One of the core issues which has contributed to the economic downfall of Sri Lanka, is failures of successive governments to reform the state revenue raising mechanisms and to make them efficient. Long have many questioned why every government has failed to make the Customs Department, the Excise Department and the Inland Revenue Department, efficient and improve collection of revenue, which has for decades been, lacklustre, to put it politely. 

One of the key reasons, thus far is lack of political will to enact such measures, which points to strong back room links between tax dodging businesses, tycoons and the polity of the island nation.

This week, the buck kept getting passed around on the ugly business of the Excise Department’s inability to collect dues, especially for highly connected breweries. It is reported that the Commissioner General of Excise has claimed that a directive issued by the Parliament’s Committee on Ways and Means (CWM) pertaining to the collection of unpaid duties for 2023 by end June, this year, couldn’t be carried out for want of Finance Ministry approval. This has become a practice, with different state institutions, pulling in different directions, the problem is not addressed quickly. While the buck is passed around, the monies due remain uncollected, and the cost of living keeps hurting vulnerable communities. Last month, the CWM stated that the Commissioner General of Excise avoided the Committee, and charged that ignoring the Committee's recommendations is a disrespect to Parliament. The CWM also pointed out that there had been no reply from the Ministry of Finance (as of 12 July) regarding the steps to be taken. The issue revolves around the failure of the Excise Department to collect Rs 7.9 billion in unpaid taxes, including that from one of the leading breweries in the country, which has in the past, been late in paying tax.  

During a recent CWM meeting, which was attended by revenue raising authorities, where MP Patali Champika Ranawaka had questioned the Excise Department over its failure to recover as much as Rs. 7.9 billion owed by liquor manufacturers. Ranawaka had pointed out that out of about two dozen liquor manufacturers in business only, a few had failed to pay taxes properly. A charge which has echoed over the years. Reports indicate that the CWM has disclosed that the breweries owe the state Rs. 7.9 billion and one repeat offender  accounts for Rs. 5 billion of that amount. To put that in context, the Suwa Sariya ambulance service used to have a projected budget requirement in 2022 of nearly Rs. 4 billion. As such, one can understand the magnitude of services the State can sustain or improve if the overall Rs. 7.9 billion is collected. While the Excise Department and The treasury plays ‘pass the ball’ on collecting what’s due to the Government and the Treasury, who have been ardent advocates for increasing taxes, seem to careless how fair it is to burden the public, already battered and bruised by the economic crisis, with high indirect taxes. Shame.

Similarly, early this year Sri Lanka’s online tax collection system RAMIS was deemed “not operable”, and the Ministry of Information Technology was preparing to carry out an independent audit to find the shortcomings, State Minister of Information Technology Kanaka Herath was quoted saying. The Revenue Administration Management Information System (RAMIS) was introduced to the Inland Revenue Department (IRD) when Sri Lanka signed up for its 16th International Monetary Fund (IMF) programme in 2016. However, as always, trade unions at the IRD protested the move, claiming that the system was malfunctioning despite billions being spent for it amid allegations that the new system was reducing the direct contacts between taxpayers and the IRD to reduce corruption. Once again, with nearly eight years passed, Sri Lanka and IRD is yet to streamline and reach an acceptable level of efficiency in collecting taxes.

The CWM, it is learnt, has directed the Finance Ministry to suspend production at distilleries operated by those who have not paid their dues. The committee has also noted that the Excise Department has not been able to report the progress made in respect of probes into fake security stickers. How long the Treasury will take to comply will likely give an indication of the political will this Government has to ‘really do what's needed’ in the reforms agenda, which it has discussed with and agreed on with the IMF.

It is learnt that the IRD has reported the collection of taxes amounting to Rs. 902 billion by 30 June of this year, though the target was Rs. 826 billion.