Rules-based tax system to strengthen anti-corruption efforts

The government is now in the process of devising a rules-based tax system based on principles making it simple fair and efficient with the inclusion of safeguards in all major tax laws to strengthen anti-corruption efforts.

The aim is to amend all tax statutes and modernise such regulations by introducing new provisions reflecting international good practice to better ensure the effective and efficient operation of the tax administration, State Minister of Finance Ranjith Siyambalapitiya said.

The amendment of laws is more robust against corruption vulnerabilities, as new provisions are evaluated from various stakeholders, he said.

The Tax Administration Act which will be enacted soon applies to all taxes and that contains provisions that effectively deter corruption by imposing stricter penalties (including criminal charges) on taxpayers as well as on tax officials for allegedly taking bribes or aiding tax avoidance, he said.

Complex tax systems have resulted in alleged bribe seeking by some tax officials for aiding and abetting tax dodgers and open room for the abuse of power during successive government, she pointed out.

These systems were unpredictable, not transparent, and short-lived policy interventions that selectively increase or decrease the tax burden on taxpayers, erode tax certainty, and drag on investor confidence, irrespective of the underlying intent.

Moreover revising taxes constantly undermine the trust of taxpayers, reduces predictability of the tax system with detrimental effects on long-term investment, distorts decisions, and complicates administration, he added.

Only a few taxes apply uniformly to all taxpayers, and where the rules of the tax system are simple and widely understood, and therefore opportunities for corrupt officials to gain personal benefit by misleading tax payers are more limited, he opined.