Claims of Large Outstanding Taxes Are an Illusion

Commissioner General of the Excise Department M.J. Gunasiri dismissed claims of significant arrears in three major government revenue sources—namely the Inland Revenue Department, Sri Lanka Customs, and the Excise Department—as myths.

Speaking at the press briefing titled “Collective Path to a Stable Country” held at the Presidential Media Centre (PMC), today (26), he clarified that the outstanding tax amount for these three institutions totals only Rs.90 billion. He also noted that it is typical for any country to have 3%-5% of its total tax revenue in outstanding taxes.

Commissioner General Gunasiri further highlighted that these three institutions achieved record revenue in 2023, surpassing Rs.3 trillion. Additionally, after 25 years, they succeeded in creating a surplus in the primary account.

Addressing the media personnel, Commissioner General of Excise further explained;

The three institutions under the Ministry of Finance—the Inland Revenue Department, Sri Lanka Customs, and the Excise Department—work within a legal framework to collect state revenue. Despite some groups spreading misinformation about large tax arrears, the actual total unpaid taxes for these institutions are under Rs.90 billion. Most of these arrears are from government entities, and legal actions are underway to recover the funds, meaning these amounts should be considered deferred taxes. Once the judicial process is completed, recovery is possible. Additionally, a tax deficit of 3%-5% of total tax revenue is typical for any country. Nevertheless, overall state tax revenue has seen a significant increase over the past two years.

In 2023, the Inland Revenue Department, Sri Lanka Customs Department, and Excise Department collectively achieved the highest revenue in history, surpassing Rs.3 trillion. Notably, after 25 years, they managed to create a surplus in the primary account.

Focusing on the Excise Department, it generated an income of Rs.179 billion in 2023, with a target set at Rs.232 billion for 2024. By August 22, 2023, the department had earned Rs.106.5 billion, whereas by August 2024, it had earned Rs.132.7 billion. This represents a growth of 24.6% compared to the previous year.

The Excise Department generates revenue through license fees: Rs. 15 million for a municipal council, Rs. 12.5 million for another municipal council, and Rs. 10 million for a Pradeshiya Sabha. Licenses for manufacturing plants are set at Rs. 25 million each. As of August 20 this year, the department has earned Rs. 132.4 billion. In 2023, the department had an outstanding tax amount of Rs. 1.04 billion, with Rs. 609 million collected by February of this year. The remaining tax arrears are currently under court proceedings.

Deputy Commissioner General (Tax Policy, International Affairs and Legal) of the Inland Revenue Department B.K.S. Shantha;

With the country’s recovery, tax revenue targets were surpassed last year. The Inland Revenue Department’s revenue target for 2024 is set at Rs.2, 024 billion, with plans to collect 40% of this amount in the first four months and the remaining 60% over the last six months.

To enhance efficiency, a Risk Management Unit has been established to streamline the tax revenue process. Currently, Rs.1, 066 billion in tax revenue is suspended due to on-going court cases. The department also had Rs.188 billion in tax arrears, of which Rs.104 billion are being recovered thanks to the dedicated efforts of the Excise Department’s employees. The remaining Rs.84 billion in outstanding taxes are in the process of being recovered through legal actions.

The Inland Revenue Department had Rs.188 billion in tax arrears, of which Rs.104 billion are being recovered thanks to the dedication of the Excise Department’s employees. Another Rs.84 billion in outstanding taxes remains, and the necessary legal processes to recover this amount have already been initiated.

In 2023, the number of tax files increased from 450,000 to 1.15 million. Additionally, 4.7 million new TIN numbers were issued this year.
Recently, social media has been spreading rumours that Inland Revenue Department officers are visiting institutions in disguise to collect taxes. However, department officials do not visit institutions to collect taxes; they only go for awareness purposes. Therefore, it is important to note that no one should give money to individuals claiming to be tax collectors in disguise. The police have been alerted to investigate any complaints related to this issue, and security forces have been notified.

Finance Officer of Sri Lanka Customs Department, Anura Muthukude;

The Sri Lanka Customs Department is expected to generate Rs.1, 533 billion in revenue for 2024. By August 25 this year, the department had already collected Rs.963.7 billion. Media reports indicate that the department has Rs.58.6 billion in outstanding taxes, with Rs.57.6 billion owed by government institutions, effectively rendering that amount non-recoverable. The department has taken legal steps to recover the remaining taxes, some of which have been pending for over a decade.

To enhance transparency, the Sri Lanka Customs Department has established a new “Smat Unit,” where the public can submit complaints. It is important to note that despite a workforce shortage of 940 employees, the department’s staffs have ensured that no tax revenue has been evaded.