COPF Chairman emphasises need for fairness in taxes

The government has been advised to prioritise collecting taxes from tax evaders rather than increasing the burden on lawabiding citizens.

MP Harsha de Silva, Chairman of the Committee on Public Finance (COPF) shed light on the government's tax collection efforts, revealing significant shortfalls in expected revenue.

He emphasised the importance of revenue rationalisation while ensuring fairness in the tax system.

Dr. de Silva was speaking at a recent event which has brought to light key policy discussions essential for Sri Lanka's economic revitalisation and the pressing need for tax reform.

A vital issue raised during the event was the adoption of cost-based tariffs or costreflective pricing. He noted that this approach reduces government expenditure that would otherwise be used to support loss-making enterprises.

He cited an example of the recent need for Rs. 231.5 billion to cover payments to CPC for fuel, illustrating how mispricing can place a burden on taxpayers.

His comments have ignited a debate on the fairness of the current tax collection system and whether the government should prioritise collecting taxes from tax evaders rather than increasing the burden on law-abiding citizens.

According to the COPF Chairman, the government had expected to collect Rs. 718 billion from corporate and personal income taxes for the year 2023, but as of October 16, 2023, the actual collection had reached only Rs. 495 billion.

PAYE taxes, which were projected to yield Rs. 100 billion, had however exceeded expectations, bringing in Rs. 119 billion.

Therefore, he proposed to amend the current PAYE tax structure, as the government would go on to collect Rs.125 billion at the current compliance level and Rs. 175 billion at a 100 per cent compliance rate.

The Betting and Gaming levy, expected to generate Rs. 10 billion, only managed Rs. 5.6 billion. Similarly, Value Added Taxes (VAT) were projected to contribute Rs. 553 billion, but collections stand at Rs. 350 billion, with concerns raised about the upcoming VAT changes.

The Excise Department had aimed to collect Rs. 217 billion, inclusive of liquor tax, tobacco tax, sticker tax etc. However, the actual collection stands at just Rs. 124 billion, creating a substantial Rs. 92 billion shortfall.