IRD: Harassing the small entrepreneur

While the Government preaches about developing the small entrepreneur, the Inland Revenue Department ( IRD) is not totally geared to this and creates serious problems for the new entrepreneur.

The IRD now has a small and medium ( businesses) unit staffed by many Asst. Commissioners ( ACs) and Commissioners. But their sole task is to chase after entrepreneurs to pay VAT of 15 per cent on their sales. The threshold for this tax is Rs. 12 million a year or Rs. 3 million per quarter.

The IRD continues the registration in its computer system even in the case of businesses whose sales have dropped below the threshold. The business once registered for VAT is charged VAT even when the sales drop below the threshold.

The quarterly VAT returns require details of every invoice. This is a considerable work load and many cannot afford a computer and its operator. The IRD requires the seller to pay VAT even if the invoice is unpaid. Additional cash needed for this is another hurdle.

An avalanche of computer printed unsigned registered letters on non-compliance comes to the business. The ACs telephone the Chief Executive threatening to file action in courts.

Letters sent by the business seeking an explanation on non-compliance are ignored.

D. Seneviratne

Colombo