Tax reforms mandatory as only 0.13% of population have tax files

Sri Lanka’s tax system is in need of drastic reforms if the country is to proceed along the path of ‘sustainable’ development, as it has come to light that only 0.13 percent of the population has tax files. Finance Minister Ravi Karunanayake disclosed that only 28,000 people, out of the 21 million have tax files. The nearly negligent number affirms the extent of tax avoidance in the country which has resulted in reduced gains to government coffers. Karunanayake stated that with the rationalization and digitization of the tax system, the government would take all measures in its power to ensure that all those who are liable for taxes comply.

Otherwise, analysts point out, the burden of a narrow tax base will be continued to be borne by the general public with more and more indirect taxes slapped on them. Partly as a result of the ineffectiveness of the country’s tax system, the government recently resorted to increase its revenue by way of imposing indirect taxes, including a hike in value added (VAT) tax. The International Monetary Fund (IMF) has repeatedly urged Sri Lanka to boost its tax income by widening its tax base, narrowing the fiscal deficit and ensuring the country’s public finances are pulled to a more sustainable path. (SAA)