Verité Research Sri Lanka Economic Policy Group says universal tax registration not advisable to SL

Friday, 3 March 2023 00:36 - - {{hitsCtrl.values.hits}}

Suggests pragmatic alternatives in research note

The Verité Research Sri Lanka Economic Policy Group says the universal tax registration is not advisable for Sri Lanka and stresses the need for a pragmatic alternative.

This view is contained in the fourth research note published by the Verité Research Sri Lanka Economic Policy Group. It presents an analysis by International Centre for Tax and Development Professor Mick Moore and Verité Research Dr. Nishan De Mel explaining why universal tax registration is not advisable for Sri Lanka. Instead, the note presents four alternative practical strategies that would contribute to widening the tax base and improving the productivity of Sri Lanka’s Inland Revenue Department (IRD).

In his Interim Budget Speech on 30 August 2022, President Wickremesinghe proposed to “introduce compulsory tax registration for all residents who are above 18 years of age without considering their annual income and tax-free thresholds.” In their analysis, Professor Moore and Dr. De Mel argue that implementing this policy would be administratively costly and divert scarce resources from more productive uses, is unlikely to result in a significant increase in tax revenue, and would contribute to increased public burden and potential repression of citizens.

Instead, four specific and targeted strategies are recommended for immediate consideration by the Sri Lanka Government and the IRD:

(1) Allocation of Tax Identification Numbers (TIN) to all individuals whose total Withholding Tax (WHT) deductions in any year imply earnings in excess of Rs. 1.2 million,

(2) Allocations of TINs to all Government servants whose basic annual salaries exceed Rs. 1.2 million,

(3) Mandate all individual professionals and companies affiliated with a Government/professional body to register for a TIN, and

(4) Allocate TINs to all employees who currently have taxes deducted from salaries under the Pay-As-You-Earn (PAYE) system and have incomes that are subject to a WHT deduction.

The Verité Research Sri Lanka Economic Policy Group was formed to contribute towards a workable, analytically evaluated, medium term plan for economic recovery, which can generate both local and international confidence. The core group consists of four international and local economists. They are supported by an expanded team of local and international economists and researchers. The core group members are: Prof. Dileni Gunewardena, Prof. Mick Moore, Dr. Nishan de Mel, Prof. Shantayanan Devarajan.

The full research note laying out this policy is accessible online from Verité Research (https://www.veriteresearch.org/verite-research-sri-lanka-economic-policy-group/).