Untitled - Department of Inland Revenue

Vision 

To be a taxpayer friendly tax administrator delivering excellent service to 

the tax paying public, with well-trained and dedicated staff facilitated by 

fully automated system. 

Mission 

To collect taxes in-terms of relevant tax and other related laws, 

by encouraging voluntary compliance while deterring tax 

evasion and tax avoidance, and 

To enhance public confidence in the tax system by 

administering relevant tax and other related legislation fairly, 

friendly and expeditiously and thereby facilitate and foster a 

beneficial tax culture. 

Strategic Goals 

• To improve voluntary compliance by taxpayers with the 

tax laws through programs, which encourage and assist in 

that and detect those who do not comply and, where 

necessary, take appropriate corrective action. 

• To improve the effectiveness of the Department by the 

application of efficient work methods, technology and 

better utilization of available resources. 

• To enhance the productivity and professionalism of the 

staff through management and technical training, work 

experience, and thereby to enable them to contribute more 

effectively towards the fulfillment, by the Department, of 

its mission. 

i

PRINCIPAL OFFICIALS 

Mr. K.M.S. Kandegedara Commissioner General of Inland Revenue 

Mr. V.D. P. Ubayasiri 

Senior Deputy Commissioner General 

Information & Communication Technology and NBT 

Mrs. M. Samarasekara 

Mr. K. L. S. Silva 

Mr. H. B. A. Senevirathne 

Mrs. D. M. Nanadawathie 

Mr. H.M.Abesinghe 

Deputy Commissioner General 

Indirect Tax Administration 


Tax Surveillance & Risk Management & BOI 

Enterprises, Collection & Legal 


Tax Policy Planning & Development, Legislation, 

Rulings and International affairs 


Direct Tax Administration 


Human Resources Management 

Mr. P.D. Premarathna 

Mr. S.T. Gobalasingham 

Mr. K. A. P. Kaluarachchi 

Mrs. W. B. S. Shanthikumar 

Mrs. L. Ramanayaka 

Senior Commissioner 

Legal, Stamp Duty, Appeals and Secretary to the 

Board of Review 


Zone 3, Tax Policy Planning, Legislation and Rulings 


LTU & Corporate Tax 


Internal Audit 


Zone 1 

Mr. W.M. Mendis 

Mr. A.L.A. Sirisena 

Commissioner 

Data processing (Information Technology 1) 

Commissioner 

Nations Building Tax 

ii

Mrs. H.M.C.I. Gunasekara 

Mr. W.V.P. Karunarathna 

Mr. P.A.V. Premarathna 

Mrs. K. Dahanayaka 

Mr. K.A.G. Abayarathne 

Mr. D.B. Jayasekara 

Mrs. W Anulawathie 

Mrs. S. Edirisingha 

Mr. I.M.B Senevirathna 

Mr. J.M. Jayawardhana 

Mr. A. Sri Selvanayagam 

Mrs. R.M.R.W Manchanayaka 

Mr. D.M.L.I. Dissanayake 

Mr. A. N. Guruge 

Mrs. P. Rohini 

Mrs. R.M.P.S.K Rajapaksha 

Mr. A.A.D.U. Abesinghe 

Commissioner 

Human Resource Development 

Commissioner 

Strategic & Operational Planning, Stamp Duty & 

Taxpayer services 

Commissioner 

LTU 

Commissioner 

VAT, ESC, Betting and Gaming Levy 

Commissioner 

Corporate Tax 

Commissioner 

Zone – 1 

Commissioner 

Human Resource Management 

Commissioner 

PAYE, WHT (Interest) & Unit 3 

Commissioner 

Investigation 

Commissioner 

Appeals 

Commissioner 

Collection and Special Collection 

Commissioner 

Zone 2 & WHT (Specified fees) 

Commissioner 

Zone 3 

Commissioner 

VAT Refunds 

Commissioner 

Internal Audit & Assessment Control 

Commissioner 

Information 

Commissioner 

Procurement & Supplies and Economic Research & 

Planning 

iii

Table of Contents 

The Summary of the Performance during the Year 2010……….. 

vii 

PART I - HUMAN RESOURCE MANAGEMENT AND DEVELOPMENT 1 

Chapter 1- Human Resources 1 

1.1 Approved Cadre, The number in post and vacancies 1 

1.2 Promotions 2 

1.3 Retirements 2 

1.4 Disciplinary Action 4 

1.5 Training 4 

PART II – TAX ADMINISTRATION 

Chapter 2 - Collection of Revenue 8 

2.1 Number of Taxpayers & Tax files 8 

2.2 Total Revenue Collection 9 

2.3 Total Revenue – Cash flow 11 

2.4 Collection of Revenue – Self Assessment and Other 12 

2.5 Inland Revenue Contribution to the Government Revenue and GDP 13 

2.6 Return Compliance 14 

2.7 Income Tax Collection 15 

2.8 Value Added Tax Collection 16 

2.9 Economic Service Charge (ESC) Collection 18 

2.10 PAYE Collection 19 

2.11 Withholding Taxes (on interest and specified fees) 19 

2.12 Stamp Duty Collection 20 

2.13 Betting & Gaming Levy Collection 20 

2.14 Debits Tax Collection 21 

2.15 Construction Industry Guarantee Fund Levy Collection 22 

2.16 Nation Building Tax (NBT) Collection 22 

2.17 Inland Revenue Collection 2006 to 2010 23 

Chapter 3 - Expenditure and Productivity Ratio 26 

3.1 Comparison of the total expenditure incurred during the year with 2008 , 2009 and 2010 27 

3.2 Analysis of the Recurrent Expenditure in 2010 28 

3.3 Productivity Ratio 28 

Chapter 4 – Taxes in Default 30 

Chapter-5 -Audits, Additional Tax Charged and Collected, Refunds, Recovery Action and 

Appeals 32 

5.1 Audits 32 

5.2 Appeals 33 

5.3 Board of Review 33 

5.4 Post VAT refund audits 34 

5.5 Recovery Action 34 

5.6 Refunds 34 

PART III - 

Chapter 6 - International Relations 36 

6.1 Double Tax Avoidance Treaties 36 

6.2 Affairs related to Double Tax Treaties during the year 2010 37 

6.3 Participations at International Taxation Matters Abroad 38 

Chapter 7 - Legislation 39 

7.1 Approved Charities 39 

7.2 Rulings Given During the Year 40 

Chapter 8 - Other 41 

8.1 Tax Payer Service Unit 41 

8.2 Details of the Directions and clearance certificates issued 41 

8.3 Analytical Reports 42 

8.4 Activities in North and East 42 

v

The Summary of the Performance during the Year 2010……….. 

Inland Revenue Department (IRD) could fulfill the government objective of collecting 

revenue for development of the country during the year, along with the end of the 

gruesome terrorism which lasted for almost three decades. The total revenue 

collected by the IRD during the year 2010 was Rs. 422,512 million. It is a growth of 

Rs. 69.5 million or 19.68% when compared to the figures in year 2009. It is also a 

51.69% contribution to the total government revenue and 7.54% of the annual gross 

domestic production. 

The successful steps taken by the IRD to enhance compliance in furnishing tax 

returns have resulted in an increase in return compliances relation to every tax 

compared to year 2009. Furnishing of non- corporate income tax returns on the due 

date reached 53% during the year of assessment 2009/2010 as against 48% recorded 

in the year of assessment 2008/2009. The compliance rate of furnishing returns on 

due date, has increased up to 66% while it was 58% during the year of assessment 

2008/2009, with regard to the corporate sector. 

Many new files could be opened with the initiatives taken by Information Branch and 

Taxpayer Service Branch. Accordingly, 9,287 new income tax files and 766 PAYE tax 

files (Employers) could be opened and 14,957 persons were temporally registered for 

VAT. Number of 1V return forms issued on information received was 22,552. 

During the year, by regulating tax audits, undisclosed income and turnover 

amounting to Rs. 142,814 million could be disclosed. Additional taxes imposed 

during the year on such amounts were Rs. 15,711 million. (Inclusive of setting off 

refunds against arrears) 

Further actions were taken to provide training on Code of Ethics for all the officers of 

the Inland Revenue service. Moreover, a series of seminars and lectures was 

conducted for providing awareness on tax matters, for the public and the staff. The 

activities of the regional office in Jaffna which did not function properly for decades 

due to the conflict situation in Northern and Eastern Provinces were formally 

restored subsequent to the appointment of staff and making the public aware of taxes 

by conducting seminars. 

The project for the expansion of the Automatic Processing System for recovery of all 

types of taxes was initiated during the year with increasing the number of computers 

and other relevant equipment. 

The head quarters of the IRD which was severely damaged by the terrorist attack in 

February 2009, was renovated with sophisticated facilities and some branches which 

had been operating in other buildings were relocated in the head quarters. 

vii

Taxes under respective enactments administered by the IRD during the year 

Taxes imposed under respective enactments administered by the IRD during the year 

are as follows: 

Income Tax 

Tax 

Value Added Tax (including VAT on Financial 

services, Advance Tax on VAT and Optional VAT) 

Economic Service Charge 

Debits Tax 

Nation Building Tax 

Enactments 

Inland Revenue Act. No. 10 of 2006 as amended by Act 

No.10 of 2007, 9 of 2008 and 19 of 2009 

Value Added Tax Act. No. 14 of 2002 as amended by 

Act No 7 of 2003, 13 of 2004, 6 of 2005,8 & 49 of 2006, 

14 of 2007, 15 of 2008 and 15 of 2009 

Economic Service Charge Act. No. 13 of 2006 as 

amended by Act No 15 of 2007, 11 of 2008 and 16 of 

2009 

Debits Tax Act. No. 16 of 2002 as amended by Act No 

05 of 2003, 12 of 2007 and 17 of 2009 

Nation Building Tax Act. No.9 of 2009 as amended by 

Act No 32 of 2009 

Betting and Gaming Levy The Betting and Gaming Levy Act. No. 40 of 1988 

Stamp Duty 

Share Transaction Levy 

Construction Industry Guarantee Fund Levy 

Social Responsibility Levy 

Turnover Tax (Northern Province) 

Stamp Duty Act. No. 43 of 1982 and the Stamp Duty 

(Special Provisions) Act. No. 12 of 2006 as amended by 

Act No 10 of 2008 

Finance Act. No. 5 of 2005 and Finance Act. No. 13 of 

2007 

Finance Act. No. 5 of 2005, Finance Act No. 11 of 2006 

and Finance Act. No. 8 of 2008 

The Turnover Tax Act. No. 69 of 1981 as amended 

IRD continued to deal with the work of assessment and collection of following 

taxes, which were in force earlier and have since been repealed 

Tax 

National Security Levy 

Goods and Services Tax 

Save the Nation Contribution 

Surcharge on Wealth Tax 

Surcharge on Income Tax 

Estate Duty 

Imposed under 

The National Security Levy Act. No. 52 of 1991 as 

amended 

The Goods and Services Tax Act. No. 34 of 1996 as 

amended 

The Save the Nation Contribution Act. No. 5 of 1996 as 

amended 

The Surcharge on Wealth Tax Act. No. 25 of 1982 and 

Act No. 8 of 1989 

The Surcharge on Income Tax Act. No. 26 of 1982, Act 

No. 12 of 1984, Act No. 7 of 1989 as amended 

The Estate Duty Act. No. 13 of 1980 as amended 

viii

PART-I 

HUMAN RESOURCE MANAGEMENT AND DEVELOPMENT 

Chapter 1- Human Resources 

1.1 Approved Cadre, the number in post and vacancies 

The following table shows the approved cadre of the Department, the actual number in post 

and the vacancies, as at 31 December 2010 

Cadre of the Department as at 31.12.2010 

Grade 

Approved Number in 

Cadre 

Post 

Vacancies 

Commissioner General 1 1 - 

Senior Deputy Commissioner General 1 1 - 

Deputy Commissioner General 6 5 1 

Senior Commissioner 5 5 - 

Commissioner 22 19 3 

Deputy Commissioner 90 85 5 

Senior Assessor 

54 

750 

Assessor 567 

129 

Assessor (Supernumerary) - 2 - 

Senior Tax Officer 

158 

1000 

Tax officer 438 

402 

Combined Services 

Director (Administration) 1 1 - 

Accountant 7 7 - 

Public Management Assistant(Supra) 2 2 - 

Translator 9 7 2 

Librarian 11 1 1 - 

Librarian 111 1 - 1 

Public Management Assistant 306 266 40 

Budget Assistant 2 2 - 

Transport officer 1 - 1 

Driver 74 66 8 

KKS 319 304 15 

Other 

Engineer 1 1 - 

System Analyst 6 1 5 

System Manager 2 2 - 

System Controller 3 3 - 

System Operator 11 3 8 

Data entry Operator 18 8 10 

Stamp Clerk 1 - 1 

Receptionist 4 3 1 

Supply Assistant 2 - 2 

Building Supervisor 1 - 1 

Storeman 3 - 3 

Carpenter 1 1 - 

Total 

2651 2013 638 

Performance Report 2010 

1

1.2 Promotions 

Mr. K. M.S. Kandegedara, Deputy Commissioner General, was appointed to the rank 

of Commissioner General of Inland Revenue with effect from May 31, 2010. 

Mr. H.M. Abesinghe, Senior Commissioner was promoted to the rank of Deputy 

Commissioner General with effect from June 16, 2010. 

The following Commissioners were promoted to the rank of Senior Commissioner 

Name 

Date of promotion 

• Mrs. W. B. S. Shanthikumar 05.05.2010 

• Mrs. L. Ramanayaka 31.05.2010 

• Mr. W.M. Mendis 27.12.2010 

The following Deputy Commissioners were promoted to the rank of Commissioner 

Name 

Date of promotion 

• Mr. A. N. Guruge 10.01.2010 

• Mrs. P. Rohini 03.04.2010 

• Mrs. R.M.P.S.K Rajapaksha 05.05.2010 

• Mr. A.A.D.U. Abesinghe 31.05.2010 

• Ms. D.G.P.W. Gunathilake 03.11.2010 

• Mr. J.P.D.R. Jayasekara 05.11.2010 

06 Senior assessors were promoted to the rank of Deputy Commissioner with effect from 

May 12, 2010 

02 Assessors were promoted to the rank of Senior Assessor with effect from May 02, 2010 

and July 07, 2010 

1.3 Retirements 

The following officers were retired from service during the year. 

Mr. E.M.M. Medagoda 

Mr. E.A.S. Edirisinghe 

Mr. H.M. Premarathna Banda 

Mr. S.A. Hemapala 

Mr. K. Rajarathnam 

Mr. S. Rajapaksha 

Mr. W.M.W.Kumarasiri 

Mr. K.D.M.R. Perera 

Mr. A.B.P. Karunarathne 

Commissioner General 

Additional Commissioner General 


Commissioner 

Commissioner 

Commissioner 

Commissioner 

Deputy Commissioner 



2

Other Retirements 

Senior assessors – 05 

Assessors – 18 

Translator - 01 

Public Management Assistants – 06 

Drivers – 01 

K K S – 05 

Mr. E.M.M. Medagoda 

Mr. E.M.M. Medagoda was appointed Commissioner General of Inland Revenue on 

June19, 2009. He began his career with the Department on September 01, 1976 as an 

Assessor and held several important positions in the tax administration. During his 

tenure of office spanning 33 years, Mr. Medagoda underwent training in Japan 

participating in the Junior Tax Program held in 1985. He also followed VAT training 

Course held in Indonesia in 1995. He represented the Department at the seminar on 

Exchange and Information held in Korea in 1997, 26 th Annual Technical Conference of 

CATA held in Canada in 2005 and the 12 th Annual International Taxation meeting on 

Tax Treaties held in France in 2007, study tour for FMRP project held in Hongkong & 

Philippines in 2007. Mr. Medagoda led the delegation in the negotiation and 

conclusion of the Double Tax convention with Saudi Arabia. 

Mr. E.A.S. Edirisinghe 

Mr. E.A.S. Edirisinghe joined the Department on September 01, 1976 as an Assessor. He 

served in various capacities with dedication and reached the rank of Additional 

Commissioner General in 2009. He retired from service on October 01, 2010 having counted a 

period of 33 years in the Inland Revenue service. Mr. Edirisinghe, during the tenure of his 

office, underwent training and participated in several overseas taxation programs including 

Tax Administration program held in California in 1990, and General Tax administration 

course held in Malaysia in 2000, It is Mr. Edirisinghe’s dedication and devotion that led to 

timely completion of the refurbishment work of the Inland Revenue building within a short 

period of time. 

Mr. H.M. Premarathne Banda 

Mr. H.M. Premarathne Banda joined the Department on May 05, 1980 as an Assessor. At the 

time of his retirement, which on May 04, 2010, he was functioning as Senior Commissioner 

Secretariat. Mr. Premarathne Banda counted 30 years of dedicated service in the Department. 

He played a dedicated role in the last restructuring program of the Department. 


3

1.4 Disciplinary Action 

Category 

Balance o/s as at Commenced Concluded Balance o/s as at 

01.01.2010 during the year during the year 31.12.2010 

Assessor 5 - - 5 

Tax officer 3 - 2 1 

1.5 Training 

1.5.1 In House Training 

Training Branch of the Department conducts training courses and examinations for 

Assessors and Tax officers, regularly. This is aimed at enhancing their knowledge and 

improving their analytical skills, particularly in Taxation and Accountancy. More weight is 

placed in providing the training on subjects that are required to fulfill various service 

requirements of officers for their confirmation in the respective grades. Details of personnel 

trained and the examinations conducted during the year are as follows: 

 

Training for Assessors. 

Course 

No of Trainees 

Training classes conducted for Assessors in Class 11 Grade 11 

(promoted according to the Administrative Tribunal Case No. 

AAT/26/2008 (PSC), on 12.10.2009) for the first departmental 

examination 

10 

Training for Tax Officers 

Course 

No of Trainees 

Training classes conducted for Tax Officers in Class 111 Grade 11 for 

the conformation in Class 111 Grade 1 and eligibility for the 

promotion to Class 11 Grade 11 

Sinhala medium 

English medium 

Tamil medium 

375 

37 

20 


4

Seminars, Work Shops etc. 

Subject 

Training programs on “Management and Good 

Governance” for Deputy Commissioners 

Seminars on “Code of Ethics” for all Assessors and 

Tax Officers 

Seminars on “Tax related subjects and relevant topics 

for office work” 

No. of seminars, workshops 

held during the year 

Training sessions on “Tax Procedure” 8 

3 

3 

8 

1.5.2 Overseas Training 

Arrangements were made for several officials of the Department to participate in 

training programs, seminars and workshops held abroad with a view to expose them 

to the advances made in the administration of Tax Laws and best practices of other 

countries in order to maintain a level of professionalism as Tax administrators. 

Accordingly, 33 officers were participated in such training programs during the 

year. Details of such officers who were sent abroad for training and the training 

programs they participated are as follows: 

Name and Designation of 

the Officer 

Name of the Program 

Country of 

Training 

Duration 

1 

Mrs. L. Ramanayake 


International seminar on 

Taxation (Senior Course) 

Japan 

30.08.2010- 

22.09.2010 

2 

Mr. D.M.L.I Disanayake 

Commissioner 

Practical aspect of 

international Tax Planning 

Netherlands 

18.102010- 

22.10.2010 

3 

4 

5 

6 

7 

8 

Mr. A.N. Guruge 

Commissioner 

Mr. H.M.W.C. Bandara 


Mr. H.M. Dencil 


Mr. D.M.S. Disanayake 


Mr.W.K.K. Jayarathne 


Mr. P.K.Pathmanaden 


Practical aspect of 

international Tax Planning 

Interpretation and 

Application of Tax treaties & 

Transfer pricing 

fundamentals(IBFD) 
















Netherlands 

Netherlands 

Netherlands 

Netherlands 

Netherlands 

Netherlands 

18.102010- 

22.10.2010 

22.02.2010- 

26.02.2010 

22.02.2010- 

26.02.2010 

22.02.2010- 

26.02.2010 

22.02.2010- 

26.02.2010 

22.02.2010- 

26.02.2010 


5


9 

10 

11 

Ms. R.K.C Chithralatha 


Ms. R.M.R.W. Munchanayake 


Mr. D.U.A. Jayawardena 

Deputy Commissioner r 





LHDNM_OECD Practical 

Workshop on the Negotiation 

of Tax Treaties 

Workshop on Taxation of 

International 

Transaction(TOTI) 

Netherlands 

Malaysia 

Malaysia 

22.02.2010- 

26.02.2010 

08.03.2010- 

12.03.2010 

03.05.2010- 

21.05.2010 

12 

Mr. E. S. De Soysa 


Tax administration 

Development (KOICA) 

Korea 

15.07.2010- 

30.07.2010 

13 

Mr. T. Rajapakshe 




Korea 

15.07.2010- 

30.07.2010 

14 

Mr. R.A.N. Rajapakshe 




Korea 

15.07.2010- 

30.07.2010 

15 

Mr. M. Gunaweera 




Korea 

15.07.2010- 

30.07.2010 

16 

Mr. R. M. Dingiri Banda 




Korea 

15.07.2010- 

30.07.2010 

17 

Mr. S.M.A. Bandara 




Korea 

15.07.2010- 

30.07.2010 

18 

Ms. D.W.M. Wijekoon 




Korea 

15.07.2010- 

30.07.2010 

19 

Ms. L.M.C. Weerakoon 




Korea 

15.07.2010- 

30.07.2010 

20 

Ms. R.K.C. Chithralatha 




Korea 

15.07.2010- 

30.07.2010 

21 

Ms. T.M.J.N ThalAramba 




Korea 

15.07.2010- 

30.07.2010 

22 

Ms. K.G.C. Priyadarshanie 




Korea 

15.07.2010- 

30.07.2010 

23 

Mr. W.M. N. Wickramasinghe 


Principles of International & 

Co-operative Taxation (IBFD) 

Netherlands 

16.08.2010- 

27.08.2010 

24 

Mr. N.M.P.N.B. 

Wanigasekara 




Netherlands 

16.08.2010- 

27.08.2010 

25 

Mr. J.A.A. Parakrama 




Netherlands 

16.08.2010- 

27.08.2010 

26 

Mr. D.M.R. Disanayake 


Transfer Pricing Aspects of 

Business Restructurings 

Singapore 

14.07.2010- 

16.07.2010 


6

27 

Mr. H.T.K.F. Peris 




Singapore 

14.07.2010- 

16.07.2010 

28 

Ms. W.P.C.S. Ranaweera 




Singapore 

14.07.2010- 

16.07.2010 

29 

Mr. B.K. Saman Santha 




Singapore 

14.07.2010- 

16.07.2010 

30 

31 

32 

33 

Ms. Swarna Liyanage 


Mr. S.W.P.Y. silva 

Assessor 

Mr. M.G. Karunarathne 

Assessor 

Ms. S.I. Asanthi 

Assessor 

Tax Analysis and Revenue 

Forecasting Programme 

(FMRP) 

Master’s Degree Programme 

in International development 

(KOICA) 

GTC:Project Management for 

E Government Promotion 

(JAICA) 

Master’s Degree Programme 

in Public Policy & 

Management 

USA 

Korea 

Japan 

Japan 

27.06.2010- 

23.072010 

17.02.2010- 

30.02.2011 

05.04.2010- 

10.09.2010 

commenced 

on 

05.04.2010 

34 

Mr. L.K. Rathnayake 

Assessor 

Commonwealth Tax 

Inspectors Course(CTIC) 

UK 

02.08.2010- 

10.09.2010 


7

PART II 

TAX ADMINISTRATION 

Chapter 2 - Collection of Revenue 

The Department of Inland Revenue being the main contributor to the Government’s 

revenue is entrusted with an immense responsibility of collecting revenue to the 

Government. The Department collected net revenue of Rs. 422,512,163,644 (including 

Social Responsibility Levy) during the year. This sum shows an increase of Rs.69.5 

billion (or 19.68%) over that of year 2009. This revenue was built up by attending to 

affairs of 864,873 taxpayers, including several withholding agents through whom 

certain taxes were collected by way of deduction at source, out of which 530,213 

employees were paying income tax (by deduction at source) under PAYE scheme. 

2.1 Number of Taxpayers & Tax files 

The number of persons registered with the Department for the payment of tax, as at the end of 

the year, is given in Table 01. 

Number of Taxpayers and Tax Files as at 31-12-2010 

Income Tax 

Corporate 

Resident Companies 

29,833 

Non-Resident Companies 

576 

State Corporations, Statutory Boards and State owned institutions 54 30,463 

Non Corporate 

Individuals 

192,451 

Partnerships 

16,578 

Bodies of Persons etc. 1,107 

Employees paying income tax under Pay-As-You-Earn (PAYE) 

Scheme (as at 31-03-2010) 

530,213 740,349 

Total Income Taxpayers 770,812 

Other Tax Payers 

Persons and Partnerships registered for Economic Service Charge(ESC) 11,936 

Persons registered for Value Added Tax (VAT) 31,271 

Persons registered for Value Added Tax on Financial Services 152 

Persons registered for Optional VAT 3,950 

Persons registered for Nation Building Tax (NBT) 14,577 

Persons registered for Debits Tax 911 


8

Betting Levy Files 933 

Gaming Levy Files 4 63,734 

Total Tax payers 834,546 

Employers Registered under PAYE Scheme 14,354 

Withholding Tax on Interest (Withholding Agents) 1,793 

W H T on Specified Fees (Regular monthly schedule senders) 6,816 

Stamp Duty (Regular quarterly schedules senders) 7,364 30,327 

Total Number of tax files/ tax payers as at 31-12-2010 864,873 

Table 01 

*Not include employees given in incomplete declarations furnished by their respective 

employers 

Note: 

(i) A separate file is not generally maintained in the Department in respect of any employee 

from whose remuneration tax is deducted under PAYE Scheme, unless such employee has 

any other income. 

(ii) Individuals whose income is taxed at source as a final tax (such as interest on 

Treasury Bills, Dividends, and Rewards etc) are not included. 

deposits, 

(iii) 640 Non-Governmental Organizations and 4,648 Government employees with 

maintaining files have been included in the above statistics 

2.2 Total Revenue Collection 

The total revenue collection for the year, amounted to Rs. 422 billion shows an increase of Rs. 

69.5 billion or 19.68% over that of the previous year. This achievement could be attributable 

mainly to wide reforms undertaken in tax administration, which also led to mending the 

loopholes in the tax system. 

The ratio of the total Inland Revenue contribution to the Government revenue in the year was 

51.69%. The collection of revenue indicates 100% achievement of expectation reflecting only a 

marginal drop in collection of Income tax and Value Added Tax. Even when compared with 

the estimate of Rs. 434.61 billion for the year, the revenue for the year was short only by Rs. 

2.10 billion. The collection of outstanding (default) taxes for the year under review was Rs. 

13.0 Billion (the collection of default tax in 2009 was Rs. 15.6 Billion). This is somewhat 

noteworthy as the refurbishment of the Inland Revenue building, which was damaged in the 


9

previous year, completed only in March 2010 and the scattered offices re-occupied the 

building only in the middle of the year. 

The revenue from VAT has gone up by 28% in 2010 over that of previous year. This was 

mainly due to the increasing the volume of importation of some luxury items. However, the 

collection of income tax of Rs.117.57 billion during the year indicates a short fall of Rs 7.7 

billion over that of the year 2009. The main reason for the drop in revenue from Income tax 

could be due changes in policies. 

Table 02 shows the tax wise analysis and the table 03 shows the cash flow of the total revenue 

collection for the year 2010 

Type of Tax 

Total Revenue Collection – 2010 

Revenue 

Estimate Rs: 

(Revised) 


Collection Rs: 

Collection 

as a % of 

Estimate 

Collection 

as a % of 

Total 


Income Tax 120,040,000,000 117,575,259,945 98% 27.87% 

Economic Service Charge 15,000,000,000 18,047,723,176 120% 4.28% 

Debits Tax 9,559,000,000 10,843,436,359 113% 2.57% 

Betting & Gaming Levy 300,000,000 294,841,046 98% 0.07% 

Share Transaction Levy 2,375,000,000 2,272,957,122 96% 0.54% 

Stamp Duty 4,204,000,000 4,439,842,693 106% 1.05% 

Value Added Tax 222,628,000,000 219,563,122,247 98% 51.97% 

Goods & Services Tax 40,000,000 38,534,018 96% 0.01% 

Turnover Tax 300,000,000 388,294,514 129% 0.09% 

National Security Levy 15,000,000 23,222,185 155% 0.01% 

Construction Industry Guarantee Fund 

Levy 

780,000,000 829,785,134 106% 0.20% 

Nation Building Tax 45,362,000,000 46,022,517,148 101% 10.83% 

Total Revenue 420,603,000,000 420,339,535,587 100% 99.48% 

Social Responsibility Levy 1,300,000,000 2,172,628,059 167% 0.52% 

Total Revenue (Including SRL) 421,903,000,000 422,512,163,646 100% 100.00% 

Table 02 


10

Chart 01 

Total Revenue Collection - 2010 

Revenue Collection Rs Millions 

250,000 

200,000 

150,000 

100,000 

50,000 

0 

IT 

ESC 

DT 

VAT 

BGL STL SD GST TT NSL 

Tax Type 

CIGFL 

NBT 

SRL 

IT ESC DT BGL STL SD VAT GST TT NSL CIGFL NBT SRL 

2.3 Total Revenue – Cash flow 

Month 

January 

February 

March 

April 

May 

June 

July 

August 

September 

October 

November 

December 

Table -03 

Cash Flow- 2010 


Collection 

Cumulative Revenue 

(Including SRL) 

Collection Rs: 

Rs: 

28,684,753,511 28,684,753,511 

33,360,985,619 62,045,739,130 

25,632,333,259 87,678,072,389 

32,410,069,287 120,088,141,676 

32,486,436,610 152,574,578,286 

29,875,187,606 182,449,765,892 

35,798,647,762 218,248,413,654 

41,063,059,288 259,311,472,942 

44,389,906,062 303,701,379,004 

39,793,567,617 343,494,946,621 

43,184,763,385 386,679,710,006 

35,832,453,640 422,512,163,646 


11

Revenue Millions 

450,000 

400,000 

350,000 

300,000 

250,000 

200,000 

150,000 

100,000 

50,000 

0 

Chart 02 

Cash Flow- 2010 

Revenue Collection (Including SRL) Rs: 

Month 

Cumulative Revenue Collection Rs: 

2.4 Collection of Revenue – Self Assessment and Other 

During the year, out of the total revenue collection (excluding VAT and NBT on Imports), 

4.4% was collected as non self assessment revenue. In 2009 this was 5.79% to the total revenue 

collection. 

Table 04 shows the comparison of figures. 

Analysis of Collection under Self Assessment and other. 

2008(Rs. ‘000) 2009 (Rs. ‘000) 

Self 

Self 

Other 

Other 

Assessment 

Assessment 

2010 (Rs. ‘000) 

Self 

Other 

Assessment 

Income Tax 106,748,623 5,316,698 117,529,249 7,821,560 110,451,338,127 7,123,921,818 

VAT(Excluding 

VAT on Imports) 

NBT (Excluding 

NBT on Imports) 

97,674,946 4,478,467 96,423,173 7,074,945 115,100,917,240 4,884,494,247 

0 0 12,338,569 63,186 18,981,743,493 328,332,130 

Others 29,263,312 257,808 28,625,908 716,620 38,642,159,496 709,104,809 

Total 233,686,881 10,052,973 254,916,899 15,676,311 283,176,158,356 13,045,853,004 

% to the Total 


(Excluding VAT and 


Table 04 

95.88% 4.12% 94.21% 5.79% 

95.60% 4.40% 


12

2.5 Inland Revenue Contribution to the Government Revenue and GDP 

Table 05 shows the contribution of the Inland Revenue Department to the Government 

revenue and the GDP in 2010 and its trends in last 4 years. Chart 03 illustrates these 

contributions. Total Government revenue in 2010 has increased to Rs 817,280 Mn (Annual 

Report of Ministry of Finance & Planning – 2010) while the percentage of the total Inland 

Revenue collection to the Government revenue, recording as 51.69%. Though, there was a 

slight decline in the Department’s contribution, it is still remained above 50% of the total 

revenue collection. 

Contribution to the Government Revenue and GDP at Current Prices of Major Economic 

Activities 

GDP at Current 

Year 

Governments 

Revenue Rs. Mn 

** 

IRD’s 

Collection Rs. 

Mn 

% of IRD’s 

Collection to 

Govt. Revenue 

Prices of Major 

Economic 

Activities Rs. 

% of IRD’s 

Collection to 

GDP 

Mn * 

2006 477,833 

2007 565,051 

2008 655,260 

2009 699,643 

2010 817,280 

Source – * Central Bank of Sri Lanka (Annual Report 

Table 05 

253,319 53.01% 2,938,680 

308,205 54.54% 3,578,688 

344,570 52.59% 4,410,682 

353,015 50.46% 4,835,293 

422,512 51.69% 5,602,321 

8.62% 

8.61% 

7.81% 

7.30% 

7.54% 

Central Bank of Sri Lanka (Annual Report- 2010) **Ministry of Finance and Planning (Annual Report- 2010) 

900,000 

Chart 4 

Contribution to the Government Revenue 

800,000 

700,000 

600,000 


500,000 

400,000 

300,000 

200,000 

100,000 

0 

2006 

2007 2008 

Year 

2009 

Governments Revenue 

IRD’s Collection 

2010 


13

2.6 Return Compliance 

The programs for enhancing taxpayer compliance in timely filing tax returns and paying taxes 

on self-assessment basis continued during the year. Offering benefits to individual taxpayers 

to enhance voluntary compliance towards the tax laws, such as awarding Privilege Cards 

(Gold & Silver), granting tax concessions on importation of motor vehicles, discounts on early 

tax payments were effectively continued. 

Accordingly, for the year of assessment 2009/10, Income Tax Return Compliance rate has 

increased when compared with the previous year of assessment. Filling Corporate Income tax 

returns on the due date reached 52% as against 49% recorded in the previous year. As regards 

the Non-corporate Sector, the compliance rate of furnishing returns on the due date has 

increased to 41% from 39% in the previous year, and after one month compliance reached 66% 

in corporate sector and 53% in non-corporate sector. 

• Table 06 shows the Income Tax Return Compliance rates on due date, and on a date 

after one month from the due date for the years from 2005/06 to 2009/10. 

• Table 07 shows the rates of return compliance on other taxes. 

Year of 

Assessment 

2005/2006 

2006/2007 

2007/2008 

2008/2009 

2009/2010 

Table 06 

Income Tax Return Compliance 2005/06 to 2009/10 

Sector 

Compliance on 

Due Date 

Compliance 

within one 

month from the 

due date 

Corporate 34% 44% 

Non-corporate 33% 44% 




Non- corporate 27% 50% 





Year 

2010 

Table 07 

VAT 

ESC 

Return Compliance on Other Taxes 

Debit 

Tax 

NBT 

Stamp 

Duty 

94% 81% 100% 98% 99% 

PAYE 

Year of Assessment 

2009/10 

51% 


14

2.7 Income Tax Collection 

Income tax revenue declined by 6.2% to Rs. 117,575 Million in 2010. This slowdown of Income 

tax revenue was reflected in the income tax collected from withholding tax on interest. The 

interest rates of deposits were reduced during the year. As a result of reduction rate of 

deposit, investors moved towards share market. The Income tax collection accounts for 27.83% 

of the total revenue of the Department for the year, and that was 35.51% for the year 2008. (In 

2008 – 32.52%). 

2.7.1 Income Tax Collection 

– Sector wise clarification 

The contribution from the corporate sector to the total income tax collection of Rs. 117.57 

Billion was amounted to Rs.57.15 Billion or 48.62% whereas the non corporate sector 

contributed Rs. 60.41 Billion or 51.38%. Table 08 shows the composition of Income Tax 

collection, and chart 04 illustrates it. 

Corporate & Non-Corporate Income Tax Collection – 2010 

Sector 

Tax Collection (Rs) % 

Corporate 

57,159,980,481* 48.62% 

Non-Corporate 

60,415,279,464** 51.38% 

117,575,259,945 100% 

Table 08 

Notes- 

* includes dividend tax of Rs: 5,645Mn 

* * includes WHT deducted and remitted from interest income and services rendered by Corporate 

Sector 

Chart 5 

Corporate & Non-Corporate Income Tax Collection 

2010 

Non-Corporate 

51.38% 

Corporate 

48.62% 

Corporate 

Non-Corporate 


15

2.7.2 Source-wise Analysis of Income Tax collection 

Table 09 shows the source wise composition (employment and others) of income tax 

collected during the year 

Income Tax Collection – 2010 

Source wise Analysis (Employees and Others) 

Employment 

Source 

PAYE Scheme 16,032.11 

Self assessment and Assessments with penalties 

with tax in default 

Others 

Self assessment and Assessments with penalties 

with tax in default 

Collection (Rs,Mn) 

279.83 16,311.94 

57,669.69 

With holding tax on interest, rent & specified fees 38,694.03 

Deductions at source 5,646.92 

Compounding penalties 0 102,010.64 

Gross Collection 118,322.58 

Less: Refunds -747.33 

Net collection 117,575.25 

Table 9 

2.8 Value Added Tax Collection 

Reflects an increase of 28% over that of the previous year which was Rs 171.11 Billion. Even 

when compared with the estimate of Rs: 222.62 Billion for the year, the revenue for the year 

reduced by Rs 3.06 Billion only. Increasing the volumes of importation in motor vehicles 

including luxury items helped to increase the VAT revenue. The part of VAT collected on 

domestic supplies shows a slight increase over that of the previous year. The total domestic 

VAT collected for the year was 120 Billion and this amount was an increase of 16.5 Billion over 

that of the year 2009 which was Rs 103.5.Billion. The total VAT collected on imports during 

the year 2009 was Rs 67.6 Billion and in the year, 2010, it was Rs 99.5 Billion. 

Table 10 shows the Sector wise classification of Value Added Tax collection and the 

contribution to the GDP. 

Sector wise Analysis of VAT Contribution to GDP 

Sector Net Collection (Rs) % 

% of VAT Collection to GDP 

2010 2009 

Manufacturing Sector 31,705,003,722.00 14.44% 0.57 0.58 

Non Manufacturing Sector 88,280,407,765.00 40.21% 1.58 1.56 

On Imports 99,577,710,759.00 45.35% 1.77 1.4 

Total 219,563,122,247.00 100% 3.91 3.54 

Table 10 


16

Table 11 shows the Value Added Tax Gross Collection and Refunds, and the net Collection, 

sector wise, which is illustrated by Chart 05. 

Value Added Tax Gross Collection and Refunds 

Sector 

2009 2010 

Net Collection 

(Rs. Mn) 

Gross Collection 

(Rs. Mn) 

Refunds 

Net Collection (Rs. 

Mn) 

Manufacturing 28,220.54 39,282.04 7,577.04 31,705.00 

Non- Manufacturing 

-Services 54,267.71 59,664.36 1,292.61 58,371.75 

-Financial Services 20,949.92 29,826.27 

29,826.27 

-Optional VAT 61.95 75,279.58 82.38 89,573.01 82.38 88,280.40 

Imports 67,619.45 99,577.83 0.12 99,577.71 

Total 171,117.57 228,432.88 8,869.77 219,563.11 

Table 11 

Chart 05 

Value Added Tax Collection - 2010 

Imports 

45.27% 

Manufacturing 

Sector 

14.46% 

Non Manufacturing 

Sector 

40.27% 

2.8.1 Industry-wise Analysis 

Table 12 shows the domestic VAT industry-wise analysis, such as banking, insurance, hotel 

& restaurant, construction, electricity & gas, imports, financing and their contribution to the 

total VAT revenue. 


17

Gross Domestic VAT – Manufacturing and Service Sectors 

Year 

2008 

(Rs.Mn) 

% 

Year 

2009 

(Rs.Mn) 

% 

Year 

2010 

(Rs.Mn) 

Banking 14,708 13.10% 15,669 14.00% 21,391 36.52% 

Insurance 3,689 3.30% 2,674 2.40% 3,370 26.02% 

Hotel & Restaurant 3,324 3.00% 2,495 2.20% 3,882 55.63% 

Construction 8,178 7.30% 6,401 5.70% 6,077 -5.07% 

Electricity & Gas 391 0.30% 1,723 1.50% 151 -91.23% 

Imports 10,166 9.10% 7,687 6.90% 11,914 54.99% 

Financing 10,717 9.60% 10,664 9.50% 13,354 25.23% 

Communication 5,411 4.80% 4,140 3.70% 7,111 71.77% 

Petroleum Product 1,556 1.40% 5,533 4.90% 2,438 -55.94% 

Beverage –Alcoholic 7,484 6.70% 8,650 7.70% 10,887 25.86% 

Services not classified 7,057 6.30% 1,560 1.40% 7,085 354.26% 

Manufacturing not classified 6,012 5.40% 5,971 5.30% 6,507 8.99% 

VAT on Financial Services & Others 33,260 29.70% 38,733 34.60% 25,817 -33.35% 

% 

Table 12 

Total 111,954 100 111,899 100 119,985 7.23% 

Import and supply of light weight electrical and electronic items under the certain HS code 

were exempted from VAT with effected from 01.06.2010 

2.9 Economic Service Charge (ESC) Collection 

During the year, 1,541 new ESC files were opened increasing the total to 14,355 as at 

31.12.2010. 

The Department collected Rs. 18,048 Mn. as ESC during the year, and its contribution to the 

total collection was 4.27%. It recorded 120 percent growth of the collection as against the 

estimate for the year. 

Table 13 shows sector - wise analysis of Corporate and Non Corporate of Economic Service 

Charge collection for the year 2010 and Chart 06 illustrates it. 

Economic Service Charge Collection- 2010 

Sector Collection % 

Corporate Sector 16,350,031,690.09 90.60% 

Non Corporate Sector 1,697,691,485.67 9.40% 

Total 18,047,723,175.76 100% 

Table 13 


18

Chart 6 

Economic Service Charge Collection 2010 

Corporate Sector 

90.60% 

Non Corporate Sector 

9.40% 

2.10 PAYE Collection 

Gross revenue collected under PAYE scheme, during the year, was Rs.16, 312 Million (in 2009– 

Rs.: 14,536 Mn.) which is part of Income Tax collection. 

The number of employees paying income tax under Pay-As-You-Earn (PAYE) scheme 

recorded 530,213. (Not including the number of employees in the incomplete declarations 

furnished by certain employers) and the number of employers registered under PAYE Scheme 

was 14,534. 

Analysis of Tax under PAYE and Level of income 

Below 

300,000 

Range of Income 

Total Gross 

Remuneration 

No. of 

Employees 

Tax under PAYE 

Paid 

Tax not deducted 

41,469,355,614.32 281,972 

Tax deducted 182,998,224.49 

300,001 - 600,000 45,325,091,275.86 106,540 709,935,978.75 

600,001 - 800,000 28,487,940,494.67 41,083 845,578,174.05 

800,001 - 1,000,000 21,216,809,207.74 23,075 961,216,067.33 

1,000,001 - 1,200,000 12,511,456,616.07 58,441 785,680,069.35 

1,200,001 - 1,400,000 6,944,988,664.48 5,513 631,577,156.07 

1,400,001 -1,900,000 10,538,688,391.96 6,376 1,260,750,680.93 

Above 1,900,000 27,542,672,331.25 7,213 6,502,363,136.23 

Total 194,037,002,596.35 530,213 11,880,099,487.20 

Note: This information is based on records in the completed returns furnished by the employers for the Y/E 

2009/2010 

Table-14 

2.11 Withholding Taxes (on interest and specified fees) 

WHT on interest recorded a collection of Rs. 29,422,008,983/- during the year, which consists 

Rs. 22,325,326,102/- on Treasury Bills and Bonds (Rs. 35,785,982,991/- for the year 2009) and 


19

the balance from other instruments (deposits etc). WHT revenue on interest declined by Rs.1, 

834 Mn against the estimated for the year. Due to the reduction of interest rate of deposit by 

the Central Bank, investors moved to the share market. This may be a reason for the drop of 

the WHT revenue of interest. 

Rs. 9,239,680,706/- Mn. was collected as WHT on Specified Fees (Rs 8,610,067,557/- Mn for the 

year 2009) through 6,816 permanent withholding taxpayers sending monthly schedules 

during the year. Number of 80,520 monthly schedules received from them, recording 98.4% 

compliance rate. The facility of directions for non-deduction available to ESC payers resulted 

in drop of the WHT revenue on specified fees against the estimated for the year, (Rs 

11,344Mn). 

2.12 Stamp Duty Collection 

Rs 4,440 Mn. generated from Stamp Duty during the year as against the estimate of Rs. 4,204 

Mn. This shows that 105% of the estimate is achieved. The total collection of Stamp Duty 

increased by 33.41% when compared to year 2009. 

The Department conducted advisory and supervisory visits with view to enhance the tax base 

and accordingly 156 places were visited in the year 2010. Numbers of regular registered 

compounding agents of Stamp Duty were 7364, and out of this 6,758 have furnished schedules 

recording a 99 % compliance. 

2.13 Betting & Gaming Levy Collection 

During the year, collection of Betting and Gaming levy was Rs.294, 841,046/-. This reflects a 

marginal decline by Rs. 5,158,954/-when compared with the estimated for the year. However, 

this collection showed an increase of 9.8Mn than the previous year. 

Prosecution actions were taken during the year against the number of 27 defaulters by the 

Betting and Gaming Levy Branch. 

Table 15 compares the Revenue Estimate of Betting and Gaming Levy with the Revenue 

Collected in the year. 

Collection of Betting & Gaming Levy -2010 

Estimated Revenue 

(Rs.) 

Actual Collection 

(Rs.) 

% 

Table 15 

300,000,000 294,841,046 98.28% 


20


300 

299 

298 

297 

296 

295 

294 

Chart 7 

Collection of Betting & Gaming Levy -2010 

300.00 

294.84 

293 

292 


Actual Collection 

2.14 Debits Tax Collection 

Debits Tax generated Rs. 10,843Mn and constituted 2.58% of the total revenue collection 

during the year. The Debits Tax collection could increase the target by Rs 1, 284Mn set for the 

year and it reflects 35% increase over the corresponding figure in 2009. 

Table 16 compares the revenue estimate of Debits Tax with the revenue collected during the 

year, and the Chart 08 illustrates it. 

Debits Tax Collection – 2010 


(Rs) 

Revenue Collection 

(Rs) 

9,559,000,000 10,843,436,359 113.00% 

Table 16 

% 

Chart 8 

Debits Tax Collection – 2010 


11,000 

10,800 

10,600 

10,400 

10,200 

10,000 

9,800 

9,600 

9,400 

9,200 

9,000 

8,800 

9,559 

Estimated Revenue (Rs) 

10,843 

Revenue Collection (Rs) 


21

2.15 Construction Industry Guarantee Fund Levy Collection 

Revenue collection from Construction Industry Guarantee Fund Levy exceeded the estimate 

by Rs. 49,785,134/-. With its contribution of Rs 829,785,134/- to the total revenue. As a 

percentage of the estimate, it recorded the rate of 106% during the year. This increase shows 

the success of policy change made by introducing withholding system to this levy. 171 

Construction Levy payers have been registered for paying this levy and all have submitted the 

declarations on time with due payments, recording 100% compliance. 

2.16 Nation Building Tax (NBT) Collection 

Collection from NBT for the year exceeded the estimate by 660 Mn and contributed 10.89% to 

the total revenue collection. Total number of tax payers registered for NBT as at 31. 12. 2010 

was 14,627. Out of the companies registered for NBT are 8,783 and the rest are individuals and 

partnerships. NBT collection has recorded a 100% achievement of the estimate for the year. 

NBT revenue increased by 69% to 46,022 Mn in 2010. 

Analysis of NBT collection -2010 

Sector 

Net Collection 

(Rs.) 

Manufacturing 7,714,130,983.00 

Services 11,595,944,639.00 

Imports 26,712,441,526.00 

Total 46,022,517,148.00 

Table 17 

Nation Building Tax Collection – 2010 


(Rs) 


(Rs) 

45,362,000,000 46,022,517,147 101% 

Table 18 

% 


22

Millions 

46,100 

46,000 

45,900 

45,800 

45,700 

Chart 9 

Nation Building Tax Collection – 2010 

46,023 


45,600 

45,500 

45,400 

45,300 

45,200 

45,100 

45,000 

45,362 

Estimated Revenue (Rs) 

Revenue Collection (Rs) 

Importation of gold was exempted from NBT with effect from 01.03.2010 

2.17 Inland Revenue Collection 2006 to 2010 

Figures in Table 19 represent the tax wise classification of revenue collection of the Department, 

from 2006 to 2010. 

Inland Revenue Collection 2006 to 2010 – Tax wise Analysis 


Colln. 

(Rs. 

Mn) 

2006 2007 2008 2009 2010 

% 

Colln. 

(Rs. 

Mn) 

% 

Colln. 

Colln. 

Colln. 

(Rs.Mn) 

% 

(Rs.Mn) 

% 

(Rs.Mn) 

% 

Income Tax 71,481 28.22 94,965 30.81 112,065 32.52 125,350 35.51 117,575 27.83 

Economic Service Charge 8,853 3.49 12,203 3.96 14,476 4.02 14,207 4.02 18,048 4.27 

Value Added Tax 164,071 64.77 186,991 60.67 202,984 58.91 171,118 48.47 219,563 51.97 

Debits Tax 6,255 2.47 7,187 2.33 8,410 2.44 8,036 2.29 10,843 2.58 

Betting & Gaming Levy 282 0.11 268 0.09 270 0.08 269 0.07 295 0.07 

Share Transaction Levy 420 0.17 412 0.13 449 0.13 560 0.16 2,273 0.53 

Turnover tax 233 0.09 461 0.15 535 0.16 337 0.1 388 0.09 

Stamp Duty 1495 0.59 4,026 1.31 3,751 1.09 3,327 0.94 4,440 1.05 

Estate Duty 0.6 0 0 0 0 0 0 0 0 


23

Goods & Services Tax 136 0.05 142 0.05 127 0.04 56 0.01 39 0.00 

National Security Levy 93 0.04 105 0.03 68 0.02 17 0.004 23 0.00 

Construction Industry 

Guarantee Fund Levy 

24 0.01 56 0.02 230 0.07 571 0.16 830 0.20 

NBT 0.00 0.00 0 0 0 0 27,205 7.71 46,022 10.89 

Social Responsibility 

Levy 

0.00 0.00 1,389 0.45 1,206 0.35 1,962 0.56 2173 0.52 

253,344 100 308,205 100 344,571 100 353,015 100 422,512 100 

Table 19 

Chart 10 

Inland Revenue Collection 2006 to 2010 – Tax wise Analysis 

250,000 

Millions 

200,000 


150,000 

100,000 

50,000 

0 

2006 2007 2008 2009 2010 

Year 

Income Tax 


Sector wise Analysis of Revenue Collection from Files attached to Large Tax Payers 

Units and International Unit. 

Revenue collections of Large Taxpayers Units constitute more than 60% of the total revenue of 

the department. Table 20 shows the sector wise analyses of revenue collection of total files attach 

to Large Taxpayers units and International Unit during the year 2009 and 2010. 


24

Sector 2009 2010 

Agriculture 704,119,455 1,167,684,186 

Alcohol & Beverages 11,527,949,430 14,695,070,049 

Bank, Investment companies, Money 

lending and leasing 

35,203,988,610 37,854,812,051 

Construction 7,094,371,316 7,021,604,471 

Exporter 2,917,606,556 3159568179 

Fishing 44,427,117 28,837,488, 

Whole sale and retail 1,661,587,754 1,805,155,650 

Hotels 2,561,735,140 3,418,001,062 

Importer 9,851,540,316 13,748,377,671 

Manufacturing 27,339,464,561 33,705,571,254 

Mining and quarrying 54,138,113 117,462,782 

Poultry 829,992,325 1,128,088,357 

Petroleum 6,276,098,545 4,015,857,366 

Services 17,790,195,720 20,203,463,006 

Telecommunication & Broadcasting 13,905,890,184 15,712,721,165 

Tobacco 9,572,741,877 9,848,082,546 

Trade 6,514,903,536 4,015,470,034 

Table 20 


25

Chapter 3 - Expenditure and Productivity Ratio 

Total expenditure of the Department in the year was Rs.1, 597 Mn which recorded a 42% 

decrease when compared with the previous year figure Rs.2, 759 Mn. Out of the total 

expenditure, 90% or Rs.1, 442 Mn was incurred as recurrent expenditure which was a 

decrease by 4% as against that of 2009 which was Rs 1,495 Mn. Expenditure on 

emoluments increased by 1% to 1,081 Mn from 1,072 Mn in 2009. This was the largest 

single expenditure item which accounted for 67.68% of total expenditure and 75% of 

recurrent expenditure. 

The capital expenditure during the year recorded a huge decrease of 88% compared to 

2009 and reached Rs. 155 Mn. (That was 1,263Mn in 2009). Out of the total expenditure 

of the Department, 10% represents capital expenditure; that ratio was 46% in the 

previous year. 

The Internal Audit 

Audits carried out by the Internal Audit Branch included examining of all payment 

vouchers relating to capital and, recurrent expenditure including incentive payments, 

daily vehicle running charts (maintained by the head office and regional offices), pay 

sheets, the board of survey reports , the Appropriation Account for the year 2009 and 

bank reconciliation 2010. In addition to these activities, examining the action taken to 

recover the amounts due on dishonored cheques, revenue accounts relating to VAT and 

Income Tax, checking the unsettled imprest for the year 2008, Public Servants Advance 

Account for the year 2009 and the refund of taxes were the other main tasks performed 

by the Internal Audit Branch. After carrying out the above audit procedures, 72 Internal 

Audit quarries were raised. 


26

3.1 Comparison of the Total Expenditure incurred during the year with 2008 , 2009 

and 2010 

Total Expenditure- 2008, 2009 and 2010 

Description 

Recurrent Expenditure 

2008 

(Rs:’000) 

% 

2009 

(Rs:’000) 

% 

2010 

(Rs:’000) 

Emoluments 1,045,957 74.89% 1,072,170 38.85% 1,081,102 67.68% 

Traveling 17,612 1.26% 9,512 0.34% 7,647 0.48% 

Supplies &Equipments 48,685 3.49% 51,652 1.87% 55,603 3.48% 

Repairs & Maintenance 32,822 2.35% 32,401 1.17% 21,650 1.36% 

Contracted Services 133,650 9.57% 318,665 11.56% 264,372 16.55% 

Transfers 11,494 82% 11,501 0.42% 11,309 0.71% 

Other Recurrent Exp. - 0.00% - 0.00% - 0.00% 

Modernization Programme - 0.00% - 0.00% - 0.00% 

Sub Total 1,290,220 1,495,901 1,441,684 

Capital Expenditure 

Reconstruction and Improvements 34,985 2.51% 1,095,330 39.69% 131,178 8.21% 

Acquisitions 68,910 4.93% 155,947 5.65% 15,636 0.98% 

Capacity Building 12,382 0.45% 8,964 0.56% 

Skill Development 2,483 0.18% - 0.00% - 0.00% 

Sub Total 106,378 1,263,659 155,778 

Table 21 

Total 1,396,598 100% 2,759,561 100% 1,597,462 100% 

Note :WHT (IT ) deductedby the department during the year-2010 -3.4 Mn 

VAT (withheld) by the department during the year-2010 – 6.4 Mn 

Chart 11 

Total Expenditure- 2008, 2009 and 2010 

% 

Thousands 

3,000,000 

2,500,000 

2,000,000 

1,500,000 

1,000,000 

500,000 

0 

2008 2009 2010 

Year 

Recurrent Expenditure Capital Expenditure 


27

3.2 Analysis of the Recurrent Expenditure in 2010 

Transfers 

0.71% 

Chart 12 

Recurrent Expenditure - 2010 

Contracted Services 

16.55% 

Repairs & 

Maintenance 

1.36% 

Emoluments 

67.68% 

Supplies & 

Equipments 

3.48% 

Traveling 

0.48% 

3.3 Productivity Ratio 

The total expenditure of the Department in the year was Rs. 1,597,461,930/- and the 

revenue collected was Rs. 421,838,781,198/-. The Productivity Ratio (i.e. the revenue 

collected for every rupee of expenditure) therefore, works out to 264:1. In other words, 

the cost of collection for Rs. 100 was 38 cents. The Cost of collection per Rs. 100, 

excluding VAT and NBT on Imports accounted 54 Cents (In the previous year this 

amounts were 78 cents and Rs 1/- respectively). 

Table 22 provides a classification of Revenue Collection, Total Expenditure and the cost 

of collection from the year 2008 to the year 2010. 

Revenue Collection, Total Expenditure and Cost of Collection (Rs. Mn) 

2008 2009 2010 


Income Tax 


Value Added Tax 

Debits Tax 

Betting & Gaming Levy Share Transaction Levy 

112,065.30 

14,475.90 

202,984.40 

8,410.10 

269.7 

448.9 125,350.80 14,207.30 171,117.60 8,036.00 268.5 560.2 

117,575.26 

18,047.72 

219,563.12 

10,843.44 

294.84 

2,272.96 


28

Turnover Tax 535.3 336.7 388.29 

Stamp Duty 3,750.60 3,327.90 4,439.84 

Estate Duty 0 0 0 

Goods & Services Tax 126.7 55.7 38.53 

National Security Levy 67.6 17.2 23.22 

Construction Industry Guarantee Fund Levy 229.9 570.9 829.79 

Social Responsibility Levy 1206.4 1,962.10 2,172.63 

Nation Building Tax 27,204.60 46,022.52 

Total 344,570.80 353,015.50 422,512.16 

Expenditure 

Recurrent Expenditure 

Emoluments 1,045.90 1,072.10 1,081.10 

Traveling 17.60 9.50 7.65 

Supplies & Equipment 48.70 51.70 55.60 

Repairs & Maintenance 32.8 32.4 21.65 

Contracted Services 133.7 318.7 264.37 

Transfers 11.5 11.5 11.31 

Others 0.00 0.00 0.00 

Capital Expenditure 

Reconstruction & Improvements 34.9 1,095.30 131.18 

Acquisitions 68.9 156 15.64 

Capacity Building - 12.4 8.96 

Skill Development 2.5 - 

Total Expenditure 1,396.50 2,759.60 1,597.46 

Cost of Collection per Rs.100, Rs. 0.4 0.78 0.37 

Cost of Collection per Rs. 100, excluding VAT & NBT on imports 1 0.54 

Table 22 


29

Chapter 4 - Taxes in default 

Table 23 shows the amounts of taxes in default, the taxes held over and the collectible 

taxes in default excluding Penalty, as at 31.12.2010 

Analysis of the default taxes – as at 31.12.2010 


Gross Tax in 

Default 

Total Penalty 

(Rs.) 

Total Default 

Taxes 

Excluding 

Penalty (Rs.) 

Disputed Tax 

excluding 

Penalty (Rs.) 

Collectible 

Tax 

excluding 

Penalty (Rs.) 

Income Tax 93,494,467,703 34,037,193,473 59,457,274,230 48,100,045,531 11,357,228,699 

Surcharge on 

Income Tax 

1,457,828,113 475,330,848 982,497,265 732,264,138 250,233,127 

Value Added Tax 95,139,970,990 30,576,910,300 64,563,060,690 51,310,827,335 13,252,233,355 

Economic Service 

Charge 

6,763,068,561 2,880,014,896 3,883,053,665 2,451,952,043 1,431,101,622 

Wealth Tax 90,433,504 90,433,504 82,987,632 7,445,872 

Surcharge on 

Wealth Tax 

3,189,029 3,189,029 3,120,276 68,753 

Gift Tax 13,926,258 13,926,258 10,375,990 3,550,268 

Income Tax 

(WHT on 

2,188,745,265 657,881,339 1,530,863,926 1,506,732,855 24,131,071 

Interest) 

Stamp Duty 66,384,917 15,783,405 50,601,512 50,601,512 

Goods & Services 

Tax 

1,271,238,390 1,271,238,390 1,053,549,520 217,688,870 

Turnover Tax 7,096,278,529 2,294,175,952 4,802,102,577 4,329,120,997 472,981,580 

National Security 

Levy 

Save the Nation 

Contribution 

Compounding 

Penalty 

5,014,000,101 1,457,051,336 3,556,948,765 3,311,674,612 245,274,153 

52,833,300 12,120,842 40,712,458 38,439,961 2,272,497 

13,471,224 13,471,224 13,471,224 - 

Obsolete Taxes 182,264,807 182,264,807 13,774,618 168,490,189 

Social 

Responsibility 

levy 

Nation Building 

Tax 

4,885,827 4,885,827 97,763 4,788,064 

1,578,287,884 428,570,109 1,149,717,775 795,463,870 354,253,905 

Total 214,431,274,402 72,835,032,500 141,596,241,902 113,753,898,365 27,842,343,537 

Table 23 


30

Under the supervision of the Special Collection Unit, the Department was able to collect 

Rs.11.52 billion of default taxes out of the outstanding taxes as at 31.12.2008 during the 

year, as against the target set only at Rs.15 Billion for the year. Furthermore, taxes in 

default amounting to Rs 13,045 Mn. were collected during the year, including dues on 

assessments during the year 2010. Table 24 and 25 shows the amounts of default taxes 

collected during the year. 

Collection of arrears during the year out of the default taxes as at 31.12.2010 

Target of collection 

Amount collected 

Progress of the collection 

of default 15,000,000,000 Taxes (Rs.) during 11,523,381,984 the year (Rs.) 

76.82% 

Table 24 

Analysis of Revenue Collection of Default Taxes 2008-2010 

Non Self Assessment 

2010(Rs. ‘000) 2009 (Rs. ‘000) 2008 (Rs. ‘000) 

Income Tax 6,844,105,711 7,821,560 5,316,698 

VAT(Excluding VAT on imports) 4,884,494,247 7,074,945 4,478,467 

Others 1,317,253,046 779,806 257,808 

Total 13,045,853,004 15,676,311 10,052,973 

% to the Total Revenue (Excluding VAT and 


4.40% 5.79% 4.12% 

Table 25 


31

Chapter 5 - Audits, Additional Tax Collections, Refunds, Recovery Action and 

Appeals 

5.1 Audits 

Audits and investigations are undertaken with a view to achieve the widest possible 

coverage of the taxpayer population, in terms of business activity, entity type and 

business size. It has been, however, found that the utilization of the investigation 

resources in the area of large taxpayers is more productive than in the others. The 

number of audits carried out during the year was less than the previous year, since 

officers had to engage in work of shifting offices to the refurbished Head Office 

Building after the terrorist attack from the temporary relocated premieres. However, 

audit functions were carried out in a satisfactory level resulting in collection of an 

additional tax amounting to Rs. 8 Billion, in the year. Number of Audits conducted 

and additional tax collected are shown in the table 26 and 27. Out of the total 

additional tax agreed, 92% (9.8Billion) additional revenue has been imposed on 

Corporate Sector. 

Particulars of Audits and Additional Tax Collection during the year.(Rs.000.) 

Income 

Tax 

PAYE VAT ESC NBT Other Total 

Total amount of additional tax 

assessed during the year 

Total amount of additional tax 

collected during the year 

Number of Audit cases 

commenced during the year 2010 

9,302,813 53,154 5,896,476 1,280,547 200,680 679,925 17,413,595 

8,605,278 43,159 5,133,092 1,093,388 157,330 679,057 15,711,304 

6,463 

Number of Audit cases finalized 

during the year 2010 

* Penalty due on Additional Tax has not been included. 

Table 26 

6,179 

Classification of Additional Taxes by Corporate and Other units (excluding penalty) 

Description 

Additional 

Income/Turnover 

Assessed & Agreed 

(Rs) 

Additional Tax Assessed & Agreed (Rs.000) 

Corporate 

- LTU 

Corporate 

- Other 

Other 

Units 

Additional Tax 

Collected (Rs) 

(Includes Refunds 

claims setoff) 

Income Tax 72,135,907 7,090,523 1,477,644 734,646 9,302,813 8,605,278 

VAT 28,684,930 3,014,596 873,552 2,008,328 5,896,476 5,133,092 

ESC 33,348,630 990,715 249,179 40,653 1,280,547 1,093,388 

PAYE 2,303,924 33,204 19,950 53,154 43,159 

NBT 2,169,054 64,324 42,666 93,690 200,680 157,330 

Others 4,172,324 675,165 4,760 679,925 679,057 

Total 142,814,769 11,868,527 2,667,751 2,877,317 17,413,595 15,711,304 

Table 27 

Total 


32

5.2 Appeals 

Appeals to the Commissioner General 

During the year, the Department has finalized 2,075 appeals received against the 

assessment issued and the analysis of appeal position is as follows: 

Analysis of the Appeal Received and Settlement 

Balance as at 

01.01.2010 

Income 

Tax 

Value 

Added Tax 

Others 

Total 

Units (as per APL 2) 430 692 53 1175 

Appeal Branch (as perAPL2) 44 48 15 107 

CGIR' s Hearing 45 56 33 134 

Registered (as per APL 2) during the year 610 566 100 1276 

Finalized 

Determined ( CGIR) 83 164 45 292 

Units (APL 4) 761 998 117 1876 

Appeal Branch 69 43 9 121 

Submitted for CGIR's hearing 63 246 36 345 

Balance as at 

31.12.2010 

Units (as per APL 2) 279 260 36 575 

*Appeal Branch (as per APL2) 82 102 28 212 

CGIR' s Hearing 25 138 24 187 

*Files received to Appeal branch during the year 170 343 58 571 

Table 28 

5.3 Board of Review 

The position regarding the appeals made to the Board of Review was as follows: 

Number of appeals pending before the Board as at 01-01-2010 99 

Number of appeals lodged during the year 

• Income Tax 14 

• VAT 16 

• GST 1 

• Penalty 1 

• BTT 4 36 

Number of orders issued on conclusion of hearing 37 

Number of appeals outstanding as at 31-12-2010 98 

The Board of Review took up 33 cases for hearing during the year, and 37 orders were 

issued on conclusion as indicated above. 

Cases stated during the year for the opinion of the Court of Appeal – 22 


33

5.4 Post VAT refund audits 

Special VAT audit branch of the Department completed 177 cases (files) as post VAT 

refund audits during the year covering 3,987 taxable periods, resulting in the 

collection of Rs.1,211,609,295/- as additional tax. Numbers of 7 cases were reported to 

legal branch for prosecution actions under Section 67 of the Value Added Tax Act.459 

cases of Post VAT refund in the other units have been selected for audit and 494 cases 

were completed with outstanding cases as at 31.12.2009. 

5.5 Recovery Action 

Following table shows the number of cases attended and notices issued for recovery of 

taxes during the year. 

Recovery Action 

Cases Notices 

Issuing Seizer Notices 3366 3120 

Prosecution Action 1736 1635 

Other Action 1034 899 

Table 29 

5.6 Refunds 

An analysis of refunds made during the year (excluding the refunds, which were set 

off against outstanding taxes) is as follows: 


Amount of 

Refund Rs: 

2010 2009 

% to Net 


Collection of 

each tax 

Amount of 

Refund Rs: 

% to Net 


Collection of 

each tax 

VAT 8,869,784,827.36 4.05% 8,400,766,072.00 4.91% 

Debit Tax 1,814,672.89 0.02% 8,988,276.00 0.11% 

Stamp Duty 2,162,855.00 0.05% 2,138,676.00 0.06% 

Co-operate Income Tax 609,584,440.29 1.07% 95,672,184.00 0.19% 

PAYE 43,757,498.00 0.27% 90,319,430.00 0.63% 

WHT (On Interest 10%) 3,542,706.80 0.01% 3,461,417.00 0.01% 

WHT (On Specified Fees) 28,804,937.75 0.31% 26,675,308.00 0.31% 

Other Non Corporate Income 

Tax 

61,638,570.34 1.12% 114,100,114.00 2.21% 

Total 9,621,090,508.43 2.28% 8,472,121,477.00 0.02% 

Table 30 


34

The Department received 1,046 VAT refund claims (with bank guarantee) during the 

year and (together with the balance cases remained as at 31.12.2009) 1,549 cases were 

finalized during the year, Accordingly, Rs 2,173 Million was refunded in the year. 

VAT refund claims totaling to 24,250 (without bank guarantee) were received during 

the year and 14,732 cases were finalized by refunding Rs. 6,541 Million in the year. 

Out of the total amount refunded during the year a sum of Rs: 312 Mn has been 

transferred / set off against outstanding taxes. 

In addition to the refunds 2,005 Credit Vouchers were issued on claims received 

up to 30.11.2010. The refunds include the Input tax of Rs.2, 223 Million refunded 

in relation to supplies made to the special projects (number of cases 2,234). 

Furthermore, 1643 valid refund cases of Income Taxes were completed during the 

year. 


35

6.1 Double Tax Avoidance Treaties 

PART III 

Chapter 6 - International Relations 

Countries enter into Double Tax Treaties to eliminate or mitigate the incidence of 

juridical double taxation and fiscal evasions in the international trade (or transactions). 

These Treaties are particularly important for developing countries as they play a great 

role in attracting foreign investments, expertise, modern technology etc. 

Sri Lanka has as at 31-12-2010 entered into tax treaties with 38 countries as referred to 

in the Table-31. 

The countries with which double tax treaties are in force as at 31-12-2010 

Country 

Date of 

Signing the 

Agreement 

Gazette 

No. 

Gazetted 

Date 

Operative in Sri 

Lanka From the 

Year of 

Assessment 

1 Australia 18-Dec-89 657/2 08-Apr-91 1992/93 

2 Bangladesh 24-Jul-86 448/13 07-Apr-87 1989/90 

3 Belgium 03-Feb-83 292/6 09-Apr-84 1984/85 

4 Canada 23-Jun-82 253/8 13-Jul-83 1986/87 

5 China 11-Aug-03 1374/20 06-Jan-05 2006/07 

6 Denmark 22-Dec-81 228/15 20-Jan-83 1980/81 

7 France 17-Sep-81 210/17 17-Sep-82 1982/83 

8 Finland 18-May-82 253/8 13-Jul-83 1981/82 

9 Germany 13-Sep-79 113 31-Oct-80 1982/83 

10 Hong Kong (Limited) 26-Mar-04 1374/21 06-Jan-05 2005/06 

11 India 27-Jan-82 210/17 17-Sep-82 1980/81 

12 Indonesia 03-Feb-93 789/10 21-Oct-93 1995/96 

13 Iran 25-Jul-00 1187/16 06-Jun-01 2002/03 

14 Italy 28-Mar-84 322/4 05-Nov-84 1978/79 

15 Japan 12-Dec-67 14803/5 29-May-68 1969/70 

16 Korea 28-May-84 342/11 29-Mar-85 1980/81 

17 Kuwait 05-Feb-02 1245/19 18-Jul-02 2002/03 

18 Malaysia 16-Sep-97 1028/21 22-May-98 99/2000 

19 Mauritius 12-Mar-96 958/10 15-Jan-97 1998/99 

20 Nepal 06-Jul-99 1116/6 26-Jan-00 2001/02 

21 Netherlands 17-Nov-82 281/13 26-Jan-84 1979/80 


36

22 Norway 01-Dec-86 464/4 27-Jul-87 1989/90 

23 Oman (Limited) 26-Jul-94 881/7 26-Jul-95 1979/80 

24 Pakistan 15-Oct-81 210/17 17-Sep-82 1983/84 

25 Philippines 11-Dec-00 

1237/7 21-May-02 

1256/27 02-Oct-02 

2010/11 

26 Poland 25-Apr-80 130 27-Feb-81 1984/85 

27 Qatar 07-Nov-04 1422/10 05-Dec-05 2008/09 

28 Romania 19-Oct-84 371/9 15-Oct-85 1986/87 

29 Russia 02-Mar-99 1101/22 15-Oct-99 2003/04 

30 Saudi Arabia (Limited) 16-Dec-99 1101/23 15-Oct-99 1983/84 

31 Singapore 29-May-79 57/11 10-Oct-79 1977/78 

32 Sweden 23-Feb-83 297/28 18-May-84 1985/86 

33 Switzerland 11-Jan-83 292/6 09-Apr-84 1981/82 

34 Thailand 14-Dec-88 571/16 18-Aug-89 1990/91 

35 

U.A.E. (Limited) 07-Jul-92 824/13 23-Jun-94 1979/80 

U.A.E. (Comprehensive) 24-Sep-03 1346/1 21-Jun-04 2004/05 

36 U.K. 21-Jun-79 60/23 02-Nov-79 1977/78 

37 

U.S.A 14-Mar-85 398/4 22-Apr-86 

U.S.A. Protocol 20-Sep-02 1298/8 21-Jul-03 

2004/05 

38 Vietnam 26-Oct-05 1455/9 24-Jul-06 2007/08 

Table -31 

6.2 Affairs related to Double Tax Treaties during the year 2010 - 

Treaty with Saudi Arabia 

The approval of the cabinet was obtained on 09-06-2010 for signing the agreement at 

Government level and for presenting for Parliamentary approval. 

Agreement with Seychelles 

The approval of the cabinet was obtained on 01-01-2010 for signing the agreement at 

Government level and for presenting for Parliamentary approval. 

Agreement with Bahrain 

Documents were prepared on official papers in English, Sinhala and Arabic for the 

purpose of signing at Government Level. 

Agreement with South Africa 

Awaited for signature at Government level. 


37

6.3 Participations at International Taxation Matters Abroad 

Name and 

No Designation of the 

officer 

01 Mr. H.B.A. Senevirathne 

DCGIR 

Name of the 

Programme 

31 st CATA Annual 

Technical Conference 2010 

Country Duration 

Abuja-Nigeria 10.10.2010- 

16.10.2010 

02 Mr. K.A.P. Kaluarachchi 

SCIR 

03 Mr. P.G.K. 

Samarathunga 

DC 

04 Mr. O.P.P.K. Sirisena - 

DC 

05 Mr. H.M.G. Wijesinghe- 

DC 

06 Mr. M.S.M. Fuward 

DC 

07 Mr. P.M. Dissanayake- 

DC 

08 Mr. J. Rathnayake 

DC 

Table -32 

- do - Abuja-Nigeria 10.10.2010- 

16.10.2010 


16.10.2010 


16.10.2010 


16.10.2010 

International Tax Dialogue The Philippines 02.03.2010- 

Conference on “Taxing 

05.03.2010 

Micro and Small Business” 



05.03.2010 




05.03.2010 



38

Chapter 7 - Legislation 

7.1 Approved Charities 

The following institutions were declared as approved charities during the year. 

S/N 

Name and Address of the Organization 

Gazette 

Number 

Date 

(i) 

(ii) 

(iii) 

(iv) 

(v) 

(vi) 

Fund for the construction of Sri Dhammarathi Ruhunu 

Temple of sacred Tooth Relic & Pirivena Monastery 

Building for Conducting meditation training in 

Kithalgama west, Thihagoda, Mathara. 

Prithipura Infant Home, Prithipura Society, Prithipura 

Road, Hendala, Waththala. 

Building Renovation Fund of Midddeniya Ancient 

Viharaya, Middeniya PuranaMaha 

Viharasthanabhiwardhana Sabawa, Midddeniya 

Ancient Viharaya, Middeniya. 

Shanthi Niwasa of the Missionaries of Charity, 

Missionaries of Charity, St. Jhon’s way, Modara, 

Colombo 15. 

Jagaddala Development Center for the children of the 

Jagaddala social welfare institute, Sri 

Punyawardhanaramaya, Jagaddala social welfare 

institute, Kindelpitiya, Bandaragama 

Monastery Building Fund of Botale Sri Gotabaya 

Rajamaha Viharaya, Sri Gotabaya Rajamaha Viharaya, 

Botale, Ambepussa. 

7/1638 22.01.2010 

7/1638 22.01.2010 

1672 17.09.2010 

1667 13.08.2010 

1660 24.06.2010 

1676 15.10.2010 

The total number of charitable institutions that were performing as at 31.12.2010 is 563. 


39

7.2 Rulings Given During the Year 

Relevant section of the Act Description Ruling Number 

Section 16(2)(b) of (IT Act 

No 10 of 2006) 

Section 20,21 and 21A (IT 

Act No 10 of 2006) 

Section 26(1)(r) (IT Act No 

10 of 2006) 

Section 44 (IT Act No 10 of 

2006) 

Section 61(1)(b)(iii) of (IT 

Act No 10 of 2006) 

Section 78(IT Act No 10 of 

2006) 

Section 78 and Section 113 

(IT Act No 10 of 2006) 

Value Added Tax Act No 

14 of 2002 

Value Added Tax Act No 

14 of 2002 

ESC Act No 13 of 2006 

ESC Act No 13 of 2006 

Clarification on exemption on 

primary process of agricultural 

produce – Coconut fiber 

Extension of the last date for the 

investment 

Deductibility of management 

fees of plantation companies 

Liability on the sale of shares 

Income tax on dividends not 

distributed 

Taxation of Co-ownership 

set off of withholding tax (WHT) 

paid against partnership tax 

payable 

The WHT charged by the 

western Province Provincial 

Council 

Management fee subscriptions 

etc collected by management 

corporation of condominium 

properties 

Clubs or associations referred to 

in the section 101 of the Inland 

Revenue Act No 10 of 2006 

Government assisted private 

schools 

Ref Rul/IT/2008/10 

Ref 2/2010/2 

Ref ACT/12/1 


Ref ACT/12/1 


Ref ACT/12/1 

Ref ACT 17/9 

Ref ACT 17/9 

Ref ACT/2/2004/6 

Ref ACT 12/1 


40

Chapter 8 - Other 

9.1 Tax Payer Service Unit 

The Taxpayer Service Unit has made facilities for the taxpayers and the public to obtain 

services conveniently. The Unit is equipped with officers to assist every person seeking help 

or information. Relevant enactments, departmental publications, paying-in slips, forms etc. 

are available in this Unit. To avoid possible delays and inconveniences, arrangements made to 

issue Taxpayer Identification numbers (TINs) and temporary VAT Numbers at this Unit were 

continued with improve of results. Accordingly, this Unit issued 14,957 Temporary 

Identification Numbers, 3,478 Income Tax registrations, 14,957 Temporary VAT certificates 

and 766 PAYE registrations during the year 2010. Furthermore, 118 clearance certificates were 

issued for non-taxpayers and 14 awareness programs / seminars were organized and several 

leaflets were prepared during the year for the benefit of taxpayers. As an average, 

approximately 125 persons obtained services from Taxpayers Service Unit per day during the 

year. 

8.2 Details of the Directions and clearance certificates issued by the Department are as 

Follows: 

Description 2010 2009 

Directions issued 

• to employers in respect of PAYE deduction 4,679 6,276 

• to banks for WHT on interest 1 148 

• in relation to specific Fees 7,845 7,542 

Clearance Certificates Issued 

• in relation to withdrawals balances from Provident Fund 613 5,252 

• in relation to persons leaving the country 49 83 

Privilege Cards Issued 

• Gold Cards 203 366 

• Silver Cards 79 120 


41

8.3 Analytical Reports 

The Economic Research and Policy Unit of the Department performed different types of 

researches by analyzing data received from various sources such as Central Bank, Census & 

Statistics Department etc. 

The following reports were prepared during the year. 

1. Report on withholding tax on interest 

2. Revenue proposal for tea sector 

3. Report on Tax liability of agencies of foreign employment bureau 

4. Report on Tax liability of Mineral water 

5. Report on Tax liability of Affiliated University 

6. Bench Marks for 04 selected industries/ services. (Plastic manufacture, restaurants, paint 

industry, storage and warehouse) 

7. Comparison of Share Transaction Levy, received with the actual transactions at the 

Colombo Stock exchange 

8. Report on Advanced VAT 

(i) Whether Government Institution comply with the statutory provisions of the VAT 

Act 

(ii) Returns furnished by the taxpayers are true and correct 

(iii) Whether the computer system is given the correct tax credit on Advanced VAT. 

9. Quarterly VAT refund reports (31.12.2009, 31.03.2010, 30.06.2010, 30.09.2010) 

10. Monthly and Quarterly Tax Bulletins (up to 30.10.2010) 

8.4 Activities in North and East 

Jaffna Regional office 

This is the first regional office opened in the year 1963. The administrative districts of 

Jaffna, Killinochchi and Mulathivu are coming under the purview of this regional 

office. Due to the war situation prevailed in the North; the office was not properly 

functioned up to year 2009. 

Revenue collection during the year 2009 and 2010 in Jaffna Regional office 

IT ESC TT Total 

2009 9,096,666 1,605,749 65,873,760 76,576,175 

2010 12,735,396 1,807,274 149,376,892 163,919,562 


42

New files opened during the year 2010 and 2009 

Tax type 2010 2009 

Income tax 

Individual 367 126 

Partnership 39 31 

BTT 1441 213 

Total 1847 370 

Batticaloa Regional office 

The administrative districts of Ampara and Batticaloa are coming under the purview 

of the regional office. The normal functioning of this office was not so affected as in 

the case of Jaffna regional office. However the office functioned without a deputy 

commissioner for a period of five years till 2009 and a permanent deputy 

commissioner was appointed only in February 2010. The activities of the unit were 

accelerated by opening new files and collecting more taxes. 

Revenue collection during the year 2009 and 2010 in Batticaloa Regional office 

IT ESC TT Total 

2009 33,713,487 15,144,553 105,870,850 154,866,041 

2010 40,598,798 20,633,404 5,853,861 67,116,906 

New files opened during the year 2010 and 2009 

Tax type 2010 2009 

Income tax 

Individual 646 662 

Partnership 18 13 

ESC 17 29 

Optional VAT 0 35 

Total 681 739 


43

DISTRIBUTION OF STAF , FILES AND REVENUE AMONG THE ASSESSING DIVISIONS Annexure 

Assessing Divisions 

Staff Files Revenue (RS.Mn) 

DC SA A STO TO IT B&G /SD 

VAT/ 

OP VAT 

PAYE ESC NBT DT IT&SRL/ WHT VAT & GST PAYE ESC NBT 

International Unit ( 5B ) 1 1 4 1 3 525 47 53 43 12 2,124 574 469 377 69 3,613 

Unit 1& 2 1 - 8 3 7 4,964 19 468 17 485 

Unit 4 1 1 6 1 4 1,187 1,043 868 687 744 1,099 2,500 341 567 562 5,069 

Unit 4 A (4 New) 1 1 11 6 4,853 1,929 1,523 717 670 152 383 66 75 60 736 

Unit 5 1 3 4 1 5 1,035 790 924 387 646 1,005 3,537 576 733 755 6,606 

Unit 5 C (5 New) 1 1 12 1 4 4,484 1,927 3,394 571 1,008 978 1,082 238 229 204 12 2,743 

Unit 10 2 1 15 3 11 665 500 501 434 379 3,748 7,035 1,656 1,700 1,665 15,804 

Unit 12 (5A) 1 1 6 2 6 1,132 1,740 1,012 962 860 1,432 3,436 758 733 927 7,286 

Unit 5 D (12 New) 1 1 8 2 6 5,790 2,530 2,959 904 956 343 818 151 171 145 1,628 

Unit 14 1 1 7 1 8 2,043 1,153 886 570 518 243 925 51 239 182 1,640 

Unit 15 1 1 9 1 6 2,461 1,250 814 657 634 206 924 63 218 183 1,594 

Unit 6 - A 2 1 10 2 11 228 237 212 226 190 6,374 10,952 1,196 2,060 1,915 22,497 

Unit 6 - B 2 1 8 2 11 216 221 210 211 170 5,690 13,366 1,561 1,283 2,700 2 24,602 

Unit 6 - C 2 1 15 1 8 122 109 112 108 47 911 21,077 7,725 3,569 3,063 1,120 10,845 47,399 

Unit 7 - A 2 1 13 2 6 238 232 229 227 179 6,218 29,367 2,602 2,373 2,147 42,707 

Unit 7 - B 2 2 12 1 6 240 228 209 230 174 3,076 10,081 790 1,042 2,470 1 17,460 

Unit 8 2 2 9 5 8 226 231 220 229 127 5,506 16,426 1,907 1,453 3,378 28,670 

VAT Registration 1 - 4 1 1 12,047 12,047 

VAT Unit A 2 1 7 1 6 8,458 3,382 3,382 

VAT Unit B 1 1 6 2 6 8,646 3,364 3,364 

VAT & GST Colle 1 - 11 1 5 35 35 

Advance VAT 1 1 1 1 5 3,265 39 39 

VAT (Special Audit ) 1 1 13 4 7 - 

ESC Branch 1 - 10 5 5 17 17 

B&G 1 - 2 4 933 303 303 

VAT Refund 1 4 3 13 7 16 - 

VAT Refund 2 1 - 10 2 3 - 

WHT Specified Fees 1 1 11 2 11 6,816 10,073 10,073 

WHT On Interest 1 - 10 5 1,793 29,430 29,430 

Unit 3 2 - 17 2 14 327 327 

PAYE 1 - 4 2 3 228 898 293 2,273 3,464 

NBT Unit 1 - 7 3 8 5,714 826 826 

Stamp Duty Branch 1 1 5 4 3 7,364 3,468 3,468 

Regional Offices - 

Colombo South 1 1 15 1 11 10,617 31 277 501 470 2 103 2 577 

Colombo Central 1 2 14 2 7 15,877 28 471 456 2 210 668 

Colombo City 1 - 15 2 11 8,725 41 415 928 546 2 201 749 

Maharagama East 1 1 12 5 7 13,818 59 294 162 2 83 247 

Maharagama West 1 - 14 4 7 16,729 112 222 245 3 81 329 

Badulla 1 - 6 3 8 6,502 130 108 69 5 46 120 

Galle 1 1 8 11 7,569 25 206 311 142 12 84 238 

Kalutara 1 1 11 6 5 7,968 61 28 158 41 114 2 56 172 

Matara - - 14 1 7 9,756 14 227 241 151 9 88 248 

Nuwara Eliya 1 - 8 2 6 4,129 99 132 67 2 45 114 

Ratnapura 1 1 8 1 10 7,554 52 52 198 1 174 2 73 249 

Anuradhapura 1 - 12 2 10 5,151 164 171 94 1 81 218 394 

Gampaha 1 2 14 11 2 17,639 1 16 393 131 141 272 

Batticaloa 1 1 1 10 3,904 2 76 144 40 41 21 6 68 

Jaffna - - 1 1 2,941 13 2 149 164 

Kandy 1 1 19 5 13 11,503 33 394 326 299 14 85 398 

Kegalle 1 1 12 4 9 5,633 6 120 102 58 3 24 85 

Kurunegala 1 2 14 8 9 10,768 42 175 277 10 183 4 96 283 

Dambulla 1 1 13 5 8 8,252 19 41 171 4 94 1 49 144 

Negombo 1 1 11 4 9 10,410 91 343 24 203 1 79 283 

Total 63 45 510 132 302 224,463 8,552 36,626 14,354 11,936 14,577 104,179 128,065 16,287 17,998 19,308 13,118 4,161 303,116 

VAT on imports 99,578 

NBT on imports 26,712 

Other taxes 198 

Treasury Transfers 2,363 

sums credited by accounts branch 193 

432,160 

Less -dishonoured cheques (27) 

432,133 

Less - Refunds (9,621) 

422,512 

DT/STL/ 

Con. Levy 

TT/B&G/ 

SD 

Total

Untitled - Department of Inland Revenue

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