Performance Report 2005 - Department of Inland Revenue
Performance Report 2005 - Department of Inland Revenue
Performance Report 2005 - Department of Inland Revenue
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<strong>Performance</strong> <strong>Report</strong><br />
<strong>2005</strong><br />
DEPARTMENT OF INLAND REVENUE<br />
SRI LANKA
PERFORMANCE REPORT<br />
OF THE<br />
COMMISSIONER GENERAL OF INLAND REVENUE<br />
FOR THE YEAR <strong>2005</strong><br />
P. P. D. P. KARUNASEKARA
Message <strong>of</strong> the Commissioner General<br />
This <strong>Report</strong> reviews activities and performance <strong>of</strong> the <strong>Department</strong> <strong>of</strong> <strong>Inland</strong> <strong>Revenue</strong><br />
during the year <strong>2005</strong>. It outlines mainly the revenue collection and the expenditure<br />
incurred during the year.<br />
In the year <strong>2005</strong>, the <strong>Department</strong> was able to collect a tax revenue <strong>of</strong> Rs. 198.3 billion<br />
representing 99% <strong>of</strong> its expectation for the year. This collection reflects an increase<br />
<strong>of</strong> Rs. 33.5 billion over that <strong>of</strong> the previous year. It is 52.22% <strong>of</strong> the total Government<br />
<strong>Revenue</strong> <strong>of</strong> the year. The higher degree <strong>of</strong> dedication and devotion <strong>of</strong> my staff,<br />
invariably working under considerable pressure, is clearly visualized from this<br />
achievement.<br />
I wish to express my appreciation to all grades <strong>of</strong> the Staff <strong>of</strong> the <strong>Department</strong>, the<br />
Pr<strong>of</strong>essionals and the large number <strong>of</strong> Taxpayers for their co-operation extended.<br />
P. P. D. P. Karunasekara<br />
Commissioner General <strong>of</strong> <strong>Inland</strong> <strong>Revenue</strong>
<strong>Department</strong>’s Mission<br />
To collect the taxes under the law by encouraging voluntary compliance and by<br />
deterring tax evasion and tax avoidance, and<br />
To enhance Public confidence in the integrity and efficiency <strong>of</strong> the tax system by<br />
administering tax and related legislation fairly, uniformly and courteously, and<br />
thereby facilitate and foster a beneficial tax culture.<br />
Strategic Goals<br />
To improve voluntary compliance by taxpayers with the tax laws through<br />
programmes which encourage and assist that and detect those who do not comply<br />
and, where necessary, take appropriate corrective action.<br />
To improve the effectiveness <strong>of</strong> the <strong>Department</strong> by; the applications <strong>of</strong> efficient<br />
work methods, technology and better utilization <strong>of</strong> available resources.<br />
To enhance the productivity and pr<strong>of</strong>essionalism <strong>of</strong> the staff through<br />
management and technical training, work experience, and thereby to enable them to<br />
contribute more effectively towards the fulfillment, by the <strong>Department</strong>, <strong>of</strong> it’s mission.
Table <strong>of</strong> Contents<br />
Page<br />
Management Directory 01<br />
Organization Chart 04<br />
CHAPTER 1 – HUMAN RESOURCES<br />
1.1 Approved Cadre 05<br />
1.2 Training 05<br />
1.2.1 Overseas Training 05<br />
1.2.2 Training Programmes conducted by the Training Branch <strong>of</strong> IRD 06<br />
1.3 Promotions 08<br />
1.4 Retirements 10<br />
CHAPTER 2 – REVENUE COLLECTION<br />
2.1 Number <strong>of</strong> Tax Files 13<br />
2.2 Number <strong>of</strong> Income Taxpayers 13<br />
2.3 Income Tax Return Filing Compliance 2001/02 – 2004/05 14<br />
2.4 <strong>Revenue</strong> Collection 14<br />
2.5 Cash Flow in <strong>2005</strong> 15<br />
2.6 <strong>Inland</strong> <strong>Revenue</strong> Contribution to Government <strong>Revenue</strong> and GDP 16<br />
2.7 <strong>Inland</strong> <strong>Revenue</strong> Collection 2001 to <strong>2005</strong> 17<br />
2.8 Income Tax Collection in <strong>2005</strong> 18<br />
2.8.1 Corporate and Non-corporate Income Tax 18<br />
2.8.2 Source wise Analysis <strong>of</strong> Income Tax Collection in <strong>2005</strong> 18<br />
2.9 Economic Service Charge 19<br />
2.10 Value Added Tax Collection in <strong>2005</strong> 19<br />
2.11 Betting & Gaming Levy Collection in <strong>2005</strong> 20<br />
2.12 Debits Tax Collection in <strong>2005</strong> 21<br />
2.13 Share Transaction Levy 21<br />
2.13.1 Introduction <strong>of</strong> Share Transaction Levy 21<br />
2.13.2 Collection <strong>of</strong> Share Transaction Levy in <strong>2005</strong> 22<br />
CHAPTER 3 – EXPENDITURE & PRODUCTIVITY RATIO<br />
3.1 Comparison <strong>of</strong> the Expenditure in 2004 and <strong>2005</strong> 23<br />
3.2 Analysis <strong>of</strong> Recurrent Expenditure in <strong>2005</strong> 24<br />
3.3 Productivity Ratio 24<br />
3.4 Cost <strong>of</strong> <strong>Revenue</strong> Collection 24<br />
CHAPTER 4 – TAXES IN DEFAULT<br />
4.1 Taxes in default as at 31-12-<strong>2005</strong> 25<br />
CHAPTER 5 – INTERNATIONAL TAXATION<br />
5.1 Double Tax Treaties 26<br />
5.2 IRD’s Representations in relation to international tax matters 27<br />
CHAPTER 6 – LEGISLATION<br />
6.1 Legislation enacted during the year <strong>2005</strong> 28<br />
6.2 Rulings issued by the Commissioner General in <strong>2005</strong> 28<br />
6.3 Declarations under Section 31(7)(a) <strong>of</strong> the <strong>Inland</strong> <strong>Revenue</strong> Act 29<br />
6.4 Legal actions taken during the year <strong>2005</strong> 30<br />
CHAPTER 7 – AUDITS, ADDITIONAL TAX COLLECTION AND APPEALS<br />
7.1 Audits and Additional Tax collection in <strong>2005</strong> 31<br />
7.2 Appeals 31<br />
7.3 Board <strong>of</strong> Review 31<br />
CHAPTER 8 – TAXPAYER SERVICES AND TAXPAYER EDUCATION<br />
8.1 Taxpayer Services Unit 32<br />
8.2 Tax Seminars 32<br />
CHAPTER 9 – MODERNIZATION PROGRAMME OF THE INLAND REVENUE<br />
DEPARTMENT<br />
33
MANAGEMENT DIRECTORY<br />
(As at 31-12-<strong>2005</strong>)<br />
Mr. P. P. D. P. Karunasekara<br />
Commissioner General <strong>of</strong> <strong>Inland</strong> <strong>Revenue</strong><br />
Mr. A. A. Wijepala<br />
Deputy Commissioner General – Tax Administration<br />
Mr. R. A. D. H. Ranasinghe<br />
Deputy Commissioner General – Information & Communication Technology (ICT)<br />
Mr. S. Angammana<br />
Deputy Commissioner General – Tax Surveillance & Risk Management, and International Affairs<br />
Mr. E. A. S. Edirisinghe<br />
Deputy Commissioner General – Human Resources Management<br />
Mr. R. K. H. Kaluarachchi<br />
Deputy Commissioner General – Tax Policy Planning & Development, Legislation,<br />
Rulings and BOI Enterprises<br />
Mr. E. M. M. Medagoda - Senior Commissioner – Internal Audit<br />
Mr. H. M. Herath - Senior Commissioner – Large Taxpayer Unit and Corporate Tax<br />
Mr. V. G. D. P. Ubesiri - Senior Commissioner – Zone 3<br />
Mr. N. S. Wattaladeniya - Senior Commissioner – Zone 1<br />
Mr. P. Wickramasena - Senior Commissioner – Zone 2<br />
Mr. K. M. S. Kandegedara - Commissioner – Human Resources<br />
Mrs. Anula Seneviratne - Commissioner – Employee Services<br />
Mr. H. A. Somapala - Commissioner – Value Added Tax Refunds<br />
Mr. W. P. Sirisena - Commissioner – Southern Region<br />
Mrs. Mallika Samarasekara -<br />
Commissioner – LTU<br />
Mr. K. L. S. Silva - Commissioner – Collection and Withholding Tax<br />
Mr. H. B. A. Seneviratne - Commissioner – Corporate Tax (Unit 10 and 12) and Secretariat<br />
Mrs. D. M. Nandawathie - Commissioner – Information<br />
Mr. A. A. Amararatne - Commissioner – Value Added Tax<br />
Mr. W. Thilakaratne - Commissioner – Internal Audit<br />
Mr. R. K. Premadasa - Commissioner – Taxpayer Services
2<br />
Mr. P. B. Madawala - Commissioner – Northern Region<br />
Mr. H. M. Abeysinghe - Commissioner – Appeals<br />
Mr. P. D. Premaratne - Commissioner – Investigation<br />
Mr. H. M. Premaratne Banda - Commissioner – Corporate Tax (Unit 1&2, Unit 4, Unit 5)<br />
Mr. S. T. Gobalasingham - Commissioner – Northern Region<br />
Mr. K. A. P. Kaluarachchi - Commissioner – Computer Development<br />
Mrs. W. B. S. Shanthikumar -<br />
Commissioner – Colombo (Metropolitan) Regional Office<br />
Mrs. Leela Ramanayake - Commissioner – Training<br />
Mr. W. M. W. Kumarasiri - Commissioner – BOI & Investment Promotion<br />
Mr. W. M. Mendis - Commissioner – Human Resources<br />
Mrs. R. A. M. A. K. Herath -<br />
Commissioner – Appeals (VAT)<br />
Mr. C. W. W. Gamanayake Deputy Commissioner - Unit 4<br />
Mrs. P. Karunaratne Deputy Commissioner - Ratnapura Regional Office<br />
Mr. W. A. Fernando Deputy Commissioner - Maharagama Regional Office<br />
Mrs. V. Jayasooriya Deputy Commissioner - Colombo Central Regional Office<br />
Mr. A. L. A. Sirisena Deputy Commissioner - Kegalle Regional Office<br />
Mrs. H. M. C. I. Gunasekara Deputy Commissioner - Kalutara Regional Office<br />
Mr. W. V. P. Karunaratne Deputy Commissioner - Negombo Regional Office<br />
Mr. A. W. Ambepitiya Deputy Commissioner - Colombo City Regional Office<br />
Mr. S. Rajapakse Deputy Commissioner - Colombo East Regional Office<br />
Mr. P. A. V. Premaratne Deputy Commissioner - Unit 6A<br />
Mrs. K. Dahanayake Deputy Commissioner - Unit 7<br />
Mr. K. A. G. Abhayaratne Deputy Commissioner - Unit 6B<br />
Mr. D. B. Jayasekara Deputy Commissioner - Kandy Regional Office<br />
Mrs. W. Anulawathie Deputy Commissioner - Appeals<br />
Mrs. S. Edirisinghe Deputy Commissioner - Value Added Tax<br />
Mr. I. M. B. Seneviratne Deputy Commissioner - Unit 12<br />
Mrs. Priya Fernando Deputy Commissioner - Computer Development Unit<br />
Mr. J. M. Jayawardene Deputy Commissioner - Banking and Financial Services<br />
Mr. M. Jayasekara Deputy Commissioner - Taxpayer Services Unit<br />
Mr. S. A. Hemapala Deputy Commissioner - Unit 5<br />
Mr. H. H. R. Somasiri Deputy Commissioner - Galle Regional Office<br />
Mr. H. N. S. Siriwardene Deputy Commissioner - Colombo Central Regional Office<br />
Mr. K. Rajaratnam Deputy Commissioner - Internal Audit<br />
Mr. A. Sri Selvanayagam Deputy Commissioner - Information<br />
Mr. H. D. P. N. Ranjith Deputy Commissioner - Badulla Regional Office<br />
Mrs. M.R. W. Manchanayake Deputy Commissioner - Unit 8<br />
Mr. D. M. L. I. Dissanayake Deputy Commissioner - Unit 4<br />
Mr. A. N. Guruge Deputy Commissioner - Matara Regional Office<br />
Mrs. P. Rohini Deputy Commissioner - Unit 1 & 2<br />
Mrs. R. M. P. S. K. Rajapakse Deputy Commissioner - Unit 3<br />
Mr. A. A. D. U. Abeysinghe Deputy Commissioner - Anuradhapura Regional Office<br />
Miss D. G. P. W. Goonathilake Deputy Commissioner - Secretariat<br />
Mr. J. P. D. R. Jayasekara Deputy Commissioner - Information II<br />
Mr. D. M. S. Dissanayake Deputy Commissioner - Secretariat
Mr. M. G. Somachandra Deputy Commissioner - Unit 7<br />
Mrs. C. H. Weerasinghe Deputy Commissioner - Colombo North Regional Office<br />
Mrs. H. M. D. Munasinghe Deputy Commissioner - Unit 10<br />
Mr. P. G. K. Samaratunga Deputy Commissioner - Colombo South Regional Office<br />
Mr. G. V. Somasiri Deputy Commissioner - Legal and Collection<br />
Mrs. R. Wijesinghe Deputy Commissioner - Internal Audit<br />
Mrs. K. M. S. Jayaweera Deputy Commissioner - PAYE<br />
Mr. K. H. N. C. Perera Deputy Commissioner - Economic Service Charge and Betting & Gaming Levy<br />
Mrs. K. D. M. R. Silva Deputy Commissioner - Unit 4<br />
Mrs. S. N. P. Abrew Deputy Commissioner - Stamp Duty<br />
Mr. K. K. Samarapala Deputy Commissioner - Value Added Tax<br />
Mr. D. B. Kannangara Deputy Commissioner - Ratnapura Regional Office<br />
Mrs. K.S.B.R.D.S. Karunaratne Deputy Commissioner - Data Preparation & <strong>Revenue</strong> Accounting Unit<br />
Mr. K. G Piyatissa Deputy Commissioner - Appeals<br />
Mr. O. P. P. K. Sirisena Deputy Commissioner - Investigation<br />
Mr. K. Dharmasena Deputy Commissioner - International Division<br />
Mr. H. M. G. Wijesinghe Deputy Commissioner - Research & Policy Unit<br />
Mrs. B. A. D. D. Herath Deputy Commissioner - LTU - Banking & Financial Services Unit<br />
Mr. D. B. Dissanayake Deputy Commissioner - Value Added Tax<br />
Mr. K. D. N. P. Koralearachchi Deputy Commissioner - Appeals<br />
Mr. T. M. Dayananda Deputy Commissioner - Kurunegala Regional Office<br />
Mr. W. S. K. de Costa Deputy Commissioner - Value Added Tax<br />
Mr. M. S. M. Fuward Deputy Commissioner - Unit 5<br />
Mr. P. M. Dissanayake Deputy Commissioner - Unit 4<br />
Mr. P. L. A. Liyanage Deputy Commissioner - Appeals<br />
Mr. A. A. Dayaratne Deputy Commissioner - LTU – Banking & Financial Services Unit<br />
Mr. J. Ratnayake Deputy Commissioner - Value Added Tax<br />
Mr. J. A. A. Parakrama Deputy Commissioner - Unit 7<br />
Mr. A. G. Sumanadasa Deputy Commissioner - Internal Audit<br />
Mrs. K. P. M. Gunathilake Deputy Commissioner - Organization<br />
Mr. U. B. Keerthisinghe Deputy Commissioner - Internal Audit<br />
Mr. H. M. P. B. Herath Deputy Commissioner - Internal Audit<br />
Mr. S. P. Abeysinghe Deputy Commissioner - Unit 3<br />
Mr. B. G. Piyadasa Deputy Commissioner - Internal Audit<br />
Mrs. Vijitha Paranamana Deputy Commissioner - Colombo City Regional Office<br />
Mrs. Gnana Sumanasekara Deputy Commissioner - Colombo North<br />
Mr. I. K. Jinadasa Deputy Commissioner - Value Added Tax<br />
Mr. E. S. de Soyza Deputy Commissioner - Withholding Tax Branch<br />
Mr. H. M. W. C. Bandara Deputy Commissioner - Unit 08<br />
Mr. D. R. S. Hapuarachchi Deputy Commissioner - Training<br />
Mr. W.M.P.N.B. Wanigasekara Deputy Commissioner - Unit 10<br />
Mr. M. J. Gunasiri Deputy Commissioner - Unit 12<br />
Mr. D. K. Ranatunga Deputy Commissioner - LTU – Banking & Financial Services Unit<br />
Mr. D. Rangalla Deputy Commissioner - Unit 6A<br />
Mr. R. M. Jayasinghe Deputy Commissioner - Unit 6B<br />
Mr. M. H. Denzil Deputy Commissioner - Value Added Tax<br />
Mr. U. B. Wakkumbura Deputy Commissioner - Unit 8<br />
Mr. J. A. G. Mahindaratne Deputy Commissioner - Unit 4<br />
Mrs. D. M. Pathmakumari Deputy Commissioner - Internal Audit<br />
Mr. B. J. Jayaratne Deputy Commissioner - Unit 5<br />
Mr. M. L. M. Thahir Deputy Commissioner - Unit 7<br />
3
4<br />
Organisation Chart - <strong>Department</strong> <strong>of</strong> <strong>Inland</strong> <strong>Revenue</strong><br />
As at 31-12-<strong>2005</strong><br />
Board <strong>of</strong> Review Commissioner General /<br />
Chairman - <strong>Revenue</strong> Board<br />
Ombudsman<br />
Secretary to the <strong>Revenue</strong> Board<br />
Senior Commissioner: Internal Audit<br />
Commissioner: System & Finance Audit<br />
Senior Deputy Commissioner<br />
General<br />
Commissioner:<br />
Procurement & Supplies<br />
Commissioner:<br />
Appeals<br />
Deputy Commissioner<br />
Chief Accountant<br />
Building Engineer<br />
Deputy<br />
Commissioner<br />
DCG:<br />
Tax Administration<br />
• Commissioner:<br />
Taxpayer Services<br />
[TS]<br />
• Commissioner: Audit<br />
[Aud]<br />
• Commissioner:<br />
Collection &<br />
Enforcement [C&E]<br />
• Commissioner:<br />
Returns & Payment<br />
Processing [R&PP]<br />
DCG: ICT<br />
[Chief Information Officer]<br />
• Commissioner: ICT I<br />
[ICT Manager,<br />
Developments & Reforms]<br />
• Commissioner: ICT II<br />
ICT Manager, Projects &<br />
Engineering]<br />
• DC: Application &<br />
Database Development<br />
Unit [Team Leader]<br />
• DC: Network Operations<br />
Centre [Team Leader]<br />
• DC: ICT Reforms<br />
• DC: Special Projects<br />
DCG: HRM<br />
• Commissioner:<br />
Human<br />
Resources<br />
• Commissioner:<br />
Human<br />
Resource<br />
Development<br />
• Commissioner:<br />
Employee<br />
Services<br />
• HR Specialist I **<br />
• HR Specialist II<br />
DCG: Tax<br />
Surveillance [TS] &<br />
Risk Management<br />
[RM] and<br />
International Affairs<br />
• Commissioner:<br />
Investigation<br />
• Commissioner:<br />
International<br />
Affairs<br />
• Commissioner:<br />
Information &<br />
Non Filers & Stop<br />
Filers<br />
Deputy<br />
Commissioner<br />
DCG: Tax Policy<br />
Planning,<br />
Development,<br />
Legislation, Rulings<br />
& BOI Enterprises<br />
• Commissioner:<br />
Strategic and<br />
Operational<br />
Planning, Tax<br />
Policy Planning,<br />
Legislation , and<br />
Rulings<br />
• Commissioner:<br />
BOI & Investment<br />
Promotion<br />
• Commissioner:<br />
Research &<br />
Policy<br />
• Policy, Planning & **<br />
Standards Guidance<br />
• Database Administrator<br />
• Application Developer<br />
• Hardware, Network &<br />
System Administrator<br />
• Cyber Security & Risk<br />
Administrator<br />
• Data Centre Administrator<br />
• e-Government<br />
• Emerging Technology<br />
• Intranet/Web Developer<br />
• S<strong>of</strong>tware Engineering & QA<br />
• IT Helpdesk<br />
• ICT Competitive<br />
Outsourcing<br />
Training Centre<br />
Deputy<br />
Commissioner<br />
• Tax Policy **<br />
Analyst<br />
• Fiscal Policy<br />
Expert<br />
• Economist<br />
• Financial Analyst<br />
• Legal Officer<br />
• Research<br />
Assistant<br />
• Statistician<br />
Senior Commissioner: Tax<br />
Administration - Zone 1<br />
Senior Commissioner:<br />
Tax Administration - LTU<br />
Senior Commissioner:<br />
Tax Administration -<br />
Zone 2<br />
Senior Commissioner:<br />
Tax Administration -<br />
Zone 3<br />
• Commissioner: Colombo<br />
Regional Offices, VAT,<br />
Stamp Duty, Unit 3 and ESC<br />
• Commissioner: LTU,<br />
Corporate Tax & Debit Tax<br />
• Commissioner: South<br />
Region<br />
• Commissioner: North<br />
Region<br />
Deputy Commissioner Deputy Commissioner Deputy Commissioner Deputy Commissioner
5<br />
CHAPTER 1<br />
HUMAN RESOURCES<br />
1.1 Approved Cadre<br />
The following Table shows the approved Cadre, the actual number <strong>of</strong> staff in service and the<br />
vacancies as at December 31, <strong>2005</strong>.<br />
Post Approved Cadre In Post Vacancies<br />
Commissioner General 01 01 -<br />
Senior Deputy Commissioner General* 01 - 01<br />
Deputy Commissioner General* 05 05 -<br />
Senior Commissioner* 05 05 -<br />
Commissioner 22** 22 -<br />
Deputy Commissioner 90** 85 05<br />
Senior Assessor and Assessor 750** 212 538<br />
Senior Tax Officer and Tax Officer 1000** 555 445<br />
System Administrator 02 02 -<br />
System Analyst 06 01 05<br />
Accountant 06 06 -<br />
Combined Service 326 297 29<br />
K. K. S. 294 291 03<br />
Others 42 28 14<br />
Total 2550 1510 1040<br />
Note: * Newly created Posts.<br />
** Cadre was increased in December <strong>2005</strong>.<br />
1.2 Training<br />
1.2.1 Overseas Training<br />
Following Officials were participated in Training Programmes, Seminars and Workshops (as<br />
indicated) held abroad during the year.<br />
Name <strong>of</strong> the Officer<br />
01 Mr. W. Tilakarante<br />
Commissioner<br />
Training Programme Seminar or<br />
Workshop<br />
Workshop on Tax Audits in Cash Based<br />
Economies<br />
Country<br />
Mauritius<br />
Duration<br />
12 Days<br />
02 Mrs. P. Karunaratne<br />
Deputy Commissioner<br />
Workshop on Taxation <strong>of</strong> International<br />
Transactions<br />
Malaysia<br />
19 Days
6<br />
03 Mr. P. A. V. Premaratne<br />
Deputy Commissioner<br />
04 Mrs. K. Dahanayake<br />
Deputy Commissioner<br />
Asia Pacific Regional LTU Seminar Thailand 05 Days<br />
Developing E-Commerce & E-Business Singapore 12 Days<br />
05 Mrs. R.M.P.S.K. Rajapaksa<br />
Senior Assessor *<br />
Tax Analysis and <strong>Revenue</strong> Forecasting<br />
Programme<br />
USA<br />
26 Days<br />
06 Mr. D. M. S. Dissanayake<br />
Senior Assessor *<br />
Tax Analysis and <strong>Revenue</strong> Forecasting<br />
Programme<br />
USA<br />
26 Days<br />
07 Mr. M. G. Somachandra<br />
Senior Assessor *<br />
08 Mrs. H. M. D. Munasinghe<br />
Senior Assessor *<br />
Asia Pacific Regional LTU Seminar Thailand 05 Days<br />
Advancing Management Potential UK 47 Days<br />
09 Mr. P. G. K. Samaratunga<br />
Senior Assessor *<br />
Commonwealth Management<br />
Development Programme<br />
Malaysia<br />
40 Days<br />
10 Mr. T. M. Dayananda<br />
Senior Assessor *<br />
Principles <strong>of</strong> International and<br />
Comparative Taxation<br />
The<br />
Netherlands<br />
12 Days<br />
11 Mr. S. S. D. Weerasekara<br />
Senior Assessor<br />
Tax Enforcement Course Malaysia 12 Days<br />
12 Mr. Mahinda Gunaweera<br />
Senior Assessor<br />
Information & Communication<br />
Technology Skills for Government<br />
Officials<br />
Singapore<br />
25 Days<br />
13 Mr. D. U. A. Jayawardhana<br />
Senior Assessor<br />
International Seminar on Taxation<br />
(General Tax Course) II<br />
Japan<br />
75 Days<br />
14 Mr. Dayaratne Banda<br />
Senior Assessor<br />
Study Tour to the Taxpayer Service<br />
Centre <strong>of</strong> India<br />
India<br />
02 Days<br />
15 Mrs. W. P. C. S. Ranaweera<br />
Assessor<br />
16 Mrs. R.A.R.P. Ranasinghe<br />
Senior Tax Officer<br />
Commonwealth Tax Inspectors Course UK 47 Days<br />
Data Base Management Systems India 54 Days<br />
* Promoted to the post <strong>of</strong> Deputy Commissioner with effect from 01-12-<strong>2005</strong><br />
1.2.2 Training Programmes conducted by the Training Branch <strong>of</strong> the <strong>Department</strong><br />
Details <strong>of</strong> Training Courses and Examinations conducted by the Training Branch, during the year<br />
are as follows:<br />
01. Training Courses conducted for Assessors.<br />
(a) 17 Assessors in Class II Grade II were trained for the First <strong>Department</strong>al Examination.<br />
(b) 68 Assessors in Class II Grade II were trained for the Final <strong>Department</strong>al Examination.
7<br />
02. Training Courses conducted for Tax Officers.<br />
(a) 15 Tax Officers in Class III Grade I were trained for the Examination to confirm in<br />
Class III Grade I and to qualify for the promotion to Class II Grade II.<br />
(b) One Tax Officer in Class III Grade II was trained for the Examination to confirm in<br />
Class III Grade II and to qualify for the promotion to Class III Grade I.<br />
03. Examinations conducted for Assessors:<br />
Name <strong>of</strong> the Examination Held on Number<br />
Sat<br />
Number<br />
Successful<br />
01 Final <strong>Department</strong>al Examination for Assessors 07-02-<strong>2005</strong> to 21 09<br />
in Class II Grade II<br />
14-02-<strong>2005</strong><br />
02 Final <strong>Department</strong>al Examination for Assessors 09-05-<strong>2005</strong> to 12 10<br />
in Class II Grade II (Repeat, 2 nd Attempt) 16-05-<strong>2005</strong><br />
03 Final <strong>Department</strong>al Examination for Assessors 30-06-<strong>2005</strong> to 02 01<br />
in Class II Grade II (Repeat, 3 rd Attempt) 01-07-<strong>2005</strong><br />
04 Final <strong>Department</strong>al Examination for Assessors 15-08-<strong>2005</strong> 01 01<br />
in Class II Grade II (Indirect Tax)<br />
05 Final <strong>Department</strong>al Examination for Assessors 15-08-<strong>2005</strong> to 01 01<br />
in Class II Grade II (Repeat, 4 th Attempt) 16-08-<strong>2005</strong><br />
04. Examinations conducted for Tax Officers.<br />
Name <strong>of</strong> the Examination Held on Number<br />
Sat<br />
Number<br />
Successful<br />
01 Examination for Tax Officers in Class III Grade 25-01-<strong>2005</strong> 57 48<br />
I to confirm in Class III Grade I, and to qualify<br />
for promotion to Class II Grade II. (Repeat, 2 nd<br />
Attempt)<br />
02 Examination for Tax Officers in Class III Grade 17-03-<strong>2005</strong> 10 09<br />
I to confirm in Class III Grade I, and to qualify<br />
for promotion to Class II Grade II. (Repeat, 3 rd<br />
Attempt)<br />
03 Examination for Tax Officers in Class III Grade 25-07-<strong>2005</strong> 16 10<br />
I to confirm in Class III Grade I, and to qualify<br />
for promotion to Class II Grade II.<br />
04 Examination for Tax Officers in Class III Grade 16-09-<strong>2005</strong> 06 06<br />
I to confirm in Class III Grade I, and to qualify<br />
for promotion to Class II Grade II. (Repeat, 2 nd<br />
Attempt)<br />
05 Examination for Tax Officers in Class III Grade<br />
II to confirm in Class III Grade II, and to qualify<br />
for promotion to Class III Grade I.<br />
16-09-<strong>2005</strong> 01 01<br />
05. Seminars conducted for Officials <strong>of</strong> the <strong>Department</strong>.<br />
Subject<br />
Held on<br />
01 Receipts and Payments Accounts (Sinhala Medium) 14-03-<strong>2005</strong><br />
02 A Seminar on How to Analyze the Cash-Flow Statements 08-04-<strong>2005</strong><br />
03 Audit <strong>of</strong> Corporate Accounts 09-05-<strong>2005</strong><br />
11-05-<strong>2005</strong><br />
13-05-<strong>2005</strong>
8<br />
18-05-<strong>2005</strong><br />
04 Finance Act, and Amendments to <strong>Inland</strong> <strong>Revenue</strong> Act, No. 38 <strong>of</strong> 2000 25-05-<strong>2005</strong><br />
(Sinhala Medium)<br />
05 Finance Act, and Amendments to <strong>Inland</strong> <strong>Revenue</strong> Act, No. 38 <strong>of</strong> 2000 02-06-<strong>2005</strong><br />
(Sinhala Medium)<br />
06 Seminar on Tax Compliance 11-08-<strong>2005</strong><br />
07 Deviating from Tax Amnesties to Public Relations and Tax Education 30-08-<strong>2005</strong><br />
08 Seminar on Tax Compliance Strategies and Applicability <strong>of</strong> Them 22-09-<strong>2005</strong><br />
09 Seminar on Government Securities and Primary Dealers 23-09-<strong>2005</strong><br />
10 Seminar on Operations in Foreign Currency Banking Unit in<br />
Commercial Banks 25-10-<strong>2005</strong><br />
11 Examination <strong>of</strong> Forge Documents (Sinhala Medium) 13-12-<strong>2005</strong><br />
1.3 Promotions<br />
Mr. R. P. L. Weerasinghe, Commissioner-Large Taxpayers Unit, was appointed Commissioner<br />
General on 01-01-<strong>2005</strong>. He retired on 10-07-<strong>2005</strong> and Mr. P. P. D. P. Karunasekara, Additional<br />
Commissioner General, was appointed Commissioner General, with effect from 11-07-<strong>2005</strong>.<br />
Following Commissioners were promoted to posts <strong>of</strong> Deputy Commissioner General:<br />
Name<br />
Effective Date<br />
Mrs. I. K. Balasooriya 03-01-<strong>2005</strong><br />
Mr. R. M. Jothipala 03-01-<strong>2005</strong><br />
Mr. K. D. Upatissa 03-01-<strong>2005</strong><br />
Mr. A. A. Wijepala 03-01-<strong>2005</strong><br />
Dr. P. P. A. Hameed 03-01-<strong>2005</strong><br />
Mr. R. A. D. H. Ranasinghe 15-03-<strong>2005</strong><br />
Mr. S. Angammana 14-04-<strong>2005</strong><br />
Mr. E. A. S. Edirisinghe 10-07-<strong>2005</strong><br />
Mr. R. K. H. Kaluarachchi 29-08-<strong>2005</strong><br />
Following Commissioners were promoted to posts <strong>of</strong> Senior Commissioner:<br />
Name<br />
Effective Date<br />
Mr. E. M. M. Medagoda 01-12-<strong>2005</strong><br />
Mr. H. M. Herath 01-12-<strong>2005</strong><br />
Mr. V. D. G. P. Ubesiri 01-12-<strong>2005</strong><br />
Mr. N. S. Wattaladeniya 01-12-<strong>2005</strong><br />
Mr. P. Wickramasena 01-12-<strong>2005</strong><br />
Following Deputy Commissioners were promoted to posts <strong>of</strong> Commissioner:<br />
Name<br />
Effective Date<br />
Mr. K. M. S. Kandegedara 01-03-<strong>2005</strong><br />
Mrs. A. Seneviratne 01-03-<strong>2005</strong><br />
Mr. H. A. Somapala 15-03-<strong>2005</strong><br />
Mr. W. P. Sirisena 14-04-<strong>2005</strong><br />
Mrs. M. Samarasekara 10-07-<strong>2005</strong>
9<br />
Mr. K. L. S. Silva 29-08-<strong>2005</strong><br />
Mr. H. B. A. Seneviratne 01-12-<strong>2005</strong><br />
Mrs. D. M. Nandawathie 01-12-<strong>2005</strong><br />
Mr. A. A. Amararatne 01-12-<strong>2005</strong><br />
Mr. W. Thilakaratne 01-12-<strong>2005</strong><br />
Mr. R. K. Premadasa 01-12-<strong>2005</strong><br />
Mr. P. B. Madawala 01-12-<strong>2005</strong><br />
Mr. H. M. Abeysinghe 01-12-<strong>2005</strong><br />
Mr. P. D. Premaratne 01-12-<strong>2005</strong><br />
Mr. H. M. Premaratne Banda 01-12-<strong>2005</strong><br />
Mr. S. T. Gobalasingham 01-12-<strong>2005</strong><br />
Mr. K. A. P. Kaluarachchi 01-12-<strong>2005</strong><br />
Mrs. W. B. S. Shanthikumar 01-12-<strong>2005</strong><br />
Mrs. L. Ramanayake 01-12-<strong>2005</strong><br />
Mr. W. M. W. Kumarasiri 01-12-<strong>2005</strong><br />
Mr. W. M. Mendis 01-12-<strong>2005</strong><br />
Mrs. R. A. M. A. K. Herath 01-12-<strong>2005</strong><br />
Following Senior Assessors were promoted to posts <strong>of</strong> Deputy Commissioner:<br />
Name<br />
Effective Date<br />
Mr. D. B. Jayasekara 01-01-<strong>2005</strong><br />
Mr. K. N. C. N. Perera 24-01-<strong>2005</strong><br />
Mrs. W. Anulawathie 01-03-<strong>2005</strong><br />
Mrs. S. Edirisinghe 01-03-<strong>2005</strong><br />
Mr. I. M. B. Seneviratne Banda 01-03-<strong>2005</strong><br />
Mrs. P. Fernando 01-03-<strong>2005</strong><br />
Mr. J. M. Jayawardhana 01-03-<strong>2005</strong><br />
Mr. M. Jayasekara 01-03-<strong>2005</strong><br />
Mr. S. A. Hemapala 01-03-<strong>2005</strong><br />
Mr. H. H. R. Somasiri 15-03-<strong>2005</strong><br />
Mr. H. N. S. Siriwardhana 14-04-<strong>2005</strong><br />
Mr. K. Rajaratnam 10-07-<strong>2005</strong><br />
Mr. A. Sri Selvanayagam 13-07-<strong>2005</strong><br />
Mr. H. D. P. N. Ranjith 29-08-<strong>2005</strong><br />
Mrs. R. M. R. W. Manchanayake 01-12-<strong>2005</strong><br />
Mr. D. M. L. I. Dissanayake 01-12-<strong>2005</strong><br />
Mr. A. N. Guruge 01-12-<strong>2005</strong><br />
Mrs. P. Rohini 01-12-<strong>2005</strong><br />
Mrs. R. M. P. S. K. Rajapakse 01-12-<strong>2005</strong><br />
Mr. A. A. D. U. Abeysinghe 01-12-<strong>2005</strong><br />
Miss D. G. P. W. Goonathilake 01-12-<strong>2005</strong><br />
Mr. J. P. D. R. Jayasekara 01-12-<strong>2005</strong><br />
Mr. D. M. S. Dissanayake 01-12-<strong>2005</strong><br />
Mr. M. G. Somachandra 01-12-<strong>2005</strong><br />
Mrs. C. H. Weerasinghe 01-12-<strong>2005</strong><br />
Mrs. H. M. D. Munasinghe 01-12-<strong>2005</strong><br />
Mr. P. G. K. Samaratunga 01-12-<strong>2005</strong><br />
Mr. G. V. Somasiri 01-12-<strong>2005</strong><br />
Mrs. R. Wijesinghe 01-12-<strong>2005</strong><br />
Mrs. K. M. S. Jayaweera 01-12-<strong>2005</strong><br />
Mr. K. H. N. C. Perera 01-12-<strong>2005</strong><br />
Mrs. K. D. M. R. Silva 01-12-<strong>2005</strong><br />
Mrs. S. N. P. Abrew 01-12-<strong>2005</strong>
10<br />
Mr. K. K. Samarapala 01-12-<strong>2005</strong><br />
Mr. D. B. Kannangara 01-12-<strong>2005</strong><br />
Mrs. K. S. B. R. D. S. Karunaratne 01-12-<strong>2005</strong><br />
Mr. K. G. Piyatissa 01-12-<strong>2005</strong><br />
Mr. O. P. P. K. Sirisena 01-12-<strong>2005</strong><br />
Mr. K. Dharmasena 01-12-<strong>2005</strong><br />
Mr. H. M. G. Wijesinghe 01-12-<strong>2005</strong><br />
Mrs. B. A. D. D. Herath 01-12-<strong>2005</strong><br />
Mr. D. B. Dissanayake 01-12-<strong>2005</strong><br />
Mr. K. D. N. P. Koralearachchi 01-12-<strong>2005</strong><br />
Mr. T. M. Dayananda 01-12-<strong>2005</strong><br />
Mr. W. S. K. de Costa 01-12-<strong>2005</strong><br />
Mr. M. S. M. Fuward 01-12-<strong>2005</strong><br />
Mr. P. M. Dissanayake 01-12-<strong>2005</strong><br />
Mr. P. L. A. Liyanage 01-12-<strong>2005</strong><br />
Mr. A. A. Dayaratne 01-12-<strong>2005</strong><br />
Mr. J. Ratnayake 01-12-<strong>2005</strong><br />
Mr. J. A. A. Parakrama 01-12-<strong>2005</strong><br />
Mr. A. G. Sumanadasa 01-12-<strong>2005</strong><br />
Mrs. K. P. M. Goonathilake 01-12-<strong>2005</strong><br />
Mr. U. B. Keerthisinghe 01-12-<strong>2005</strong><br />
Mr. H. M. P. B. Herath 01-12-<strong>2005</strong><br />
Mr. S. P. Abeysinghe 01-12-<strong>2005</strong><br />
Mr. B. G. Piyadasa 01-12-<strong>2005</strong><br />
Mrs. Vijitha Paranamana 01-12-<strong>2005</strong><br />
Mrs. G. Sumanasekara 01-12-<strong>2005</strong><br />
Mr. I. K. Jinadasa 01-12-<strong>2005</strong><br />
Mr. E. S. de Soyza 01-12-<strong>2005</strong><br />
Mr. H. M. W. C. Bandara 01-12-<strong>2005</strong><br />
Mr. D. R. S. Hapuarachchi 01-12-<strong>2005</strong><br />
Mr. W. M. P. M. B. Wanigasekara 01-12-<strong>2005</strong><br />
Mr. M. J. Gunasiri 01-12-<strong>2005</strong><br />
Mr. D. K. Ranatunga 01-12-<strong>2005</strong><br />
Mr. D. Rangalla 01-12-<strong>2005</strong><br />
Mr. R. M. Jayasinghe 01-12-<strong>2005</strong><br />
Mr. M. H. Denzil 01-12-<strong>2005</strong><br />
Mr. U. B. Wakkumbura 01-12-<strong>2005</strong><br />
Mr. J. A. G. Mahindaratne 01-12-<strong>2005</strong><br />
Mrs. D. M. Padma Kumari 01-12-<strong>2005</strong><br />
Mr. B. J. Jayaratne 01-12-<strong>2005</strong><br />
Mr. M. L. M. Thahir 01-12-<strong>2005</strong><br />
17 Senior Tax Officers were promoted to the post <strong>of</strong> Assessor (Class II Grade II), and 01<br />
Computer Operator was promoted to the post <strong>of</strong> System Controller.<br />
1.4 Retirements<br />
The following <strong>of</strong>ficers were retired from service during the year:<br />
Mr. K. Suseelar - Commissioner General<br />
Mr. R. P. L. Weerasinghe - Commissioner General<br />
Mrs. I. K. Balasooriya - Deputy Commissioner General
11<br />
Mr. R. M. Jothipala - Deputy Commissioner General<br />
Mr. K. D. Upatissa - Deputy Commissioner General<br />
Dr. P. P. A. Hameed - Deputy Commissioner General<br />
Mr. H. L. M. Fouz - Deputy Commissioner<br />
Mr. A. G. de Z. Jayathilake - Deputy Commissioner<br />
Mr. K. N. C. N. Perera - Deputy Commissioner<br />
Six Senior Assessors, Seven Assessors and Twenty seven Senior Tax Officers were also retired<br />
during the year.<br />
Mr. K. Suseelar<br />
Mr. K. Suseelar joined the <strong>Department</strong> <strong>of</strong> <strong>Inland</strong> <strong>Revenue</strong> in June 1968 as an Assistant Assessor.<br />
He was appointed Commissioner General on September 09, 2002. Having completed 37 years in<br />
the <strong>Inland</strong> <strong>Revenue</strong> Service he retired on January 01, <strong>2005</strong>. During his long career in the<br />
<strong>Department</strong> he served with distinction for a considerable period <strong>of</strong> time in the Computer Service<br />
and Computer Development Unit, first as its Deputy Commissioner and then as its Commissioner.<br />
Mr. Suseelar, displayed his abilities in the field <strong>of</strong> negotiations <strong>of</strong> Double Tax Avoidance Treaties<br />
as well. He led the negotiations teams to Hong Kong, Qatar and South Africa, and concluded<br />
treaties with those countries.<br />
He followed a Taxation course in Japan in 1979 and has during his tenure <strong>of</strong> <strong>of</strong>fice participated in<br />
several overseas taxation programmes.<br />
Mr. R. P. L. Weerasinghe<br />
Mr. R. P. L. Weerasinghe began his career with the <strong>Department</strong> as an Assistant Assessor in 1970.<br />
He was appointed Commissioner General on January 01, <strong>2005</strong>. He retired from the <strong>Inland</strong> <strong>Revenue</strong><br />
Service in July <strong>2005</strong> after a long period <strong>of</strong> service spanning 35 years. He served with distinction in<br />
principal branches <strong>of</strong> the <strong>Department</strong>, particularly in the corporate Units <strong>of</strong> the <strong>Department</strong>. Mr.<br />
Weerasinghe was instrumental in the formulation <strong>of</strong> policy framework <strong>of</strong> Economic Service Charge<br />
introduced in 2004.<br />
He followed Tax Auditing and Investigation programme in Germany in 1985 and has during his<br />
tenure <strong>of</strong> <strong>of</strong>fice participated in several other taxation programmes and workshops abroad. He<br />
displayed talent in taxation <strong>of</strong> international transactions and was a member <strong>of</strong> negotiation teams <strong>of</strong><br />
Double Tax Avoidance Agreements with Vietnam, UAE, Qatar and South Africa.<br />
Mrs. I. K. Balasooriya<br />
Having entered the <strong>Department</strong> <strong>of</strong> <strong>Inland</strong> <strong>Revenue</strong> in 1970 as an Assistant Assessor and completed<br />
34 years devoted service, Mrs. Balasooriya retired from service as a Deputy Commissioner<br />
General, in January <strong>2005</strong>. She underwent training in Tax Administration in USA (California) in<br />
1988 and represented the <strong>Department</strong> at the 24 th Annual Technical Conference and the 9 th General<br />
Meeting <strong>of</strong> CATA held in Malaysia in 2003. Mrs. Balasooriya functioned as the Senior Tax<br />
Advisor to the Ministry <strong>of</strong> Finance for a short period time prior to her retirement.
12<br />
Mr. R. M. Jothipala<br />
Mr. Jothipala began his career with the <strong>Department</strong> as an Assistant Assessor in 1970, and<br />
completed a dedicated service <strong>of</strong> 34 years in the <strong>Department</strong> covering different subject areas. He<br />
retired in March <strong>2005</strong> as a Deputy Commissioner General. He followed a training programme in<br />
Tax Administration in USA (California) in 1988 and during his career has participated in a few<br />
other taxation programmes overseas.<br />
Mr. K. D. Upatissa<br />
Mr. Upatissa who joined the <strong>Department</strong> as an Assistant Assessor in 1970, retired from the Service<br />
in October <strong>2005</strong> counting 35 years service while functioning as a Deputy Commissioner General.<br />
During his long career in the <strong>Department</strong> he served with distinction in several key Branches <strong>of</strong> the<br />
<strong>Department</strong>. Mr. Upatissa followed a training programme in Tax Administration in USA<br />
(California) in 1988.<br />
Dr. P. P. A. Hameed<br />
Dr. Hameed commenced his career with the <strong>Department</strong> in 1970, as an Assistant Assessor. He<br />
served the <strong>Department</strong> for nearly 35 years, stepping to several positions in the tax administration,<br />
particularly the head <strong>of</strong> Corporate Units and Information Division, and eventually reaching the<br />
position <strong>of</strong> a Deputy Commissioner General. Dr. Hameed participated at the Programme on<br />
Exchange <strong>of</strong> Information and Bank secrecy held in Korea in the year 2002.
13<br />
CHAPTER 2<br />
REVENUE COLLECTION<br />
Collection <strong>of</strong> <strong>Revenue</strong> is the main objective <strong>of</strong> taxation and the quantum <strong>of</strong> which determines the<br />
overall success or failure <strong>of</strong> the <strong>Inland</strong> <strong>Revenue</strong> <strong>Department</strong>. Concerted effort is therefore made to<br />
fulfill the revenue requirement <strong>of</strong> the Government keeping in the line with the Mission <strong>of</strong> the<br />
<strong>Department</strong>.<br />
2.1 Number <strong>of</strong> Tax files<br />
The number <strong>of</strong> tax files handled by the <strong>Department</strong> during the year is shown in the Table<br />
01:<br />
Table 01<br />
Number <strong>of</strong> Registered Taxpayers in the <strong>Department</strong> as at 31-12-<strong>2005</strong><br />
Persons Registered for Income Tax purposes<br />
* Resident Companies 21,644<br />
* Non-Resident Companies 370<br />
* State Corporations, Statutory Boards and State owned institutions 73<br />
* Individuals 120,570<br />
* Partnerships 12,632<br />
* Bodies <strong>of</strong> Persons etc. 2,262<br />
Total Number <strong>of</strong> Persons & Partnerships registered for Income Tax Purposes (Files) 157,551<br />
Employers Registered for the purpose <strong>of</strong> PAYE Scheme 9,766<br />
Persons and Partnerships registered for Economic Service Charge (ESC) 7,701<br />
Persons registered for the purpose <strong>of</strong> Value Added Tax (VAT0 22,852<br />
Persons registered for Debits Tax purposes 943<br />
Betting Levy Files 1,054<br />
Gaming Levy Files 7<br />
Total Number <strong>of</strong> Files handled by the <strong>Department</strong> as at 31-12-<strong>2005</strong> 199,874<br />
2.2 Number <strong>of</strong> Income Taxpayers<br />
The number <strong>of</strong> persons who registered with the <strong>Department</strong> as at the end <strong>of</strong> the year, in<br />
relation to Income Tax, is as follows:<br />
Table 02<br />
Number <strong>of</strong> Income Taxpayers – <strong>2005</strong><br />
Persons registered for Income Tax purposes<br />
Corporate<br />
* Resident Companies 21,644<br />
* Non-Resident Companies 370<br />
* State Corporations, Statutory Boards and State owned Institutions 73<br />
Non-Corporate<br />
* Resident and Non-resident Individuals 120,570<br />
* Partnerships 12,632<br />
* Bodies <strong>of</strong> Persons etc. (Co-op. Societies, Executors, Trustees, Clubs etc.) 2,262<br />
Employees paying income tax under Pay-As-You-Earn (PAYE) Scheme 205,089<br />
Total Number <strong>of</strong> Income Taxpayers 362,640
14<br />
2.3 Income Tax Return Filing Compliance 2001/2002 to 2004/<strong>2005</strong><br />
Table 03<br />
Income Tax Return Compliance 2001/02 to 2004/05<br />
Year <strong>of</strong><br />
Assessment<br />
Sector<br />
Compliance<br />
on Due<br />
Date<br />
%<br />
Compliance<br />
after one<br />
month from<br />
the due<br />
date<br />
%<br />
Compliance<br />
after four<br />
months from<br />
the due<br />
date<br />
%<br />
2001/2002 Corporate 32% 44% 52%<br />
Non-corporate 33% 46% 59%<br />
2002/2003 Corporate 31% 48% 58%<br />
Non-corporate 32% 47% 57%<br />
2003/2004 Corporate 50% 58% 85%<br />
Non-corporate 32% 41% 68%<br />
2004/<strong>2005</strong> Corporate 37% 43% 75%<br />
Non-corporate 28% 41% 55%<br />
2.4 <strong>Revenue</strong> Collection<br />
The total collection <strong>of</strong> revenue for the year <strong>2005</strong> reached Rs. 198.3 billion representing a<br />
growth <strong>of</strong> 20% over that <strong>of</strong> 2004. It is noteworthy that when revenue under each type <strong>of</strong> tax<br />
is compared with the corresponding estimates, targeted collection under each type <strong>of</strong> tax,<br />
except income tax, has been achieved sparing excesses. Collection under Income Tax<br />
together with Economic Service Charge which is mostly an advance against income tax,<br />
indicates only a marginal drop as against the target. It is, however, in excess <strong>of</strong> Rs. 4.2<br />
billion when compared to that <strong>of</strong> 2004.<br />
Overall collection <strong>of</strong> the <strong>Department</strong> for the year reached as much as 99% <strong>of</strong> overall<br />
estimate.<br />
Collection under each types <strong>of</strong> tax is shown in Table 04, and it is illustrated in Chart 01.<br />
Table - 04<br />
Total <strong>Revenue</strong> Collection - <strong>2005</strong><br />
Type <strong>of</strong> Tax<br />
<strong>Revenue</strong> Estimate<br />
Rs.<br />
<strong>Revenue</strong> Collection<br />
Rs.<br />
Collection as a %<br />
<strong>of</strong> Estimate<br />
Collection as a %<br />
<strong>of</strong> the Total <strong>Revenue</strong><br />
Income Tax 55,911,000,000 42,154,887,322 75.40% 21.26%<br />
Economic Service Charge - 7,283,167,056 - 3.67%<br />
Value Added Tax 138,232,000,000 141,877,922,830 102.64% 71.55%<br />
Debits Tax 5,445,000,000 5,700,862,973 104.70% 2.87%<br />
Betting & Gaming Levy 153,000,000 196,371,909 128.35% 0.10%<br />
Share Transaction Levy 450,000,000 451,233,786 100.27% 0.23%<br />
Turnover Tax - 143,096,426 - 0.07%<br />
Stamp Duty - 8,961,348 - 0.0045%<br />
Estate Duty - 550,703 - 0.0003%<br />
Goods & Services Tax - 448,941,014 - 0.23%<br />
National Security Levy - 34,623,758 - 0.02%<br />
TOTAL 200,191,000,000 198,300,619,125 99.06% 100.00%
15<br />
Chart – 01<br />
Total <strong>Revenue</strong> Collection - <strong>2005</strong><br />
IT<br />
ESC<br />
150,000<br />
135,000<br />
120,000<br />
105,000<br />
VAT<br />
VAT<br />
DT<br />
B&GL<br />
Rs. Million<br />
90,000<br />
75,000<br />
60,000<br />
STL<br />
TT<br />
SD<br />
45,000<br />
30,000<br />
IT<br />
ED<br />
GST<br />
15,000<br />
0<br />
ESC<br />
DT B&GL STL TT SD ED GST NSL<br />
Type <strong>of</strong> Tax<br />
NSL<br />
2.5 Cash Flow in <strong>2005</strong><br />
The Cash Flow <strong>of</strong> the IRD during the year <strong>2005</strong> is shown in the Table 05, and Chart 02<br />
illustrates the cash flow from January to December <strong>2005</strong>.<br />
Month<br />
Table - 05<br />
Cash Flow – <strong>2005</strong><br />
<strong>Revenue</strong><br />
Collection<br />
Rs. Mn.<br />
Cumulative<br />
<strong>Revenue</strong><br />
Collection Rs. Mn.<br />
January 13,158 13,158<br />
February 12,812 25,970<br />
March 12,594 38,564<br />
April 4,703 53,267<br />
May 5,731 68,998<br />
June 3,553 82,551<br />
July 15,359 97,910<br />
August 22,751 120,661<br />
September 19,820 140,481<br />
October 19,345 159,826<br />
November 18,380 178,206<br />
December 20,095 198,301
16<br />
Chart - 02<br />
Cash Flow – <strong>2005</strong><br />
200,000<br />
180,000<br />
160,000<br />
140,000<br />
Rs. Million<br />
120,000<br />
100,000<br />
80,000<br />
60,000<br />
40,000<br />
20,000<br />
0<br />
January<br />
February<br />
March<br />
April<br />
May<br />
June<br />
July<br />
August<br />
September<br />
October<br />
November<br />
December<br />
<strong>Revenue</strong> Collection<br />
Cumulative <strong>Revenue</strong> Collection<br />
2.6 <strong>Inland</strong> <strong>Revenue</strong> Contribution to the Government <strong>Revenue</strong> and Gross Domestic<br />
Product (GDP)<br />
Table 06 below shows the IRD’s contribution to the Government revenue and the GDP in<br />
<strong>2005</strong> and its trend in last 4 years, while Chart 04 illustrates the IRD’s contribution to the<br />
Government revenue in last 5 years.<br />
Table 06<br />
Contribution to the Government <strong>Revenue</strong> and GDP at Current Factor Prices<br />
Year<br />
Government<br />
<strong>Revenue</strong><br />
Rs. Million<br />
IRD's Collection<br />
Rs. Million<br />
% <strong>of</strong> IRD's<br />
Collection to<br />
Govt. <strong>Revenue</strong><br />
GDP at Current<br />
Factor Prices<br />
Rs. Million<br />
% <strong>of</strong> IRD's<br />
Collection to<br />
GDP<br />
2001 234,296 133,230 56.86% 1,245,599 10.70%<br />
2002 261,887 137,609 52.55% 1,403,286 9.81%<br />
2003 276,465 139,044 50.29% 1,562,737 8.90%<br />
2004 311,473 164,803 52.91% 1,800,750 9.15%<br />
<strong>2005</strong> 379,747 * 198,301 52.22% 2,098,323 9.45%<br />
Source - Central Bank <strong>of</strong> Sri Lanka Annual <strong>Report</strong> <strong>2005</strong><br />
* Provisional Figures
17<br />
Chart 03<br />
Contribution <strong>of</strong> the IRD’s Collection to the Government <strong>Revenue</strong> – 2001 to <strong>2005</strong><br />
400,000<br />
350,000<br />
300,000<br />
Rs. Million<br />
250,000<br />
200,000<br />
150,000<br />
100,000<br />
50,000<br />
0<br />
2001 2002 2003 2004 <strong>2005</strong><br />
Government <strong>Revenue</strong><br />
IRD's Collection<br />
2.7 <strong>Inland</strong> <strong>Revenue</strong> Collection 2001 to <strong>2005</strong><br />
Figures in Table 07 represent the tax wise revenue collection <strong>of</strong> the IRD, from 2001 to <strong>2005</strong><br />
Table 07<br />
<strong>Inland</strong> <strong>Revenue</strong> Collection 2001 to <strong>2005</strong> – Tax wise Analysis<br />
2001 2002 2003 2004 <strong>2005</strong><br />
Type <strong>of</strong> Tax Collection % Collection % Collection % Collection % Collection %<br />
Income Tax 33,614 25.23% 37,682 27.38% 38,602 27.76% 37,904.0 23.00% 42,154.8 21.26%<br />
Economic Service Charge - - - 4,052.8 2.46% 7,283.1 3.67%<br />
Value Added Tax - 35,181 25.57% 97,754 70.30% 117,030.9 71.01% 141,877.9 71.55%<br />
Debits Tax - 1,310 0.95% 3,601 2.59% 4,488.8 2.72% 5,700.8 2.87%<br />
Betting & Gaming Levy - 55 0.04% 56 0.04% 77.1 0.05% 196.4 0.10%<br />
Share Transaction Levy - - - - 451.2 0.23%<br />
Turnover Tax 1,119 0.84% 678 0.49% 4 0.00% 106.2 0.06% 143.1 0.07%<br />
Stamp Duty 8,415 6.32% 2,331 1.69% 69 0.05% 51.3 0.03% 8.9 0.00%<br />
Estate Duty 2 0.00% 2 0.00% - 0.4 0.00% 0.5 0.00%<br />
Goods & Services Tax 45,972 34.51% 31,511 22.90% (759) -0.55% 852.6 0.52% 448.9 0.23%<br />
National Security Levy 43,073 32.33% 28,859 20.97% (284) -0.20% 239.9 0.15% 34.6 0.02%<br />
Save the Nation<br />
Contribution 1,035 0.78% - - - -<br />
TOTAL 133,230 100% 137,609 100% 139,043 100% 164,804 100% 198,300 100%
18<br />
2.8 Income Tax Collection in <strong>2005</strong><br />
2.8.1 Corporate and Non-corporate Income Tax<br />
Table 08 shows the composition to Income Tax collection, and Chart 04 Illustrates the same<br />
with percentages.<br />
Table - 08<br />
Corporate and Non-corporate Income Tax Collection – <strong>2005</strong><br />
Sector Tax Collection (Rs.) %<br />
Corporate 19,711,949,809.16 46.76%<br />
Non-Corporate 22,442,937,513.30 53.24%<br />
Total 42,154,887,322.46 100%<br />
Chart - 04<br />
Income Tax Collection – <strong>2005</strong><br />
Corporate 47%<br />
Non-Corporate<br />
53%<br />
2.8.2 Source wise analysis <strong>of</strong> Income Tax Collection in <strong>2005</strong><br />
Table 09<br />
Income Tax Collection – <strong>2005</strong><br />
Source wise Analysis (Employees and Others)<br />
Source<br />
Employment<br />
Collection (Rs. Mn.)<br />
PAYE Scheme 5,132.4<br />
Self Assessment and Assessments<br />
with penalties for tax in default 691.4 5,823.8<br />
Others<br />
Self Assessment and Assessments<br />
with penalties for tax in default 22,658.1<br />
Withholding Tax on Interest, Rent &<br />
Specified Fees 12,375.6<br />
Deductions at Source 1,995.8<br />
Compounding Penalties 0.6 7,030.1<br />
Gross Collection 42,853.9<br />
Less: Refunds (698.9)<br />
Net Collection 42,155
19<br />
2.9 Economic Service Charge<br />
Table 10 shows the Economic Service Charge collection in <strong>2005</strong>, and Chart 05 illustrates<br />
the same.<br />
Table 10<br />
Economic Service Charge Collection – <strong>2005</strong><br />
Sector Collection (Rs.) %<br />
Corporate Sector 6,675,035,489 91.65%<br />
Non-corporate Sector 608,131,567 8.35%<br />
Total 7,283,167,056 100%<br />
Chart 05<br />
Economic Service Charge Collection – <strong>2005</strong><br />
Noncorporate<br />
Sector<br />
8.35%<br />
Corporate<br />
Sector<br />
91.65%<br />
2.10 Value Added Tax Collection in <strong>2005</strong><br />
Table 11 shows the sector wise Value Added Tax gross collection and refunds in <strong>2005</strong>.<br />
Table 11<br />
Value Added Tax Collection and Refunds - <strong>2005</strong><br />
Sector Gross Collection<br />
Rs. Mn.<br />
Refunds<br />
Rs. Mn.<br />
Net Collection<br />
Rs. Mn.<br />
Manufacturing 31,504 12,279 19,225<br />
Non-manufacturing 35,515 25 35,490 *<br />
Imports 87,180 17 87,163<br />
Total 154,199 12,321 141,878<br />
* Inclusive <strong>of</strong> VAT on Financial Services<br />
Table 12 shows the Value Added Tax (net) Collection sector wise, and it is illustrated by the<br />
Chart 06.
20<br />
Table 12<br />
Value Added Tax (Net) Collection – <strong>2005</strong><br />
Sector<br />
Net Collection<br />
(Rs. Mn.) %<br />
Manufacturing 19,225 13.55%<br />
Non-manufacturing 28,878 20.35%<br />
Financial Services 6,612 4.66%<br />
Imports 87,163 61.44%<br />
Total 141,878 100.00%<br />
Chart 06<br />
Value Added Tax Collection – <strong>2005</strong><br />
Manufacturing<br />
13.55%<br />
Non-Manufacturing<br />
20.35%<br />
Imports 61.44%<br />
Financial Services<br />
4.66%<br />
2.11 Betting & Gaming Levy Collection in <strong>2005</strong><br />
Table 13 compares the revenue estimate <strong>of</strong> Betting & Gaming Levy with the collection for<br />
the year, and it is illustrated in Chart 07.<br />
Table 13<br />
Collection <strong>of</strong> Betting & Gaming Levy - <strong>2005</strong><br />
<strong>Revenue</strong> Estimated <strong>Revenue</strong> Collected %<br />
(Rs.)<br />
(Rs.)<br />
153,000,000 196,371,909 128.35%<br />
Chart 07<br />
Betting & Gaming Levy Collection <strong>2005</strong><br />
200,000,000<br />
175,000,000<br />
Rupees<br />
150,000,000<br />
125,000,000<br />
100,000,000<br />
75,000,000<br />
<strong>Revenue</strong><br />
Estimated<br />
<strong>Revenue</strong><br />
Collection<br />
50,000,000<br />
25,000,000<br />
-<br />
Betting & Gaming Levy
21<br />
2.12 Debits Tax Collection in <strong>2005</strong><br />
Table 14 compares the revenue estimate <strong>of</strong> Debits Tax with revenue collection in <strong>2005</strong>, and<br />
it is illustrated in the Chart 08.<br />
Table 14<br />
Debits Tax Collection - <strong>2005</strong><br />
Estimated <strong>Revenue</strong> (Rs.) <strong>Revenue</strong> Collection (Rs.) %<br />
5,445,000,000 5,700,862,973 104.70%<br />
Chart 08<br />
Debits Tax Collection <strong>2005</strong><br />
6,500,000,000<br />
5,500,000,000<br />
Rupees<br />
4,500,000,000<br />
3,500,000,000<br />
2,500,000,000<br />
Estimated<br />
<strong>Revenue</strong><br />
<strong>Revenue</strong><br />
Collection<br />
1,500,000,000<br />
500,000,000<br />
Debits Tax<br />
2.13 Share Transaction Levy<br />
2.13.1 Introduction<br />
Share Transaction Levy (STL) was introduced under Part II <strong>of</strong> the Finance Act, No.<br />
05 <strong>of</strong> <strong>2005</strong>, with effect from 01-01-<strong>2005</strong>. It is a levy imposed on the turnover at the<br />
rate <strong>of</strong> 0.2% <strong>of</strong> every buyer and seller, in respect <strong>of</strong> every share trading transaction<br />
conducted through the Stock Exchange. The STL is collected by the relevant<br />
stockbroker, stock dealer or custodian bank, who is responsible for the settlement <strong>of</strong><br />
such share transaction. The levy so collected should be paid to the Stock Exchange<br />
through which the share transaction took place, at the time <strong>of</strong> making settlement <strong>of</strong><br />
such share transaction by the respective stockbroker, stock dealer or custodian bank.<br />
The stock exchange is required to remit the levy so collected, to the <strong>Inland</strong> <strong>Revenue</strong><br />
<strong>Department</strong>.
22<br />
2.13.2 Collection <strong>of</strong> Share Transaction Levy in <strong>2005</strong><br />
The Table 15 shows the estimate for the year <strong>2005</strong> and the amount collected and<br />
Chart 09 illustrates the same.<br />
Table 15<br />
Share Transaction Levy - <strong>2005</strong><br />
Estimated <strong>Revenue</strong> <strong>Revenue</strong> Collection %<br />
Rs.<br />
Rs.<br />
450,000,000 451,233,786 100.27%<br />
Chart 09<br />
Share Transaction Levy Collection <strong>2005</strong><br />
Rs. Million<br />
500<br />
450<br />
400<br />
350<br />
300<br />
250<br />
200<br />
150<br />
100<br />
50<br />
0<br />
Estimated<br />
<strong>Revenue</strong><br />
Rs. 450 M<br />
<strong>Revenue</strong><br />
Collection<br />
Rs. 451.2 M<br />
Share Transaction Levy
23<br />
CHAPTER 3<br />
EXPENDITURE AND PRODUCTIVITY RATIO<br />
3.1 Comparison <strong>of</strong> the total expenditure incurred in the year <strong>2005</strong> with 2004.<br />
Table 16<br />
Total Expenditure – 2004 and <strong>2005</strong><br />
Description 2004 (Rs. ' 000.) % <strong>2005</strong> (Rs.' 000) %<br />
Recurrent Expenditure<br />
Emoluments 363,934 73.76% 467,061 59.18%<br />
Traveling 3,179 0.64% 4,105 0.52%<br />
Supplies & Equipments 14,602 2.96% 20,595 2.61%<br />
Repairs & Maintenance 15,600 3.16% 20,199 2.56%<br />
Contracted Services 54,009 10.95% 62,484 7.92%<br />
Transfers 721 0.15% 649 0.08%<br />
Other Recurrent Exp. 8,714 1.77% 42,195 5.35%<br />
Modernization Programme 6,409 1.30% -<br />
Sub Total 467,168 617,288<br />
Capital Expenditure<br />
Reconstruction and<br />
Improvements 7,827 1.59% 13,290 1.68%<br />
Acquisitions 5,861 1.19% 158,641 20.10%<br />
Modernization Project 12,549 2.54% -<br />
Sub Total 26,237 171,931<br />
TOTAL 493,405 100% 789,219 100%<br />
Chart 10<br />
Capital and Recurrent Expenditure – 2004 and <strong>2005</strong><br />
Capital<br />
Expenditure<br />
5%<br />
Capital<br />
Expenditure<br />
22%<br />
2004 <strong>2005</strong><br />
Recurrent<br />
Expenditure<br />
95%<br />
Recurrent<br />
Expenditure<br />
78%
24<br />
3.2 Analysis <strong>of</strong> the Recurrent Expenditure in <strong>2005</strong><br />
Chart 11<br />
Recurrent Expenditure <strong>2005</strong><br />
Contracted Services<br />
10%<br />
Transfers<br />
0%<br />
Other Recurrent<br />
Expenditure<br />
7%<br />
Repairs &<br />
Maintenance<br />
3%<br />
Supplies &<br />
Equipments<br />
3%<br />
Traveling<br />
1%<br />
Emoluments<br />
76%<br />
3.3 Productivity Ratio<br />
The total expenditure <strong>of</strong> the <strong>Department</strong> in the year <strong>2005</strong> was Rs. 789,219,000, and the<br />
amount <strong>of</strong> <strong>Revenue</strong> collected was Rs. 198,300,619,125. The Productivity Ratio ( i.e. the<br />
revenue collected for every rupee <strong>of</strong> expenditure) therefore works out to 1:251. In other<br />
words, the cost <strong>of</strong> collection <strong>of</strong> Rs. 100 was 40 cents.<br />
3.4 Cost <strong>of</strong> <strong>Revenue</strong> Collection<br />
Table 17<br />
<strong>Revenue</strong> Collection, Total Expenditure and Cost <strong>of</strong> Collection<br />
Type <strong>of</strong> Tax 2001 2002 2003 2004 <strong>2005</strong><br />
Income Tax 33,614 37,682 38,602 37,903.8 42,154.8<br />
Economic Service Charge - - - 4,052.8 7,283.2<br />
Estate Duty 2 2 - 0.4 0.6<br />
Stamp Duty 8,415 2,331 69 51.3 9.0<br />
Debits Tax - 1,310 3,601 4,488.8 5,700.9<br />
Turnover Tax 1,119 678 4 106.2 143.1<br />
Goods and Services Tax 45,972 31,511 (759) 852.6 448.9<br />
National Security Levy 43,073 28,859 (284) 239.9 34.6<br />
Value Added Tax - 35,181 97,754 117,030.9 141,877.9<br />
Save the Nation Contribution 1,027 - - - -<br />
Betting & Gaming Levy - - 56 77.1 196.4<br />
Share Transaction Levy - - - - 451.2<br />
Miscellaneous 8 55 - - -<br />
Total Collection 133,230 137,609 139,043 164,803.8 198,300.6<br />
Total Expenditure 483 870 450 493.4 789.2<br />
Cost <strong>of</strong> Collection per Rs.100, cents 0.36 0.63 0.32 0.30 0.40<br />
Cost <strong>of</strong> Collection per Rs. 100, excluding VAT on Imports, cents 0.71
25<br />
CHAPTER 4<br />
TAXES IN DEFAULT<br />
4.1 Figures in Table 18 represent the amounts <strong>of</strong> Taxes in default, amounts <strong>of</strong> taxes held over and<br />
collectible taxes in default, as at 31-12-<strong>2005</strong>.<br />
Table 18<br />
Taxes in Default as at 31-12-<strong>2005</strong><br />
(Rupees)<br />
Type <strong>of</strong> Tax Tax in Default Tax Held over Collectible<br />
Tax in Default<br />
as at 31-12-<strong>2005</strong><br />
%<br />
<strong>of</strong> total<br />
arrears<br />
Income Tax 25,740,798,116 5,142,460,255 20,598,337,861 21.39%<br />
Economic Service Charge 801,300,649 - 801,300,649 0.83%<br />
Value Added Tax 50,589,775,475 - 50,589,775,475 52.54%<br />
Surcharge on Income Tax 1,922,892,115 52,281,433 1,870,610,682 1.94%<br />
Wealth Tax 124,484,412 242,803 124,241,609 0.13%<br />
Surcharge on Wealth Tax 4,865,791 - 4,865,791 0.01%<br />
Gift Tax 18,650,679 - 18,650,679 0.02%<br />
Estate Duty 35,839,430 - 35,839,430 0.04%<br />
Stamp Duty 17,920 - 17,920 0.00%<br />
Goods & Services Tax 9,548,531,364 - 9,548,531,364 9.92%<br />
Turnover Tax 7,979,275,663 1,049,152,797 6,930,122,866 7.20%<br />
National Security Levy 5,636,102,927 - 5,636,102,927 5.85%<br />
Save the Nation Contribution 109,553,034 - 109,553,034 0.11%<br />
Betting & Gaming Levy 25,125,200 25,125,200 - -<br />
Compounding Penalty 14,814,124 - 14,814,124 0.02%<br />
Obsolete Taxes 2,712,220 - 2,712,220 0.00%<br />
TOTAL 102,554,739,119 6,269,262,488 96,285,476,631 100%<br />
Note: Total Tax in default represents cumulative balances under each type <strong>of</strong> tax. These balances in full<br />
are, however, not actually due per se. An arrears or default is created when an assessment is<br />
issued for what ever reason (viz. non-furnishing a Return, non-payment <strong>of</strong> Tax on the basis <strong>of</strong> the<br />
Return, under declaration etc.) Invariably, the relevant parties have lodged appeals against most<br />
<strong>of</strong> those assessments (except on those assessments made with concurrence <strong>of</strong> Taxpayers) and<br />
consequently, settlements are held up as Taxpayers have invoked their appeal rights, in certain<br />
cases up to higher appellate levels (Board <strong>of</strong> Review, Court <strong>of</strong> Appeal etc.). On the settlement <strong>of</strong><br />
the appeals, depending on the out comes, any excess amount assessed has to be discharged.<br />
Further, these default amounts include (by definition) penalties added thereon for delays.
26<br />
CHAPTER 5<br />
INTERNATIONAL TAXATION<br />
5.1 Double Tax Treaties<br />
The main objective <strong>of</strong> Tax Treaties is to eliminate or reduce double taxation in international trade,<br />
and thereby to encourage the flow <strong>of</strong> investment, trade, technology and technical know how into<br />
the country. As at 31-12-<strong>2005</strong> Sri Lanka has entered into such agreements with 35 countries, and<br />
concluded negotiations with 6 other countries.<br />
Action taken during the year <strong>2005</strong><br />
(a)<br />
Agreement with Hong Kong<br />
Having obtained the Parliamentary approval, the relevant Gazette Notification was issued.<br />
With the notifications issued by both contracting states, the Agreement entered in to force<br />
on 29-03-<strong>2005</strong>.<br />
(b)<br />
Agreement with Qatar<br />
Having obtained the Parliamentary approval, the relevant Gazette Notification was issued.<br />
Our constitutional requirements were thus completed and notification was issued. Await<br />
notification from Qatar.<br />
(c)<br />
Agreement with China<br />
Notifications were issued by both Contracting States and accordingly, the Agreement<br />
entered into force on 22-05-<strong>2005</strong>.<br />
(d)<br />
Agreement with Vietnam<br />
Agreement was signed at Government level and preparations were being made to present it<br />
for Parliamentary approval.<br />
(e)<br />
New Agreement with India<br />
Several rounds <strong>of</strong> negotiations were held at <strong>of</strong>ficials’ level between Sri Lanka and India,<br />
under the umbrella <strong>of</strong> Comprehensive Economic Partnership Agreement (CEPA), for a new<br />
Agreement.<br />
(f)<br />
SAARC Limited Multilateral Convention on Avoidance <strong>of</strong> Double Taxation and<br />
Mutual Administrative Assistance in Tax matters.<br />
The Agreement was signed at Government level. Arrangements were being made to present<br />
the Agreement for Parliamentary approval.
27<br />
5.2 IRD’s Representations in relation to international tax matters<br />
Name <strong>of</strong> the Officer Programme/Seminar/Workshop Country Duration<br />
01 Mr. R. P. L. Weerasinghe<br />
Commissioner General<br />
CATA Management Committee<br />
Meeting<br />
UK<br />
02 Days<br />
02 Mr. P. P. D. P. Karunasekara<br />
Commissioner General<br />
4 th Round <strong>of</strong> Technical Level<br />
Negotiations on new DTR<br />
India<br />
03 Days<br />
03 Mr. A. A. Wijepala<br />
Deputy Commissioner General<br />
(i) International Tax Dialogue<br />
(VAT Conference)<br />
Italy<br />
03 Days<br />
(ii) Tax Administration Programme<br />
Korea<br />
13 Days<br />
04 Mr. R. A. D. H. Ranasinghe<br />
Deputy Commissioner General<br />
OECD Global Forum on Taxation<br />
and 10 th Annual International<br />
Taxation Meeting on Tax Treaties<br />
and Transfer Pricing<br />
France<br />
03 Days<br />
05 Mr. E. A. S. Edirisinghe<br />
Deputy Commissioner General<br />
06 Mr. E. M. M. Medagoda<br />
Senior Commissioner<br />
07 Mr. V. G. D. P. Ubesiri<br />
Senior Commissioner<br />
International Seminar on Taxation<br />
(Senior Tax Course) III Japan 27 Days<br />
26 th CATA Annual Technical<br />
Conference Canada 05 Days<br />
15 th Tax Conference Japan 04 Days<br />
08 Mr. H. B. A. Seneviratne<br />
Commissioner<br />
(i) OECD Global Forum on<br />
Taxation and 10 th Annual<br />
International Taxation Meeting<br />
on Tax Treaties and Transfer<br />
Pricing<br />
(ii) 2 nd Round Technical Level<br />
Negotiations on new DTR<br />
(iii) 4 th Round Technical Level<br />
Negotiations on new DTR<br />
France<br />
India<br />
India<br />
03 Days<br />
03 Days<br />
03 Days<br />
09 Miss D.G. P.W. Goonathilake<br />
Deputy Commissioner<br />
International Tax Dialogue (VAT<br />
Conference)<br />
Italy<br />
03 Days<br />
10 Mrs. B. A. D. D. Herath<br />
Deputy Commissioner<br />
3 rd Meeting <strong>of</strong> the Sub-Group on<br />
Avoidance <strong>of</strong> Double Taxation<br />
Nepal<br />
01 Day<br />
11 Mrs. R. P. H. Fernando<br />
Assessor<br />
4 th Round <strong>of</strong> Technical Level<br />
Negotiations on new DTR<br />
India<br />
03 Days
28<br />
CHAPTER 6<br />
LEGISLATION<br />
6.1 Following legislation was enacted during the year.<br />
(i) The Finance Act, No. 05 <strong>of</strong> <strong>2005</strong> which introduced the -<br />
‣ Social Responsibility Levy (SRL)<br />
‣ Share Transaction Levy (STL)<br />
(i) <strong>Inland</strong> <strong>Revenue</strong> (Amendment) Act, No. 8 <strong>of</strong> <strong>2005</strong><br />
(ii) Value Added Tax (Amendment) Act, No. 06 <strong>of</strong> <strong>2005</strong>.<br />
(iii)<br />
Finance (Amendment) Act, No. 07 <strong>of</strong> <strong>2005</strong> which introduced provisions for<br />
imposition <strong>of</strong> Withholding Tax on the registration <strong>of</strong> Motor Vehicles, and to amend<br />
the law related to Economic Service Charge.<br />
(iv) Betting and Gaming Levy (Amendment) Act, No. 09 <strong>of</strong> <strong>2005</strong>.<br />
6.2 Rulings given during the year.<br />
Relevant<br />
Description Ruling Number Date<br />
Section<br />
Income Tax<br />
Section 4 Benefit Valuation on Vehicles Rul/<strong>2005</strong>IT/0008 07-07-<strong>2005</strong><br />
Owned by Employee<br />
Section 4 Business <strong>of</strong> hiring vehicles carried Rul/<strong>2005</strong>IT/0011 08-09-<strong>2005</strong><br />
on by an employee<br />
Section 7 Promotional Shares Rul/<strong>2005</strong>IT/0006 25-04-<strong>2005</strong><br />
Section 10 Exemption from Income Tax on Rul/<strong>2005</strong>IT/0013 12-10-<strong>2005</strong><br />
NRFC gift scheme “Ran<br />
Kahawanu Wasana”<br />
Section 13 Government Subsidy on Sale <strong>of</strong> Rul/<strong>2005</strong>IT/0009 11-07-<strong>2005</strong><br />
Solar Home Systems<br />
Section 15(aa) Exemption <strong>of</strong> Pr<strong>of</strong>its and Income Rul/<strong>2005</strong>IT/0016 16-11-<strong>2005</strong><br />
under Section 15(aa)<br />
Section 23 What is a ‘Train Engine’- is it a Rul/<strong>2005</strong>IT/0010 11-07-<strong>2005</strong><br />
motor vehicle?<br />
Section 24 Expenditure on Overseas Travel Rul/<strong>2005</strong>IT/0020 16-11-<strong>2005</strong><br />
and Advertising, Incurred out side<br />
Sri Lanka<br />
Section 29 Limitation <strong>of</strong> Deduction <strong>of</strong> losses Rul/<strong>2005</strong>IT/0019 16-11-<strong>2005</strong><br />
to 35% <strong>of</strong> Total Statutory Income<br />
Section 29 Deduction <strong>of</strong> Interest Rul/<strong>2005</strong>IT/0012 08-07-<strong>2005</strong><br />
Section 51 Fees received in foreign currency Rul/<strong>2005</strong>IT/0015 03-11-<strong>2005</strong><br />
for services rendered outside Sri<br />
Lanka<br />
Section 73 Residence <strong>of</strong> Individuals Rul/<strong>2005</strong>IT/0002 05-04-<strong>2005</strong><br />
Section 81 Tax liability to Income Tax <strong>of</strong><br />
Non-resident Shipping Companies<br />
Rul/<strong>2005</strong>IT/0003 05-04-<strong>2005</strong>
30<br />
6.4 Legal action taken during the year<br />
6.4.1 Prosecution against non-submission <strong>of</strong> Returns<br />
352 cases were filed against non-submission <strong>of</strong> Returns<br />
Penalties were imposed in respect <strong>of</strong> 157 cases, and collected Rs. 398,000.<br />
6.4.2 Legal action taken to recover taxes in default:<br />
Prosecution in Colombo District Court – 389 cases<br />
Prosecution in Magistrate Courts – 04 cases<br />
Prohibition <strong>of</strong> defaulters leaving the Island – 04 cases<br />
6.4.3 Cases before Colombo District Court:<br />
Number <strong>of</strong> cases filed for recovery <strong>of</strong> tax in default – 389 cases<br />
Amount <strong>of</strong> tax collected - Rs. 12,631,853.<br />
Number <strong>of</strong> Warrants outstanding at the end <strong>of</strong> the year - 12,002.<br />
Total number <strong>of</strong> cases pending at the end <strong>of</strong> the year - 17,014
31<br />
CHAPTER 7<br />
AUDITS, ADDITIONAL TAX COLLECTION AND APPEALS<br />
Amidst <strong>of</strong> a severe staff shortage, the <strong>Department</strong> could maintain the audit functions in a satisfactory level<br />
resulting in collection <strong>of</strong> an additional tax amounting to Rs. 5.17 billion, in the year.<br />
7.1 Particulars <strong>of</strong> Audits and Additional Tax Collection during the year.<br />
Number <strong>of</strong> Audit cases commenced during<br />
the year <strong>2005</strong><br />
Number <strong>of</strong> Audit cases finalized during the<br />
year <strong>2005</strong><br />
Total amount <strong>of</strong> additional tax assessed<br />
during the year <strong>2005</strong> (Rs. Mn.)<br />
Total amount <strong>of</strong> additional tax collected<br />
during the year <strong>2005</strong> (Rs. Mn.)<br />
Income Tax PAYE Value Added<br />
Tax (Except<br />
VAT on<br />
Financial<br />
Services)<br />
VAT on<br />
Financial<br />
Services<br />
2,507 44 981 30<br />
1,767 35 740 28<br />
3,059.2 31 4,107.5 267.1<br />
2,258.32 10.7 2,650 267.1<br />
7.2 Appeals<br />
Appeals to the Commissioner General<br />
Income Tax<br />
Value Added Tax<br />
Opening balance as at 01-01-<strong>2005</strong> 2,439 163<br />
Less:<br />
Adjustments made in January <strong>2005</strong>, for<br />
Appeals settled in 2004 (2,101) (113)<br />
Balance as at 01-02-<strong>2005</strong> 338 50<br />
Number <strong>of</strong> Appeals lodged during the year 608 53<br />
Number <strong>of</strong> Appeals settled during the year 570 48<br />
Balance as at 31-12-<strong>2005</strong> 376 55<br />
7.3 Board <strong>of</strong> Review<br />
Number <strong>of</strong> appeals pending before the Board <strong>of</strong> Review as at 01-01-<strong>2005</strong> 102<br />
Number <strong>of</strong> appeals lodged during the year 03<br />
Number <strong>of</strong> cases taken up for hearing 12<br />
Number <strong>of</strong> orders issued on conclusion <strong>of</strong> hearing 02<br />
Number <strong>of</strong> appeals outstanding as at 31-12-<strong>2005</strong> 103<br />
Stated cases -
32<br />
8.1 Taxpayer Services Unit (TSU)<br />
CHAPTER 8<br />
TAXPAYER SERVICES AND TAXPAYER EDUCATION<br />
Taxpayer Services Unit was established in the ground floor <strong>of</strong> the Head Office building and<br />
deployed competent <strong>of</strong>ficials with a view to provide a better service to the taxpayers and public in<br />
general. Every publication <strong>of</strong> the <strong>Department</strong> is available for sale or otherwise at this Unit. Issuing<br />
temporary VAT registration numbers, giving brief clarifications on tax matters etc. are some<br />
services provided by this Unit.<br />
8.2 Tax Seminars etc.<br />
Four Post-Budget Seminars were conducted in November and December. Particulars <strong>of</strong> those are<br />
as follows:<br />
Seminar conducted on 09-11-<strong>2005</strong> in Colombo (Budget day evening)<br />
Seminar (second) conducted on 08-12-<strong>2005</strong> in Colombo<br />
Seminar (third) conducted in Tamil medium on 20-12-<strong>2005</strong> in Colombo<br />
Seminar (fourth) conducted in Galle on 22-12-<strong>2005</strong>
33<br />
CHAPTER 9<br />
INLAND REVENUE DEPARTMENT MODERNIZATION PROGRAMME<br />
Fiscal Management Reform Programme (FMRP) Project Implementation Unit:<br />
The process <strong>of</strong> the restructuring the <strong>Inland</strong> <strong>Revenue</strong> <strong>Department</strong>, which was geared by the Government<br />
recently, was continued during the year. A project implementation Unit headed by a Project Director has<br />
been established to perform functions in this regard.<br />
During the year, 15 <strong>Inland</strong> <strong>Revenue</strong> Officers were sent on a study tour to visit the <strong>Revenue</strong> <strong>Department</strong> <strong>of</strong><br />
Thailand under the auspices <strong>of</strong> the Project. The names <strong>of</strong> those Officers and designations they held at the<br />
time <strong>of</strong> the visit are given below.<br />
1. Mr. A. A. Wijepala – Commissioner<br />
2. Mr. K. D. Upatissa – Commissioner<br />
3. Mr. E. A. S. Edirisinghe – Commissioner<br />
4. Mr. E. M. M. Medagoda – Commissioner<br />
5. Mr. N. S. Wattaladeniya – Deputy Commissioner<br />
6. Mr. A. A. Amararatne – Deputy Commissioner<br />
7. Mr. P. D. Premaratne – Deputy Commissioner<br />
8. Mr. H. M. Premaratne Banda – Deputy Commissioner<br />
9. Mr. M. J. Gunasiri – Senior Assessor<br />
10. Mr. D. Rangalla – Senior Assessor<br />
11. Mr. V. Piyasoma Perera – Assessor<br />
12. Mr. L. Udayasiri – Senior Tax Officer<br />
13. Mr. Gamini Jayananda – Tax Officer<br />
14. Mr. P. H. Gunawardena – Tax Officer<br />
15. Mr. K. N. Ariyathilake – System Administrator<br />
To ensure the ethical behavior and proper conduct <strong>of</strong> Officers <strong>of</strong> the <strong>Department</strong> as required under<br />
Establishment Code, Financial Regulations etc., a “Code <strong>of</strong> Ethics and conduct” was prepared and<br />
issued to the Officers <strong>of</strong> the <strong>Department</strong> during the year.<br />
Further, “Taxpayer Charter”, a document containing rights and Obligations <strong>of</strong> the Taxpayer under<br />
the tax system, was published during the year.