Proposal to register all individuals above 18 years with the Tax Authorities

The proposed scheme would only serve to victimize the relatively poor

Young people at work

• The percentage of the population over 18 years of age is about two-thirds of the total population of about 22 million which means that about 14 million at least would need to register in compliance with this proposal

There are several proposals in the Interim Budget that are desirable such as those relating to public sector institutions which, together with politicians, have been sucking the lifeblood of the citizens of this country, contributing thereby to our gradual descent towards bankruptcy. However, I will identify and deal with only one proposal which appears to be impractical, to say the least, and will in all probability create some serious problems for a large percentage of the population besides increasing costs to the State. 

 First, this proposal assumes that many individuals, especially those between the ages of 18 and 25, are in employment and may be liable to pay taxes when the reality could be that the majority of them are still involved in education and are unemployed. This is due to standards of education and educational activities being weakened and disrupted over the years by political elements, politicization of students by groups with agendas of their own, and the COVID-19 pandemic. 

 Second, the percentage of the population over 18 years of age is about two-thirds of the total population of about 22 million which means that about 14 million at least would need to register in compliance with this proposal. Anyone with common sense and imagination can assess the enormity of the problems which would ensue relative to the issues mentioned below.

 Third, the registration of many millions who are not liable to be taxed would involve the opening of a like number of ‘tax files’. The ‘many millions’ [as I will refer to them] would have to send ‘nil’ Returns. If they are required to send the information manually, each year there would be millions of pages of ‘nil’ Returns flooding the offices of the Inland Revenue Department [IRD].  This would result in increased expenditure and manpower as well as a waste of paper. On the other hand, if it is made compulsory for the Returns to be sent online, it incorrectly assumes that every individual over 18 years of age has access to a computer. Prior to introducing this type of inappropriate solution to a problem, consideration should have been paid to how millions of non-urban people such as farmers and their families, those engaged in fishing and their families, day workers and students who will be many since they could still be in school, at university or other learning institutions, would have to comply with the proposal. They and many others would have to engage the services of someone to explain and fill ‘Nil’ Returns each year, which may drive them into greater poverty, with ‘tax consultants’ getting rich, just as tuition masters are today due to the appalling and in many ways unsuitable system of education. 

Fourth, numerous ‘sub-’stations’ of the IRD would need to be established throughout the Island, which will be engaged largely in examining these Returns and separating the non-taxable millions from the taxable ones.  One can envisage the creation of a huge cadre of public servants to cater to these needs and what that entails.
Fifth, each year the IRD would have to send the relevant forms to millions of non-taxable individuals. The proposal may even necessitate a large expansion of the postal services, which could also result in increased manpower and expenditure.

One can envisage the creation of a huge cadre of public servants to cater to these needs and what that entails

Sixth, what Sri Lanka requires is an efficient system of tax collection. How this should be achieved is not a part of this article except for what is stated below. What is proposed is likely to cause a huge bureaucratic nightmare with attendant increases in expenditure and manpower. At present, little, if anything is done to collect taxes from corrupt politicians and their cohorts, absconding businessmen and companies, just as nothing has been done to collect from them arrears of payment of electricity and water charges running into millions as has been revealed by the Water Board and the CEB. Perhaps this could be due to the fact that the public servants are at the mercy of such people. If such parasitic elements of society can get away without paying these enormous amounts of money due from them to the State, the proposed scheme would only serve to victimize the relatively poor. It would create huge unproductive costs instead of ensuring that the privileged escapees from the tax net are made to pay their dues, and such individuals are not confined to those referred to above.  The proposal as it stands could thus defeat the purpose with which it was introduced. 

The solution is to enlarge the tax net consequent to intense and thorough investigation, to ensure increased efficiency in tax collection, ensure the absence of political interference in the implementation of tax laws, and to study other systems of tax collection for ideas in this regard. Enforcing strictly the tax laws in respect of every taxable individual without allowing for a privileged class of persons or institutions to unlawfully avoid paying taxes, is an essential pre-requisite to enhanced and equitable tax administration, which in fact is essential for compliance with the concept of the Rule of Law.