Sep 01, 2017

Tax administration improvement gets underway Featured

With government firing on all cylinders, the new Inland Revenue Bill is ready to be presented in parliament soon amidst joint opposition and JVP protests.

Under this set up Improvements to tax administration gets underway to complement tax policy reforms. Changes to tax policy will be ineffective in raising revenue unless accompanied by a concerted effort to strengthen capacity on revenue administration, IMF sources said.

Laudable efforts have been underway at the Inland Revenue Department (IRD) for some end-December structural benchmarks for tax administration were met. With respect to VAT administration, IRD adopted a VAT compliance strategy that includes a time-bound plan to implement risk-based audits and KPIs to measure their effectiveness.

IRD also fully rolled out the RAMIS IT system including essential steps toward automation and the use of information technologies that are standard in many middle-income economies.

With respect to income tax administration, a concrete plan is critical to ensure that the new IRA is implemented in a timely and effective manner, including the training of tax officers.

An implementation plan has been devised by establishing a steering committee and its terms of reference, creating project teams at the IRD, and initiating the stakeholder consultation and communication process through the publication of detailed tax manuals.

Public outreach campaign is also planned, to educate and sensitize taxpayers to the new framework. IRD will adopt compliance strategies for corporate and personal income taxes (structural benchmark), following a successful implementation of the new IRA.

More broadly, organizational and business procedure reform has begun at the IRD including restructuring along functional lines, creating a design and monitoring unit, making management structure more efficient to speed up interaction with taxpayers, strengthening the Large Taxpayer Unit, introducing mandatory e-filing, and enhancing the use of taxpayer identification numbers.

The IT system for customs administration (ASYCUDA) has been improved, with case selection for risk-based cargo audit now automated.