The Finance Ministry is planning to finalise this bill shortly and if it is unable to enact in parliament soon, then it will be introduced as an amendment to the existing law.
A team of IMF experts has collected information on current revenue collection procedure and implementation of existing tax laws from several divisions of the Inland Revenue Department (IRD), a tax consultant said.
The new Act has been prepared by these experts on the line of Ghana’s new tax law prescribed by the IMF. The proposed Sri Lankan bill is in fact a carbon copy of that country’s new legislation of that country, he claimed.
Top IRD officials however have been informed during these preparations by IMF experts, trade union leader of the department said. He pointed out that tax officers will have to study and understand the new law at least four to five years for them to implement it.
This could result in heavy revenue loss to the government during the interim period, he warned, pointing out that the proposal to separate the functions of the IRD to two divisions namely administration and tax collection will bring dire consequences.
IRD trade unions are contemplating necessary action that would be taken against the enactment of the new Bill, he said.
These unions were critical of the bill being moved too quickly with too little deliberation. The proposed Bill departs from the very foundation and fabric of the current Act. If implemented in its current form, any judicial precedence, interpretations, practices and principles relating to income tax established over almost a century could not be applied in the imposition, payment and recovery of income tax in Sri Lanka, tax experts claimed.
The proposed law attempts to fundamentally change the sources of income, method of calculating the taxable income, claiming deductions, assessment procedure and the administrative provisions.
“There were no reasons to make such drastic changes in the existing income tax,” one expert pointed out. He added that the precedence always recalls the preservation of its uniform evolution”.