Sri Lanka needs a tax intelligence unit to adapt to economy: Treasury Secy

tax

Nov 04, 2015 (LBO) – Sri Lanka needs to establish a tax intelligence unit to identify economic changes and developments taking place and adapt these changes into the tax structure of the country, Treasury Secretary R H S Samaratunga told a forum.

“What lacks in Sri Lanka’s tax system is recognizing economic changes that take place from time to time,” Samaratunga said.

“We have such an old tax system and it’s more than 40 years. We have been in an open economy, so we need to question whether our systems have adapted to those economic changes that took place in our country,” he said.

“So it is time to identify those changes and for that we need to establish a tax intelligence unit in the Inland Revenue Department.”

He says most of the developed countries have tax intelligence units apart from the tax collection department to study the global economic changes, country’s fiscal and monetary changes and earning capacities of people.

Economists say Sri Lanka’s tax system is fairly regressive and most of the taxes are derived from indirect taxation where poor can be taxed more than the rich.

According to data, Island’s tax generates only 10.8 percent of GDP to finance government’s expenses.

Samaratunga said Sri Lanka’s tax structure is no match with the new administration economic goals. Therefore it is a must to change and modernize organizational structure in the Inland Revenue Department to cater to government’s needs.

“Sri Lanka no more has an agricultural based economy. It represent only 10 percent of GDP.”

“Now we are heading towards a service based economy with a lot of trade deals take place with developing and developed countries,”

“So these changes have to be adopted to the tax system,”

“Without changing the structure and adopting these economic changes, the revenue would not be compatible for government’s needs.”