Sri Lanka finance ministry, auditor-general in row over revenue losses

June 06, 2007 (LBO) – Sri Lanka’s Finance Ministry has disputed a report by the auditor-general that weak collections led to a revenue loss of 360 billion rupees. The loss, it said in its annual report for 2006, was not more than 6.2 billion rupees of which half related to the VAT refund fraud which occurred during 2002-04.

It also rejected the auditor-general’s assessment of 22 billion rupees in tax arrears, saying that the figure needs to be ‘revisited’.

The finance ministry report, released Monday, says the auditor-general’s special study on weakness in the revenue administration contained unrealistic assessments and was guilty of a “misreading of numerical values.”

The auditor-general’s report said the revenue losses had occurred due to weaknesses in the tax administration, negligence on the part of revenue agencies and lack of supervision by the Ministry of Finance and Planning.

The auditor-general also said there were discrepancies between tax returns and the custom and income statements, inefficiencies associated with recovery of arrears, that tax refunds had been made without a verification process and that there was tax avoidance throu