The Hon. (Dr.) Anil Jayantha - Minister of Labour and Deputy Minister of Economic Development

¶ 01 Hon. Presiding Member, the answer to the Question raised by Hon. Thilanka U. Gamage at the time of adjournment is as follows:

¶ 02 01. Government tax revenue plays a vital role in steering the State forward. In the past, when viewed as a percentage of GDP, tax revenue had fallen to a significantly low level — below 10 percent of GDP. Considering this situation, under prevailing conditions, we have introduced the “Tax Shakthi” program as part of the journey towards the 2025 target of 15.1 percent of GDP.

¶ 03 Specifically, a primary objective is to improve tax compliance. Historically, there has been a tendency among those able to pay tax to under-file, to avoid paying, and to engage in tax evasion. That situation still persists to some extent. Those who study taxation identify this as tax avoidance and tax evasion. Improving compliance while addressing these issues is a key objective.

¶ 04 Another objective is to broaden the tax base. In doing so, special attention is paid to VAT and the Social Security Contribution Levy (SSCL). Within the constitutional limits, we seek to bring into the tax net those who should be paying but currently remain outside it.

¶ 05 Additionally, we aim to establish an effective mechanism to build public understanding of how tax revenue is spent and the benefits derived from it, and to foster a new tax culture centered on transparency and accountability.

¶ 06 We also seek to integrate the civic responsibility of paying taxes into the social pillar of the broader “Clean Sri Lanka” initiative.

¶ 07 02. In past years, monthly tax revenue targets were not achieved, nor were annual targets. In 2024, however, we achieved 99.1 percent of the expected tax revenue. Under our Government, during the first five months of 2025, all three primary sectors — Sri Lanka Customs, the Department of Excise, and the Inland Revenue Department — have exceeded their targeted collections. We are genuinely pleased to state this. Accordingly: - Sri Lanka Customs had a target of Rs. 730,100 million, and we collected Rs. 786,150 million — 106 percent. - The Department of Excise had a five-month target of Rs. 98,000 million, which we exceeded — 104 percent. - The Inland Revenue Department had a target of Rs. 898,695 million and collected Rs. 906,720 million — 101 percent.

¶ 08 03. Regarding the number of new income tax files opened: across several categories — individual income, corporate, VAT, PAYE, Withholding Tax, etc. — a total of 121,493 tax files had been opened by 30 April.

¶ 09 04. On measures to broaden the tax base, several steps are in place:

¶ 10 - Effective 01 January 2024, VAT collection is confined to registered persons only. The annual turnover threshold for VAT registration was reduced from Rs. 80 million to Rs. 60 million, thereby broadening the base. Similarly, the SSCL registration threshold was reduced from Rs. 120 million to Rs. 60 million. Consequently, VAT revenue in 2024 grew by 88.6 percent over 2023, and SSCL revenue grew by 16 percent over 2023.

¶ 11 - The Inland Revenue Department uses the Taxpayer Identification Number (TIN). TIN is being made mandatory for all persons over 18 years, with necessary facilitation provided.

¶ 12 - The Inland Revenue Department’s RAMIS system, Sri Lanka Customs’ ASYCUDA, and the Excise Department’s RASED systems are being integrated with the Ministry of Finance’s ITMIS platform to ensure proper management and transfer of collected revenue to the relevant agencies.

¶ 13 - Public awareness is another aim. In a good State, paying tax is a civic responsibility. Through building dialogue between citizens and the State on taxation, we reinforce the social contract and highlight the benefits. Under “Tax Shakthi,” our Tax Week seeks to build a clear conversation between Government and citizens, strengthening that relationship and the social contract.

¶ 14 05. Measures specific to the agencies:

¶ 15 Inland Revenue Department 1. Making TIN mandatory is a primary step. 2. To improve compliance in core taxes — particularly VAT — we have taken measures, including abolishing the simplified VAT (SVAT) mechanism due to identified issues, and introducing an automated process within this year to efficiently refund any excess paid taxes. Necessary institutional setups have been made. 3. Supervision and regulation are carried out under KPIs covering payment, filing, returns, and registration. 4. Modernization through introducing e-filing for simple individual returns and launching an online portal to simplify obtaining tax files for individuals. 5. Establishing a specialized unit for high-net-worth individuals to improve service and risk management and enhance collection from this segment.

¶ 16 Department of Excise 1. Preparing a Schedule of Requirements for the proposed Revenue Administration System and appointing consultants to provide expert guidance. 2. Establishing a Financial Intelligence Unit within the Department. 3. Resolving identified issues in the security-sticker regime to safeguard excise revenue and ensure expected collections, including enabling verification via a mobile application due to past counterfeiting of stickers.

¶ 17 Sri Lanka Customs 1. Implementing a strategic plan, including an oversight system, to sustainably improve revenue administration for 2024–2028. 2. Officially launching the ASYHUB system.

¶ 18 Across these three sectors, we have introduced a Code of Conduct and established internal control units to strengthen discipline and performance. We are also enhancing digital systems such as IRD’s administrative management information systems, Customs’ single window, and the Excise revenue administration system.

¶ 19 Thank you.