because this is a new experience for the people.

“Efforts are being made to address these challenges at the Divisional Secretariat level, with the intention of resolving them through an online system. Recognising a taxpayer as a strong citizen contributing to a country’s stability is a principle upheld in developed countries. It is imperative for the people to embrace this change in attitude for the overall development of the country. The success of this program relies on the contribution of each individual,” he said. (Colombo/Jan09/2024)

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