April 07, 2009 (LBO) – Sri Lanka’s cash-strapped government has been unable to offer relief to the private sector over lengthy delays in getting value-added tax (VAT) refunds. Private sector officials said companies were facing cash-flow problems owing to the delays in VAT refunds on the part of the Inland Revenue Department.
Tax department officials said they were unable to pay as cash-strapped government departments, which act as VAT withholding agents, themselves delayed payments.
Exporters and manufacturers complained of persistent delays in getting tax refunds at a meeting between government officials and the corporate sector arranged by the Ceylon Chamber of Commerce.
“It’s a ‘lose-lose’ situation,” said tax expert and chamber member N R Gajendran. “Nobody gains.”
The government was not getting its due revenue while the private sector was denied refunds on time, he said.
He said the tax department can take action under the law against withholding agents which were not performing their functions.
Gajendran suggested the Inland Revenue Department give credit to companies and pursue government departments to recover the revenue.