New diagnostic report calls for quarterly publications on revenue impact due to policy changes

• TISL report asserts not publishing analysis and explanations has led to unpredictable, sub-optimal and unstable taxation
• Stresses need to implement all provisions of Fiscal Management (Responsibility) Act 

A report on the anti-corruption landscape of Sri Lanka released yesterday called for quarterly publication of a revenue report, detailing the changes to the revenue measures that might result in an annual revenue loss of 0.1 percent of GDP. 
The Civil Society Governance Diagnostic Report by Transparency International Sri Lanka (TISL) pointed out that the absence of a requirement to publish any analysis or explanations regarding the revenue impacts of tax policy changes has led to unpredictable, sub-optimal and unstable taxation. 

“This kind of publication requirement would foster the discipline of supporting policy decisions with analysis before they are adopted and enhance public and Parliament understanding about the effects of government policies on revenue,” the report highlighted. 
The ad hoc reduction of taxes in 2020 is often discussed among economists as a major factor in Sri Lanka spinning into a critical loss of government revenue, being downgraded by credit rating agencies and its debt repayments becoming unsustainable. 
The report also pointed out that there is precedence for this being placed within a set of the International Monetary Fund (IMF) programme commitments. 
In Zambia and Central Africa, the governance diagnostics requested quarterly detailing of the revenue implications of taxation policies. 
The rationale behind the call is, taxes in Sri Lanka being subject to ad hoc changes, historically. Major tax changes have been introduced without publishing any rationale or analysis on the potential revenue loss. An example is the personal income taxes, which were revised six times between 2010 and 2023. 

The report also called for the need to implement all the provisions of the Fiscal Management (Responsibility) Act, revise as appropriate and ensure that non-compliance is penalised. The reason is, the act itself has no explicit provisions to deal with non-compliance. 
The report justified the need for this measure as the non-collection of taxes in Sri Lanka has become a significant concern, particularly due to the lack of public awareness regarding this issue. 
Over the years, Sri Lanka has seen instances where taxes, such as the mansion taxes, a new tax introduced alongside the 2016-18 IMF programme and casino entrance levy, have remained uncollected, despite being passed into law. 
“This lack of transparency and consistency in tax collection has allowed vested interests, politicians and government officials to collude in behaviour that systematically reduces government revenue and increases the primary deficit,” the report stated. 
Therefore, the report stressed that comprehensive and timely reporting on tax collection shortfalls can help mitigate this negative impact on government revenue.  
The diagnostic report identifies crucial factors that need to be harnessed to facilitate and sustain anti-corruption measures necessary to ensure that Sri Lanka recovers successfully from its current financial crisis, making the best use of the IMF’s Extended Fund Facility.