Tax reforms introduced by the end of 2019 caused revenue loss to the government!

The revenue collected by the Inland Revenue Department in 2020 has shown a sharp decline compared to the taxes collected in 2019.

The latest report of the National Audit Office indicates that the revenue collected in 2020 has shown a reduction of 49 per cent.

Advertisements

The cause for the sharp reduction in tax collections was the amendments introduced to the Tax laws by the Rajapksa administration by the end of 2019.

Under the 2019 tax reforms, many taxes, including the value-added tax and other taxes introduced by the Yahapalanaya regime drastically reduced by the Gotabaya Rajapaksa government.

The Rajapaksa government also removed the nation-building tax and the Economic service tax, which reduced the volume drastically.

Audits have also revealed that due to the revision of taxes, the income tax revenue of the Inland Revenue Department has shown a sharp decrease of 49 per cent in the year 2020 concerning five types of taxes.

Accordingly, compared to the year 2019, the income accrued under five types of taxes dropped by 31.79 per cent in 2020, the value-added tax by 47.33 per cent, the loan repayment tax by 89.53 per cent, the economic, service fee tax by 72.97 per cent, and the nation building tax by 96.44 per cent.

The audit office has recommended that an expert committee be appointed to review whether the tax concessions granted by the government were a prudent move and to what extent the government could have achieved its objectives by reducing taxes.

It also wants to analyse the negative impact caused to the economy and recommend appropriate measures.