The Inland Revenue Department (IRD) achieved the revenue collection target of Rs 652 billion set by the Ministry of Finance last year and is confident of achieving this year’s target of Rs. 800 billion and collected 50 percent of the targeted amount at present, Commissioner General of Inland Revenue, A. Nadun Guruge told the Business Observer in an interview.
The Department is working on a five-year plan to transform the institution into a modern, innovative entity that serves customers in an efficient manner. To this end it has taken measures to upgrade staff skills and knowledge in delivering the service to the tax paying community in a friendly environment that encourages and motivates people to discharge their tax liability, he said.
Excerpts:
Q. Briefly explain the structure of the IRD and its responsibility towards the country.
A. The organisational structure of the Inland Revenue Department (IRD) consists of several layers. I head the department as the Commissioner General. There are 9 Deputy Commissioner Generals. Under them there are 22 Senior Commissioners and 90 Commissioners who perform their duties as Branch Managers. There are Senior Deputy Commissioners, Deputy Commissioners and Assistant Commissioners and Management Assistants, clerks and minor staff. There is a separate Accounts branch and ICT division.
Our main responsibility is to collect the correct taxes at the correct time. We achieved the given target of Rs 652 billion by the Ministry of Finance last year. The target for this year is Rs 800 billion and we are confident that we could achieve this target. We have collected 50 percent of the targeted amount at present. There are three key revenue generating departments, namely, Inland Revenue, Customs and Exercise. Compared to the others we have always been on our target up to now.
Q. What is the role of Inland Revenue Department in generating income for the government?
A. The IRD was incorporated in 1933 under an Act of Parliament. As every country and its economy needs money for development activities institutions such as IRD plays a key role in collecting such money. Non taxable income is not sufficient to complete all the development projects and the IRD plays an important role in generating funds for the government. Our main activity is to collect taxes in time for the government.
These funds are channelled towards development activities, providing free education and healthcare facilities and national security. Sri Lanka is a welfare economy and is the only country that provides free education and healthcare facilities which cost the government huge sums of money. It spends Rs. 320 billion, Rs. 198 billion and Rs. 218 billion for national security, education and healthcare facilities apart from providing other facilities including building roads and highways.
There are 1,4 million of public servants and their salaries, Samurdhi and fertilizer subsidy, repaying of loans and interest are done by taxpayers money. The income tax is a direct tax. The present composition of direct to indirect tax is 20 to 80 percent. The government aims at bringing this tax structure to 40 to 60 percent in future.
Q. What are the challenges the IRD faces in performing its designated tasks?
A. Achieving revenue targets is a challenge. However, we have been able to successfully meet this challenge. The income from VAT and NBT went down due to the Easter Sunday attacks, We have installed a highly sophisticated computer system RAMIS (Revenue Administration Management Information System) where we had a few operational issues initially.
This system has enabled us to make the tax collection process much faster and efficient. We need to have competent and efficient staff to handle the tax collectors role. To this end human development is necessary. The skill upgrading of the staff to encourage the potential customer to declare his liability is vital.
For this identifying the staff strength and weaknesses is important. As a government institution we have to fulfill the requirements of the tax payers in terms of motivating and encouraging them.
We have few cards such as gold and silver to identify high tax payers. We are in the process of discussing with institutions such as banks, Department of Motor Traffic and Immigration for priority treatment for these card holders similar to a privilege card.
Q. What is the opinion of IRD of its tax payers?
A. We are committed to being the tax payer’s partner in assisting him/her to fulfill tax obligations. There needs to be an education regarding the tax obligation from an early age to prepare the children to consider paying tax as a social responsibility.
The self assessment was introduced under the New Inland Revenue Act, 24 of 2017 which is in function from April 1 2018. The taxpayer has to declare his/her liability. If they have not paid tax accordingly IRD will issue an assessment and they have to pay accordingly. However, there are tax dodgers. There is a cumbersome legal procedure for them. Tax evasion was a civil offence, but under the new Act it is a criminal offence now. We have power to enforce this law. But I request all the taxpayers to adhere to the correct tax paying procedure. There are some criticism that the IRD is inactive. This is because all the time we do not have information to act upon. When information is there we take action. We have an intelligence and audit units. We have set up a new branch to collect tax from the professionals. This will be based on their earnings as well as other evidence that support their income.
Q. What are the amendments necessary in the existing legal framework in accommodating evolving economic environment?
A. The government is the policy maker. We are not involved in policy matters. We do the implementation part. The government should look into the necessary amendments to meet the evolving economic environment.
Q. What measures should the government take to widen the tax base?
A. We have created a customer friendly environment to better serve the taxpayers. Therefore, the government should focus on ways and means of widening the tax base. Educating the potential tax payer is a must. They should be made understand that tax money is used on national development. The willingness to pay tax should come within the taxpayer.
Our branch which was set up recently will work to bring in professionals under the tax cover. The VAT and NBT have a Rs. 12 million threshold. We should open this up more. We are increasing the number of tax files. According to RAMIS, more than 30 government institutions will be interfaced through a unique number for financial transactions. This will be a streamlined and centralised process to gather information.
Q. What more could be done to improve the organisational culture to meet modern demands?
A. We have created a customer-friendly environment and have a staff who promptly serve the customer. According to the RAMIS system we have constructed Level 2 dedicated to serve customers. Every activity is done in a cluster for the customers convenience. We are capable of providing an efficient and effective service.
Q. Do you have any plans to conduct workshops training programs to upskill staff capacity and organize awareness programs for the general public to educate them of their duties?
A. We provide our staff with local and foreign training to upgrade their skills and knowledge. With the new Act, we conducted awareness programs islandwide and the key program was held in Colombo. Awareness is important for the public to know that they have the responsibility of paying taxes for the country to continue providing the same or improved level of facilities to its people.
Q. How do you plan to modernize the IRD approach in the next few years?
A. I am preparing a five year plan. In this I have listed the action plan and it is a detailed process. The preparation of the plan is progressing well.
Q. What is the way forward for the IRD in meeting the government targets in terms of revenue generation?
A. It is necessary to widen the tax base. To this end creating awareness is extremely important. As tax collected is used on education, healthcare, national security and other development activities, our people have a duty to pay taxes. The self assessment scheme in place should be made use of for highest compliance. The tax collection should be enhanced with increase tax returns.
The default tax collection process too should be increased. To this end we need to carry out comprehensive audits. If necessary investigation and compliance branch support should be seek. We need to improve on withholding tax collection. With these actions in place we could strengthen the tax collection activities. With the introduction of the new Act we collect more taxes. There is a 15 percent increase in tax collection compared to last year.
Q. What is your message for the general public
A. We need to understand why we should pay tax. The government spends huge amount of funds on free education and healthcare, national security and other development activities. The country needs money to spend on its forward march and tax payers’ money.
The tax evader should not force us to enforce legal action. All the development activities are dependent on the funds from collecting sources. The responsible citizens should understand their social obligation. They should come to the IRD and open a file and pay the correct tax on time. This will benefit the future generation.