The Hon. (Ms.) Lakmali Hemachandra, Attorney-at-Law

¶ 01 Hon. Deputy Chairperson of Committees, thank you for the opportunity to participate today.

¶ 02 We are debating amendments to the Inland Revenue Act. The Ministry and the State Minister, and our Members, have clearly explained the objectives: to address the imbalance between indirect and direct taxes. In Sri Lanka, indirect taxes form a larger share; direct taxes are relatively low. Personal income tax is a key part of direct taxes. To ensure tax fairness, strengthening personal income tax is important.

¶ 03 Sri Lankans do pay taxes — especially as consumers via VAT and Excise — and as salaried professionals: doctors, engineers, public and private sector employees. A tax system must be fair to those who pay; it is not fair if only a segment pays while others, who should pay, do not. Everyone required by law to pay must do so.

¶ 04 Parliament’s primary responsibility is oversight of public finance. There are committees to oversee revenue. Therefore, no MP should encourage the belief that those required by law to pay taxes need not do so. This is not a matter of personal preference.

¶ 05 One reason we approached bankruptcy in 2022 was that Government tax revenue fell to about 7% of GDP. Because Parliament and the Government abdicated responsibility, the country went bankrupt. Last year, however, tax revenue rose to 16.6% of GDP — above target. That increased revenue enabled us to provide relief even amid multiple crises. We must understand that taxation is necessary and must be fair. These amendments aim to improve tax compliance. If the law requires documents to be filed and timelines to be met, that culture and sense of responsibility are good, not bad. Unlike some in the Opposition, most Sri Lankans respect the law and can meet reasonable compliance.

¶ 06 When we came to Government in 2024, in the very first Budget we reduced the burden already on taxpayers: although VAT remains at 18%, we removed VAT on infant nutrition; we increased the PAYE threshold from Rs. 100,000 to Rs. 150,000 per month, and we reduced the applicable rates across slabs — e.g., reductions of 100%, 71%, 61%, and 47% on respective brackets. We have already given relief.

¶ 07 There is still a segment that should pay but does not. We must bring them in. This is not a draconian law. The idea is simple: the IRD requires documents; there is a 30-day period; notices are issued; and only thereafter legal action is contemplated. Even Opposition MPs say the IRD has Rs. 900 billion to Rs. 1.2 trillion collectible. That is precisely the point. These are arrears from your time. We increased compliance by 18% last year per the Central Bank Annual Report. The IRD is not suddenly turning into the CID; taxpayers are given chances to show cause and grace periods. Only after all that are cases filed. The Opposition is trying to socialize an anti-tax narrative — a “politics of fifty-fifty” — but taxes are essential for a State to serve its people. That is how we provided a Rs. 100 billion relief package during the crisis. With that, I conclude. Thank you, Hon. Deputy Chairperson.