In today’s world, technology is a part of nearly every aspect of our lives. From banking and shopping to staying connected with friends and family, we rely on digital platforms to make our lives easier.
However, it is surprising to see that many individual taxpayers in Sri Lanka are still unwilling to use digital solutions such as e-tax filing even though it offers a faster, easier, and more efficient way to submit their tax returns. So, when it comes to filing taxes, why is it that many individual taxpayers prefer to stick with old-fashioned paper forms, even though the country has invested heavily in building the necessary digital infrastructure?
Our recent study has explored this crucial question and found that the problem is not just about having access to technology or awareness about it. Instead, it is a complex mix of factors within the minds of taxpayers. These include how comfortable they feel using new technology, worries about data confidentiality and security, confidence in using the system, and how ready they are to embrace change. Understanding these psychological factors is essential for the government and tax authorities to effectively encourage more taxpayers to transition to e-tax filing.
The e-tax filing landscape in Sri Lanka
In 2014, the Sri Lankan government launched the Revenue Administration and Management Information System (RAMIS), a digital platform, with the aim of simplifying tax administration and boosting compliance. This system was intended to make tax filing more convenient by moving away from paper forms, reduce administrative costs, and encourage timely tax return submissions by reducing its preparation and submission time. Despite these benefits, however, the adoption of e-tax filing has been slow.
According to the Annual Performance Report for the year 2022 published by the Inland Revenue Department, for the 2021/2022 tax year, only 38% of individual taxpayers were complied with the tax return submission up to one month from the due date. It is the same as before RAMIS was introduced.
Accordingly, even though the system is available and potentially beneficial, many individual taxpayers are still not convinced to use it. This lack of improvement in timely return-submission suggests that there are deeper issues at play, discouraging taxpayers from using the system.
About the study
In our study, we aimed to reveal the reasons behind this reluctance of individual taxpayers to use e-tax filing system. To do this, we conducted a survey using a structured questionnaire, targeting a diverse sample of 390 taxpayers. This sample included individual taxpayers employed in both the public and private sectors as well as self-employed taxpayers, ranging in age from under 25 to over 55 years, and representing various educational backgrounds.
Key Findings: What is holding taxpayers back?
The study revealed the following key factors that are preventing individual taxpayers from embracing e-tax filing.
Perceived difficulty: Although many taxpayers recognize that e-tax filing could save them time and reduce errors, they often find the system difficult to navigate. This perception of complexity is compounded by the system’s tendency to become unresponsive as deadlines approach, discouraging them from even attempting to use it. The resulting inability to submit their returns on time increases their reluctance to adopt e-tax filing, as they fear the risk of penalties and increased stress.
Readiness for change: Adopting a new system such as e-tax filing requires more than just having access to the internet and a computer. It also requires a mental readiness to change old habits and try something new. The study found that taxpayers are more likely to feel ready to use e-tax filing if they believe it will be useful and easy to use. Without this sense of readiness, they are likely to stick with what they know, even if it is less efficient.
Fear of risks: Many taxpayers worry about the security of their personal and financial information, the possibility of system failures, or making mistakes because they are not familiar with the technology. These fears can outweigh the perceived benefits of the system, leading taxpayers to avoid it altogether.
Confidence in ability: Confidence plays a crucial role in whether people are willing to try something new. If taxpayers feel confident in their ability to use e-tax filing, they are more likely to use it. However, if they doubt their skills or fear they might make mistakes, they are likely to avoid the system. This lack of confidence can be a major obstacle to adoption
Moving Forward: Recommendation
To encourage more taxpayers to adopt e-tax filing, the study suggests several strategies that the authorities should prioritize:
Improving technical readiness: Offering free training programs, clear guides, and a more user-friendly interface can help taxpayers feel more comfortable with the system. It is also essential to ensure that reliable technical support is available. Though some of these measures are already in place, further improvements are needed to make them more effective and encourage widespread use of e-tax filing.
Enhancing psychological readiness: There should also be a focus on mentally and emotionally preparing taxpayers to embrace e-tax filing. This could involve educational campaigns that promote a positive attitude towards the system, build confidence and reduce fear or anxiety related to using technology, and encourage a mindset that is open to change. By making taxpayers feel more comfortable with the idea of e-tax filing, they are more likely to adopt it.
Addressing security concerns: To build trust, the security measures in place to protect taxpayers’ data should be clearly communicated. Transparency about how data is handled can help reduce the perceived risks and make taxpayers more comfortable with using the system.
Boosting confidence: In addition to training sessions and video tutorials, providing personalized support through helplines or live chat options can assure taxpayers that help is available if they encounter difficulties. This support can significantly increase their confidence in using the system.
Promoting a culture of innovation: Encouraging a culture that values innovation can help more people embrace digital solutions such as e-tax filing. Recognizing and rewarding early adopters or offering incentives for those who switch to the e-tax system could motivate more taxpayers to make the transitionAccordingly, encouraging more taxpayers to transition to e-tax filing not only benefits individual taxpayers by making the filing process smoother but also advances Sri Lanka’s progress as a digitally savvy nation. Embracing e-tax filing is a step toward a more efficient, transparent, and modern tax system in Sri Lanka
Dr. K.V. Aruna Shantha
Senior Lecturer
Department of Accounting and Finance
Faculty of Management Studies
The Open University of Sri Lan
W.T.D. Weerasinghe
Lecturer
Department of Accounting and Finance
Faculty of Management Studies
The Open University of Sri Lanka
