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AG responds in SC to hostile contention over Inland Revenue Bill


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  • Says though power is restricted Minister can ask for information

By S.S. Selvanayagam

The Attorney General, replying to the hostile contention of the petitioners of the proposed Inland Revenue Bill, on Friday contended that the Minister’s power was restricted and in fact the Minister could call for information from the Inland Revenue Department only in the course and for the purpose of carrying out supervision of the Inland Revenue Department in terms of Article 42 of the Constitution.

Additional Solicitor General Farzana Jameel, with Senior Deputy Solicitor General Arjuna Obeysekera, State Counsels Suren Gnanaraj, Kaniska de Silva, Chaya Sri Namuni and Hashini Opatha, appeared for the Attorney General and Finance Minister Mangala Samaraweera.

Jameel made her submission before a bench comprising the Chief Justice and justices Anil Gooneratne and Nalin Perera

She replied to the contention of President’s Counsel Sanjeeva Jayawardena over the alleged acquisition of classified information of the taxpayers by the Minister, enabling him to access classified information which only the department is privy to.

The Additional Solicitor submitted that the Cabinet of Ministers was collectively responsible and answerable to the Parliament and that the conduit between Parliament and the executive was the Minister.

She said the President in the terms of Article 43 has the power to assign subjects and functions to Ministers and the functions of the Inland Revenue Department has been entrusted to the Minister of Finance in terms of the Constitution.

She contended that therefore the Minister of Finance was carrying out supervisory functions in terms of the Constitution.

She stated that the Minister was also under duty and obligation to maintain secrecy and that this obligation would continue to exist even after the Minister left office.

She stated that any violation of this obligation of secrecy can be punished with fines or a term of imprisonment.

She maintained that the power given to the Minister to request information was not arbitrary.

Sanjeeva Jayawardena PC had also complained that there had been complete suppression of any definition of the tax officers other than the Commissioner General.

The Additional Solicitor General in her reply stated that the definition of tax officials was too wide and that it was not the intention of the Government and the Government was agreeable to amend the definition of tax officials.

She submitted that taxation of all means of income above a certain limit that has been challenged was a policy of the Government in order to ensure that all high income earners contribute to the revenue of the country. She added that the collection through information provided by third parties was also part of this move.

She stated that the drafting, in order to protect the income tax base from base erosion and profit sharing (BEFS), is seen as essential to developing countries since they rely heavily on corporate tax.

She further stated that as the tax stands now, the gaps and mismatches of the tax laws are exploited to artificially shift profits to low or non-tax locations, thus causing little or no corporate tax to be paid.

She said that the many tax exemption and concessions given were abused so that the tax was not paid.

She stated that thus tightening these loopholes has been necessary for the new tax laws so as to avoid exploitation of the concessions given.

She informed court that the Supreme Court has held that the law undoubtedly is that the sovereign power of taxation is absolute, that it could be exercised up to any limitand that the determination of that limit is for the legislature and not for the courts.

She said the existing Inland Revenue Law had undergone many changes and that from 1979 the tax laws were updated and amended.

There were many substantial amendments made in 2000 and 2006 with many changes made by the way of ad-hoc amendments with the changes in government fiscal policy, she said.

The many changes made, sometimes to gain political mileage during the Budget Speech, have been included in the form of tax amendments which mainly add to the ever-expanding list of exemptions that are given in a manner that impedes the collection of taxes and complicates the incentives and leeway given to the taxpayer as well, she stated.

She submitted that this has led to constant litigation where both the taxpayer and the authorities have struggled to identify the exact measure of exemptions given and the procedure followed and interpretations into what the legislative intent was.

These disputes have been generated over the years not only due to the substantive changes made in the tax law but also due to the tax’s complicated wording as well, she said.

She said that in this backdrop, the need to simplify, modernise and rewrite the Inland Revenue Act was recognised by the authorities.

A strengthened tax law was drafted in order to support greater revenue mobilisation and to ensure international compatibility with new areas, such as transfer pricing, treaty shopping and debt bias, fall within the tax framework and to minimise avoidance and facilitate understandability, she stated.


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