Sri Lanka's tax recovery riddled in delays - report

COLOMBO (News1st): Sri Lanka's tax authority had failed to recover default taxes and penalties worth more than Rs 290.8 billion by the first half of 2019, a state audit has shown. Records showed that the government was due to receive more than Rs 4.1 trillion in taxes by mid-2019. However, a staggering Rs 3.8 trillion were identified as held over taxes, due to objections made by taxpayers, leaving around Rs 290.8 billion as recoverable taxes. "...if the taxpayer raises an objection, the issue should be resolved within a period of 60 days," the report published by the National Audit Office (NAO) showed. Apart from taxes that were held over due to appeals and legal proceedings, all other default taxes must be settled expeditiously, the report said. "An investigation should be carried out promptly on all the individual balances of which reasons for not holding over had not been identified," the NAO recommended. According to the report, taxes worth Rs 69.2 million were withheld for "no reasons". Value Added Taxes (VAT) worth Rs 3.7 trillion, Income Taxes worth Rs 311.2 billion, and Pay As You Earn (PAYE) taxes worth Rs 8.2 million, were among the default taxes by mid-2019. The NAO also observed "the lack of a formal internal control system to take follow up action and supervise from the beginning of the occurrence of defaulted taxes" at the Inland Revenue Department. It recommended action to be taken against officials who had failed in their duty of recovering the taxes on time. Sri Lanka is expected to generate Rs 1.3 trillion from taxes in 2020, down from approximately 1.7 trillion received last year.