Sri Lanka’s Inland Revenue Department (IRD) is planning to identify a group of 100 taxpayers with the highest reported income from various streams, to ensure tax compliance of highly wealthy individuals in the nation, it was reported.

According to the Sunday Times, the group is to be identified by reviewing other sources of data, including third-party data such as real estate, Financial Intelligence Unit (FIU) reports, bank account details, and information from treaty partners.

The IRD intends to add other individuals to the group for review and ongoing monitoring, as the current measures progress.

IRD Commissioner General W.A. Sepalika Chandrasekara says the measure is being taken as part of efforts to restore fairness and confidence in the country’s tax administration.

The IRD has set up a dedicated office called the High Wealth Individuals Unit (HWIU), a ten-member unit located at the Large Taxpayer Office of the department, which is tasked with contacting a select number of wealthy individuals.

The Unit will work with them and their advisors to ensure that they are up to date with their filings of tax returns as the first step.

To ensure that the wealthy pay the right amount of taxes, the IRD will be conducting additional risk assessments and profiling of wealthy taxpayers, while conducting audits on cases that have the highest risks as well. 

The IRD is also set to collaborate with both domestic and international organisations to access information that would help the HWIU to identify potential tax non-compliance. (NewsWire)

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Economic expert and Government Advisor Dr Shantha Devarajan expects Sri Lanka’s economic growth to turn positive in 2024.

In an exclusive interview with the Sunday Times, Dr Devarajan revealed economic growth was still negative but much less than in 2022, and it is expected to turn positive in 2024. 

He further said that the economic prospects for 2024 will be good if the government continues on the reform programme, as confidence in the economy returns.

Stating that Sri Lanka’s economic performance this year was certainly better than last year, Dr Devarajan pointed out that Sri Lanka brought inflation down from 70 per cent in September 2022 to 2 per cent in September 2023. 

“Economic growth was still negative but much less than in 2022; it is expected to turn positive in 2024,” he added.

Commenting on the proposed taxes for 2024, including the wealth tax, Dr Devarajan said Sri Lanka needs to increase its tax revenues and that as a general principle, the rich should be taxed more than the poor.  

He pointed out that one of the greatest sources of wealth among the rich is their property, adding that this is largely untaxed.  

“So, a property tax makes perfect sense if you want to raise tax revenues without hurting the poor,” he added.

Dr Shantha Devarajan, Professor of the Practice of International Development, Edmund A. Walsh School of Foreign Service, Georgetown University, Washington D.C., made the remarks while responding to questions on Sri Lanka’s economy, the International Monetary Fund (IMF) and related matters. (NewsWire)

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The Government will introduce two more new taxes, the wealth tax and the inheritance tax, next year, it was reported.

According to the Sunday Times, the two new taxes are to be introduced to raise more revenue for the state, as tax collections have failed to reach the expected revenue targets.

A report submitted to Parliament by the Committee on the Ways and Means states the Finance Ministry has been tasked with formulating the necessary legislation for these two proposed taxes.

Budget deficits created due to government expenditures being in excess of revenue has been cited as a major challenge faced by the government in  collecting state revenue.

The budget deficit from January to June this year was Rs 1.24 billion, in terms of the mid-year fiscal report. This was due to the repayment of the foreign debt suspended after April last year and increased state expenditure compared to the first half of last year, with double payments of interest, as per the report.

The report also noted that the tax revenue collection carried out by three key institutions, the Customs, the Inland Revenue Department and the Excise Department, in the first half of this year (January to June) is also below the estimated tax revenue targets set in the Budget 2023.

The IRD has collected only Rs 696.94 billion (41.81 per cent) of the budget estimate of Rs 1.667 trillion so far, while the Customs has collected Rs 400.07 billion (32.79 per cent) of the estimated Rs 1.22 trillion so far, and the Excise Department has collected Rs 88.963 billion (41 per cent) of the estimated target of Rs 217 billion.

The report has also recommended upgrading the current tax-collecting digital platform, RAMIS 2.0, in view of the proposed two taxes when renewing the agreement with the Singaporean company that developed and maintains the platform. (NewsWire)

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