Sri Lankan leftist groups affiliated with the Frontline Socialist Party, People’s Liberation Front (JVP) and Argalaya movement urge the government to prioritize collecting outstanding taxes before resorting to raising existing levies or introducing new ones. The issue was raised in many parliamentary committees as well.
Talking about the issue with The Island newspaper, Sri Lanka’s State Finance Minister, Ranjith Siyambalapitiya, has acknowledged difficulties in meeting revenue targets due to various barriers, including:
Legal battles: Up to 65% of uncollected taxes are tied up in lengthy legal processes, making recovery slow and challenging. Siyambalapitiya suspects some deliberately exploit this system to delay payments.
Resource limitations: Revenue collection authorities lack robust IT infrastructure, hindering efficiency and effectiveness. A 2016 proposal for improvement remains unimplemented.
Sophisticated tax evasion: Wealthy individuals and businesses utilize skilled lawyers to challenge tax demands, further complicating collection efforts.
A significant portion (60-65%) of Rs. 943 billion unpaid taxes is currently tied up in legal battles. Siyambalapitiya acknowledges the possibility of some using these avenues to delay payments strategically but also emphasizes the fundamental right of individuals and businesses to challenge tax assessments through the legal system. This right, enshrined in democratic principles, allows for addressing disputes and potential errors, ensuring fairness and due process.
However, the reality of lengthy court proceedings and complex legal processes creates a double-edged sword. While upholding democratic principles, these delays pose a significant challenge to efficient revenue collection.
Further complicating the issue is the disparity in resources. Wealthier individuals and businesses often utilize skilled legal representation, potentially extending legal battles and delaying settlements. This raises concerns about equal access to justice and the potential exploitation of the system by those with greater resources.
The Minister emphasized ongoing efforts to overcome these hurdles, including discussions with the Attorney General and Justice Minister to address legal delays, and exploring ways to modernize IT systems. He urged Parliament to assist in finding solutions rather than solely placing blame.