The New Inland Revenue Act is supposed to have been drafted by experts from the IMF. The IMF experts have not ‘even read’ the Tax Acts in Sri Lanka, nor the relevant case law and therefore had no idea why some of the provisions were introduced into the Act. I am sure the IRD officials could have codified the Act and the amendments into one Act which would also include the Budget proposals. When the draft was perused by some of the IRD union members, they had asked why no reference has been made to the incentive scheme in the draft, they had replied that they did not know such a scheme was operative in Sri Lanka. A committee set up in the UK for simplifying tax acts pointed out:
Income tax law is complicated because of:
- Diversity of taxes with different bases
- Volume of legislation
- Language not user friendly,
and
- Using words not used in ordinary language
A perusal of the draft Act would show that some of the words are not used in Sri Lanka tax legislation.
If a new Act is to be introduced, it should be discussed with all stakeholders i.e the tax paying public, the IRD officials, and other organizations, before drafting it. When the Treasury officials and IRD officials were requested to send copies, they informed the public that it was available on the web. It appears that some organisations were sent copies for their observations. But the tax paying public had been ignored. No one would download over 200 pages from the web to study the draft. The Treasury or IRD should have published it in the daily newspapers requesting observations from the public. Some taxpayers do not use computers and some would not understand the draft as it was not available in Sinhala and Tamil. The draft should have been presented in the form of a White Paper for discussion.
It would take over a year to finalize the draft and introduce a new Act.
The IRD officers should be trained before implementation to ensure that they understand the procedures and the relevant provisions.
A manual of instructions should be drawn up to assist the officers.
The IRD officials should go round the country to educate the public on the changes in the Law.
Only thereafter can the Law can be implemented. The entire procedure referred to was carried out before the Value Added Tax was introduced.
Further the New Act is being introduced just after the presentation of the 2017 budget proposals. Therefore all amendments stated in Parliament and passed should be included in the Act. If not, it would be fodder for the opposition and the public to challenge the Act in a Court of Law. ‘The fiasco that occurred after the 2016 budget will be repeated in the 2017 budget.’
It appears, the Commissioner General of Inland Revenue (CGIR) is given powers of printing some of the important provisions. The tax-paying public should have the right to challenge whatever acts contravene the law. The APPEAL procedure should be as in the present ACT and the powers of hold over of tax should be maintained. If the present draft is approved and passed, it will not result in an increase in revenue, but a retrograde step resulting in the reduction of revenue.
The Government must realize that the taxpayers will comply and pay tax if they understand the basis and accept the law as reasonable, giving them the right to challenge the acts of the IRD officials, if their actions are not within the framework of the Act.
Revolutions e.g. The French Revolution of 1789, The American Revolt of 1776 (no taxation without representation) and the revolt of 1848 against the Marala badda introduced by the British in Sri Lanka had been caused due to unreasonable taxation.
The tax payers do not have to organize strikes or road block to be heard. If all taxpayers join together as an association (without a political bias) and decide not to pay the self assessment tax from a certain date, the government will have to change the Act or put all in jail.
Sri Lanka has had a proud history of over 80 years of taxation. What was done in Ghana cannot be forced on Sri Lanka. In fact the IMF introduced VAT in Ghana and was forced to withdraw it because of the fact that it was introduced at the wrong time. Later, it was reintroduced correcting the mistakes.
I am happy that the consultants and the other organizations and institutions have opposed the draft for very good reasons.
L C D S