COLOMBO: Tax evasion by individuals and corporates has been one of the primary reasons for the decline in direct tax revenue as a percentage of GDP,
“Tax evaders deliberately understate or avoid reporting the true state of their net worth and income to the tax authorities to reduce tax liability.”
The central bank an effective method to address tax evasion is by the close monitoring of high end consumption driven transactions.
“This requires reconciling income declarations with data retrieved from high end transactions such as luxury car sales and property sales,” it said.
“Although, the Inland Revenue Department (IRD) carries out such examinations and follows up with semi automated systems, a sophisticated electronic system linking up relevant institutions with the tax system is essential to efficiently confront tax evasion.”
The central bank noted that the tax department had already started an automation process with various reforms initiated to improve tax administration, including the introduction of the Revenue Administration Management Information System (RAMIS).
“The full implementation of the RAMIS is expected to connect the system with over 20 other external institutions including the Central Bank, licensed banks, Sri Lanka Customs, Registrar of Motor Vehicles, Condominium Management Authority, Colombo Stock Exchange and the Land Registry, for effective tax reconciliation.
