IRD failed to support economy - IRD Commissioner | Daily News

IRD failed to support economy - IRD Commissioner

Need whistleblowers
IRD Commissioner D.R.S. Hapuarachchi receiving a token from tax consultants at CA Sri Lanka.
IRD Commissioner D.R.S. Hapuarachchi receiving a token from tax consultants at CA Sri Lanka.

The Inland Revenue Department (IRD) has accepted blame for its role in the failure of the economy. They accepted that even the lower rates of tax applicable under recent budgets had not been appropriately collected by the officials. They note that corruption extends from tax policy, to tax administration, and finally to taxpayers.

New IRD Commissioner D.R.S. Hapuarachchi admitted widespread corruption at the IRD. He said, “The taxpayer benefits, the tax consultant benefits, and maybe also the tax official. That’s the nature of the game.”

Hapuarachchi was speaking on 1 September at his felicitation organized by the Chartered Accountants of Sri Lanka at their premises. Hapuarachchi noted that the tax policy had been purposefully crafted for the benefit of certain industries over others. He said, “Numerous taxation exemptions, holidays, and concessions have been introduced to enhance ‘investments’ and ‘profitability’ (emphasis).” Given that tax administrators have little power to set tax rates Hapuarachchi focused his comments on his entity’s role in the system. Hapuarachchi noted that the collection by the tax administration was lacking.

He said, “Talking about the bitter truth there is an administrative gap that has contributed to this economic situation.”

He added, “Forgetting other things for a while the three players in the tax game are the taxpayer, tax official, and tax consultant who are responsible at the implementation level.”

He said, “We have failed.” Questioning the rationale for tax exemptions and disclosure figures he said, “Trustworthy research has not been carried out by Sri Lanka. Proper revenues could have been collected if the correct figures were disclosed.”

Hapuarachchi called for broad reform at the administrative level. He said, “Whistleblowers are of paramount importance to achieve tax compliance.”

Hapuarachchi criticized the current system of penalties imposed by Inland Revenue. He said with penalties all the players except the government benefit. Penalties are meagre proportionate to taxes evaded. Due to the discretionary nature of the system, the tax department is corrupted by way of graft. Tax consultants make large sums on creative interpretation of the tax code.

Hapuarachchi was disgusted by the state of the current profession. He categorized tax evasion as a white-collar crime. He claimed that tax evasion was a crime against the whole of society. Given the loss of tax revenue, there are real impacts on the broader population’s outcomes in terms of healthcare, schooling, and other essential services. In his opinion, he said, “In effect, it is worse than even murder.”

Hapuarachchi acknowledged that recent tax reform had been purposefully crafted to undermine the fiscal operations of the government. He said, “Co-ordinating between IRD and CA Sri Lanka which has been lasting for decades has not supported Sri Lanka in coming out of this situation.”

He said, “Unlike any other period, Sri Lanka is hit by the worst crisis with over a negative 8 per cent growth expected.” He added, “Raising potential government revenue depends on both our side (tax administrator and consultant).” DP



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