Sri Lanka urgently needs a special unit with authority to advise the government on tax systems, said Principal of the Tax & Regulatory Division of KPMG in Sri Lanka, Suresh Perera.
Tax consultant Suresh Perera was speaking at an Advocate Institute hosted event in Colombo on Wednesday.
“Currently Finance Ministers impose taxes without studying the ground situation and this is detrimental to the country. For several decades taxes have been implemented on a trial and error basis,” he said.
The golden rule in tax is that they should be imposed to discourage some sectors and encourage others. For example, in most countries high taxes are levied on alcohol, cigarettes while less taxes are imposed on SMEs, exporters, agriculture, tourism and similar sectors. “But in Sri Lanka this does not happen and in most cases all are taxed at the same rate.”
“Another area is to implement the Robin Hood system where more taxes are taken from the people who have more. But this too does not happen,” Perera said.
In 2019 sweeping tax reduction was done without any survey and if a powerful advisory unit was in place it would have advised and shown the politicians of the adverse effects of reducing taxes.
“Recently the IMF too identified this issue and I think a powerful tax policy unit will be introduced soon which will spell out short or long term policies,” he said.
Sri Lanka had also offered so many tax amnesties. Due to this many people also knew that this was coming and avoided paying taxes until the amnesty was offered.
The Inland Revenue Department is also understaffed as their cadre is around 2,800. This is a somewhat strange scenario as most of the other public institutions are over staffed. They should also be given new technology to collect taxes. “Hence their cadre should be increased and they should be given a bigger salary so that they won’t be tempted to engage in corruption.
“We know that most of the officers are paid less than 100,000 and due to this most youth don’t like to go there,” Perera said.
He said that Sri Lanka also needs a Tax Ombudsman where people could appeal against what they think are unfair taxes.
