Sunday Times (Sri Lanka)

Massive tax evasion aggravates economic stress


At a time of unpreceden­ted economic stress, the Government is losing billions of rupees in revenue with the increase in tax evasion, t h e Pa rl i a m e n t a r y Committee on Public Accounts (COPA) has found.

Extension of tax holidays, tax exemption for investment in start– ups and concession­s given to agricultur­e and tourism sectors were aimed at providing a much needed boost to the economy during post COVID- 19 period, COPA reports revealed.

Although the government has made all efforts to make life much easier for tax payers and investors providing tax breaks and concession­s with the easing of compliance­s and procedures, tax evasion continues unabated.

The Inland Revenue Department ( IRD) has been deprived of around Rs. 144.5 billion in revenue last year owing to tax evasion, COPA disclosed.

Over 200 individual­s, finance companies, casinos and state institutio­ns were among the tax evaders, a member of COPA said adding that certain state institutio­ns were under liquidatio­n at present.

Under this set up tax evasion has been made a serious offence liable for imprisonme­nt and heavy fines extending the range of civil penalties for taxpayers who avoid paying taxes.

The Inland Revenue Act ( IRA) stipulated heavy punishment for those convicted of tax evasion, Finance Ministry sources revealed adding that the IRD has been directed to prosecute such offenders without delay. The IRD also announced recently that any informant providing informatio­n on tax evaders to the department will be offered a reward of 10 per cent of the additional surcharge and total fine recovered from the defaulter.

According to the new Act, a fine of Rs. 10 million and / or imprisonme­nt for up to two years, compared to the previous punishment of six months shall be imposed for tax evaders if found guilty of charges by a court of law, a senior Ministry official said.

Meanwhile tax concession­s and exemptions have been given to two Chinese companies involved in developmen­t activities at Colombo Po r t City and Hambantota port area under the Strategic Developmen­t Act.

Shangri- La Hotel has also secured several tax concession­s including the extension of corporate tax holiday, exemption on dividend income and exemption on income tax for 20 expatriate staff, among others under a new Bill tabled in Parliament recently.

Issuing two special gazette notificati­ons under the signature of Prime Minister and Finance Minister Mahinda Rajapaksa, two Chinese companies - Port City Colombo Pvt Ltd and Ceylon Tyre Manufactur­ing Company Pvt Ltd have been given these tax concession­s recently.

Port City Colombo has been granted a 15 year tax holiday for the constructi­on of five tower building at the Colombo Port City while Ceylon Tyre Manufactur­ing Company was given a 12 year tax holiday and exemption of Customs duty, VAT and PAL for the building and operating of a tyre factory at Hambatota Port Investment zone for export.

The government is now planning to build the country’s first special economic zone for services in Colombo Port City.

The Port City project “will have a significan­t impact on the national economy,” as it may generate 210,355 jobs, and add US$ 0.7 billion to the FDI, $ 11.8 billion to gross domestic product and $ 0.8 billion to government revenue every year, an official report revealed. (BS)

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