Performance Report 2005 - Department of Inland Revenue

Performance Report 

2005 

DEPARTMENT OF INLAND REVENUE 

SRI LANKA

PERFORMANCE REPORT 

OF THE 

COMMISSIONER GENERAL OF INLAND REVENUE 

FOR THE YEAR 2005 

P. P. D. P. KARUNASEKARA

Message of the Commissioner General 

This Report reviews activities and performance of the Department of Inland Revenue 

during the year 2005. It outlines mainly the revenue collection and the expenditure 

incurred during the year. 

In the year 2005, the Department was able to collect a tax revenue of Rs. 198.3 billion 

representing 99% of its expectation for the year. This collection reflects an increase 

of Rs. 33.5 billion over that of the previous year. It is 52.22% of the total Government 

Revenue of the year. The higher degree of dedication and devotion of my staff, 

invariably working under considerable pressure, is clearly visualized from this 

achievement. 

I wish to express my appreciation to all grades of the Staff of the Department, the 

Professionals and the large number of Taxpayers for their co-operation extended. 

P. P. D. P. Karunasekara 

Commissioner General of Inland Revenue

Department’s Mission 

To collect the taxes under the law by encouraging voluntary compliance and by 

deterring tax evasion and tax avoidance, and 

To enhance Public confidence in the integrity and efficiency of the tax system by 

administering tax and related legislation fairly, uniformly and courteously, and 

thereby facilitate and foster a beneficial tax culture. 

Strategic Goals 

To improve voluntary compliance by taxpayers with the tax laws through 

programmes which encourage and assist that and detect those who do not comply 

and, where necessary, take appropriate corrective action. 

To improve the effectiveness of the Department by; the applications 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 it’s mission.

Table of Contents 

Page 

Management Directory 01 

Organization Chart 04 

CHAPTER 1 – HUMAN RESOURCES 

1.1 Approved Cadre 05 

1.2 Training 05 

1.2.1 Overseas Training 05 

1.2.2 Training Programmes conducted by the Training Branch of IRD 06 

1.3 Promotions 08 

1.4 Retirements 10 

CHAPTER 2 – REVENUE COLLECTION 

2.1 Number of Tax Files 13 

2.2 Number of Income Taxpayers 13 

2.3 Income Tax Return Filing Compliance 2001/02 – 2004/05 14 

2.4 Revenue Collection 14 

2.5 Cash Flow in 2005 15 

2.6 Inland Revenue Contribution to Government Revenue and GDP 16 

2.7 Inland Revenue Collection 2001 to 2005 17 

2.8 Income Tax Collection in 2005 18 

2.8.1 Corporate and Non-corporate Income Tax 18 

2.8.2 Source wise Analysis of Income Tax Collection in 2005 18 

2.9 Economic Service Charge 19 

2.10 Value Added Tax Collection in 2005 19 

2.11 Betting & Gaming Levy Collection in 2005 20 

2.12 Debits Tax Collection in 2005 21 

2.13 Share Transaction Levy 21 

2.13.1 Introduction of Share Transaction Levy 21 

2.13.2 Collection of Share Transaction Levy in 2005 22 

CHAPTER 3 – EXPENDITURE & PRODUCTIVITY RATIO 

3.1 Comparison of the Expenditure in 2004 and 2005 23 

3.2 Analysis of Recurrent Expenditure in 2005 24 

3.3 Productivity Ratio 24 

3.4 Cost of Revenue Collection 24 

CHAPTER 4 – TAXES IN DEFAULT 

4.1 Taxes in default as at 31-12-2005 25 

CHAPTER 5 – INTERNATIONAL TAXATION 

5.1 Double Tax Treaties 26 

5.2 IRD’s Representations in relation to international tax matters 27 

CHAPTER 6 – LEGISLATION 

6.1 Legislation enacted during the year 2005 28 

6.2 Rulings issued by the Commissioner General in 2005 28 

6.3 Declarations under Section 31(7)(a) of the Inland Revenue Act 29 

6.4 Legal actions taken during the year 2005 30 

CHAPTER 7 – AUDITS, ADDITIONAL TAX COLLECTION AND APPEALS 

7.1 Audits and Additional Tax collection in 2005 31 

7.2 Appeals 31 

7.3 Board of Review 31 

CHAPTER 8 – TAXPAYER SERVICES AND TAXPAYER EDUCATION 

8.1 Taxpayer Services Unit 32 

8.2 Tax Seminars 32 

CHAPTER 9 – MODERNIZATION PROGRAMME OF THE INLAND REVENUE 

DEPARTMENT 

33

MANAGEMENT DIRECTORY 

(As at 31-12-2005) 

Mr. P. P. D. P. Karunasekara 

Commissioner General of Inland Revenue 

Mr. A. A. Wijepala 

Deputy Commissioner General – Tax Administration 

Mr. R. A. D. H. Ranasinghe 

Deputy Commissioner General – Information & Communication Technology (ICT) 

Mr. S. Angammana 

Deputy Commissioner General – Tax Surveillance & Risk Management, and International Affairs 

Mr. E. A. S. Edirisinghe 

Deputy Commissioner General – Human Resources Management 

Mr. R. K. H. Kaluarachchi 

Deputy Commissioner General – Tax Policy Planning & Development, Legislation, 

Rulings and BOI Enterprises 

Mr. E. M. M. Medagoda - Senior Commissioner – Internal Audit 

Mr. H. M. Herath - Senior Commissioner – Large Taxpayer Unit and Corporate Tax 

Mr. V. G. D. P. Ubesiri - Senior Commissioner – Zone 3 

Mr. N. S. Wattaladeniya - Senior Commissioner – Zone 1 

Mr. P. Wickramasena - Senior Commissioner – Zone 2 

Mr. K. M. S. Kandegedara - Commissioner – Human Resources 

Mrs. Anula Seneviratne - Commissioner – Employee Services 

Mr. H. A. Somapala - Commissioner – Value Added Tax Refunds 

Mr. W. P. Sirisena - Commissioner – Southern Region 

Mrs. Mallika Samarasekara - 

Commissioner – LTU 

Mr. K. L. S. Silva - Commissioner – Collection and Withholding Tax 

Mr. H. B. A. Seneviratne - Commissioner – Corporate Tax (Unit 10 and 12) and Secretariat 

Mrs. D. M. Nandawathie - Commissioner – Information 

Mr. A. A. Amararatne - Commissioner – Value Added Tax 

Mr. W. Thilakaratne - Commissioner – Internal Audit 

Mr. R. K. Premadasa - Commissioner – Taxpayer Services

2 

Mr. P. B. Madawala - Commissioner – Northern Region 

Mr. H. M. Abeysinghe - Commissioner – Appeals 

Mr. P. D. Premaratne - Commissioner – Investigation 

Mr. H. M. Premaratne Banda - Commissioner – Corporate Tax (Unit 1&2, Unit 4, Unit 5) 

Mr. S. T. Gobalasingham - Commissioner – Northern Region 

Mr. K. A. P. Kaluarachchi - Commissioner – Computer Development 

Mrs. W. B. S. Shanthikumar - 

Commissioner – Colombo (Metropolitan) Regional Office 

Mrs. Leela Ramanayake - Commissioner – Training 

Mr. W. M. W. Kumarasiri - Commissioner – BOI & Investment Promotion 

Mr. W. M. Mendis - Commissioner – Human Resources 

Mrs. R. A. M. A. K. Herath - 

Commissioner – Appeals (VAT) 

Mr. C. W. W. Gamanayake Deputy Commissioner - Unit 4 

Mrs. P. Karunaratne Deputy Commissioner - Ratnapura Regional Office 

Mr. W. A. Fernando Deputy Commissioner - Maharagama Regional Office 

Mrs. V. Jayasooriya Deputy Commissioner - Colombo Central Regional Office 

Mr. A. L. A. Sirisena Deputy Commissioner - Kegalle Regional Office 

Mrs. H. M. C. I. Gunasekara Deputy Commissioner - Kalutara Regional Office 

Mr. W. V. P. Karunaratne Deputy Commissioner - Negombo Regional Office 

Mr. A. W. Ambepitiya Deputy Commissioner - Colombo City Regional Office 

Mr. S. Rajapakse Deputy Commissioner - Colombo East Regional Office 

Mr. P. A. V. Premaratne Deputy Commissioner - Unit 6A 

Mrs. K. Dahanayake Deputy Commissioner - Unit 7 

Mr. K. A. G. Abhayaratne Deputy Commissioner - Unit 6B 

Mr. D. B. Jayasekara Deputy Commissioner - Kandy Regional Office 

Mrs. W. Anulawathie Deputy Commissioner - Appeals 

Mrs. S. Edirisinghe Deputy Commissioner - Value Added Tax 

Mr. I. M. B. Seneviratne Deputy Commissioner - Unit 12 

Mrs. Priya Fernando Deputy Commissioner - Computer Development Unit 

Mr. J. M. Jayawardene Deputy Commissioner - Banking and Financial Services 

Mr. M. Jayasekara Deputy Commissioner - Taxpayer Services Unit 

Mr. S. A. Hemapala Deputy Commissioner - Unit 5 

Mr. H. H. R. Somasiri Deputy Commissioner - Galle Regional Office 

Mr. H. N. S. Siriwardene Deputy Commissioner - Colombo Central Regional Office 

Mr. K. Rajaratnam Deputy Commissioner - Internal Audit 

Mr. A. Sri Selvanayagam Deputy Commissioner - Information 

Mr. H. D. P. N. Ranjith Deputy Commissioner - Badulla Regional Office 

Mrs. M.R. W. Manchanayake Deputy Commissioner - Unit 8 

Mr. D. M. L. I. Dissanayake Deputy Commissioner - Unit 4 

Mr. A. N. Guruge Deputy Commissioner - Matara Regional Office 

Mrs. P. Rohini Deputy Commissioner - Unit 1 & 2 

Mrs. R. M. P. S. K. Rajapakse Deputy Commissioner - Unit 3 

Mr. A. A. D. U. Abeysinghe Deputy Commissioner - Anuradhapura Regional Office 

Miss D. G. P. W. Goonathilake Deputy Commissioner - Secretariat 

Mr. J. P. D. R. Jayasekara Deputy Commissioner - Information II 

Mr. D. M. S. Dissanayake Deputy Commissioner - Secretariat

Mr. M. G. Somachandra Deputy Commissioner - Unit 7 

Mrs. C. H. Weerasinghe Deputy Commissioner - Colombo North Regional Office 

Mrs. H. M. D. Munasinghe Deputy Commissioner - Unit 10 

Mr. P. G. K. Samaratunga Deputy Commissioner - Colombo South Regional Office 

Mr. G. V. Somasiri Deputy Commissioner - Legal and Collection 

Mrs. R. Wijesinghe Deputy Commissioner - Internal Audit 

Mrs. K. M. S. Jayaweera Deputy Commissioner - PAYE 

Mr. K. H. N. C. Perera Deputy Commissioner - Economic Service Charge and Betting & Gaming Levy 

Mrs. K. D. M. R. Silva Deputy Commissioner - Unit 4 

Mrs. S. N. P. Abrew Deputy Commissioner - Stamp Duty 

Mr. K. K. Samarapala Deputy Commissioner - Value Added Tax 

Mr. D. B. Kannangara Deputy Commissioner - Ratnapura Regional Office 

Mrs. K.S.B.R.D.S. Karunaratne Deputy Commissioner - Data Preparation & Revenue Accounting Unit 

Mr. K. G Piyatissa Deputy Commissioner - Appeals 

Mr. O. P. P. K. Sirisena Deputy Commissioner - Investigation 

Mr. K. Dharmasena Deputy Commissioner - International Division 

Mr. H. M. G. Wijesinghe Deputy Commissioner - Research & Policy Unit 

Mrs. B. A. D. D. Herath Deputy Commissioner - LTU - Banking & Financial Services Unit 

Mr. D. B. Dissanayake Deputy Commissioner - Value Added Tax 

Mr. K. D. N. P. Koralearachchi Deputy Commissioner - Appeals 

Mr. T. M. Dayananda Deputy Commissioner - Kurunegala Regional Office 

Mr. W. S. K. de Costa Deputy Commissioner - Value Added Tax 

Mr. M. S. M. Fuward Deputy Commissioner - Unit 5 

Mr. P. M. Dissanayake Deputy Commissioner - Unit 4 

Mr. P. L. A. Liyanage Deputy Commissioner - Appeals 

Mr. A. A. Dayaratne Deputy Commissioner - LTU – Banking & Financial Services Unit 

Mr. J. Ratnayake Deputy Commissioner - Value Added Tax 

Mr. J. A. A. Parakrama Deputy Commissioner - Unit 7 

Mr. A. G. Sumanadasa Deputy Commissioner - Internal Audit 

Mrs. K. P. M. Gunathilake Deputy Commissioner - Organization 

Mr. U. B. Keerthisinghe Deputy Commissioner - Internal Audit 

Mr. H. M. P. B. Herath Deputy Commissioner - Internal Audit 

Mr. S. P. Abeysinghe Deputy Commissioner - Unit 3 

Mr. B. G. Piyadasa Deputy Commissioner - Internal Audit 

Mrs. Vijitha Paranamana Deputy Commissioner - Colombo City Regional Office 

Mrs. Gnana Sumanasekara Deputy Commissioner - Colombo North 

Mr. I. K. Jinadasa Deputy Commissioner - Value Added Tax 

Mr. E. S. de Soyza Deputy Commissioner - Withholding Tax Branch 

Mr. H. M. W. C. Bandara Deputy Commissioner - Unit 08 

Mr. D. R. S. Hapuarachchi Deputy Commissioner - Training 

Mr. W.M.P.N.B. Wanigasekara Deputy Commissioner - Unit 10 

Mr. M. J. Gunasiri Deputy Commissioner - Unit 12 

Mr. D. K. Ranatunga Deputy Commissioner - LTU – Banking & Financial Services Unit 

Mr. D. Rangalla Deputy Commissioner - Unit 6A 

Mr. R. M. Jayasinghe Deputy Commissioner - Unit 6B 

Mr. M. H. Denzil Deputy Commissioner - Value Added Tax 

Mr. U. B. Wakkumbura Deputy Commissioner - Unit 8 

Mr. J. A. G. Mahindaratne Deputy Commissioner - Unit 4 

Mrs. D. M. Pathmakumari Deputy Commissioner - Internal Audit 

Mr. B. J. Jayaratne Deputy Commissioner - Unit 5 

Mr. M. L. M. Thahir Deputy Commissioner - Unit 7 

3

4 

Organisation Chart - Department of Inland Revenue 

As at 31-12-2005 

Board of Review Commissioner General / 

Chairman - Revenue Board 

Ombudsman 

Secretary to the Revenue Board 

Senior Commissioner: Internal Audit 

Commissioner: System & Finance Audit 

Senior Deputy Commissioner 

General 

Commissioner: 

Procurement & Supplies 

Commissioner: 

Appeals 

Deputy Commissioner 

Chief Accountant 

Building Engineer 

Deputy 

Commissioner 

DCG: 

Tax Administration 

• Commissioner: 

Taxpayer Services 

[TS] 

• Commissioner: Audit 

[Aud] 


Collection & 

Enforcement [C&E] 


Returns & Payment 

Processing [R&PP] 

DCG: ICT 

[Chief Information Officer] 

• Commissioner: ICT I 

[ICT Manager, 

Developments & Reforms] 

• Commissioner: ICT II 

ICT Manager, Projects & 

Engineering] 

• DC: Application & 

Database Development 

Unit [Team Leader] 

• DC: Network Operations 

Centre [Team Leader] 

• DC: ICT Reforms 

• DC: Special Projects 

DCG: HRM 


Human 

Resources 


Human 

Resource 

Development 


Employee 

Services 

• HR Specialist I ** 

• HR Specialist II 

DCG: Tax 

Surveillance [TS] & 

Risk Management 

[RM] and 

International Affairs 


Investigation 


International 

Affairs 


Information & 

Non Filers & Stop 

Filers 

Deputy 

Commissioner 

DCG: Tax Policy 

Planning, 

Development, 

Legislation, Rulings 

& BOI Enterprises 


Strategic and 

Operational 

Planning, Tax 

Policy Planning, 

Legislation , and 

Rulings 


BOI & Investment 

Promotion 


Research & 

Policy 

• Policy, Planning & ** 

Standards Guidance 

• Database Administrator 

• Application Developer 

• Hardware, Network & 

System Administrator 

• Cyber Security & Risk 

Administrator 

• Data Centre Administrator 

• e-Government 

• Emerging Technology 

• Intranet/Web Developer 

• Software Engineering & QA 

• IT Helpdesk 

• ICT Competitive 

Outsourcing 

Training Centre 

Deputy 

Commissioner 

• Tax Policy ** 

Analyst 

• Fiscal Policy 

Expert 

• Economist 

• Financial Analyst 

• Legal Officer 

• Research 

Assistant 

• Statistician 

Senior Commissioner: Tax 

Administration - Zone 1 

Senior Commissioner: 

Tax Administration - LTU 


Tax Administration - 

Zone 2 


Tax Administration - 

Zone 3 

• Commissioner: Colombo 

Regional Offices, VAT, 

Stamp Duty, Unit 3 and ESC 

• Commissioner: LTU, 

Corporate Tax & Debit Tax 

• Commissioner: South 

Region 

• Commissioner: North 

Region 

Deputy Commissioner Deputy Commissioner Deputy Commissioner Deputy Commissioner

5 

CHAPTER 1 

HUMAN RESOURCES 

1.1 Approved Cadre 

The following Table shows the approved Cadre, the actual number of staff in service and the 

vacancies as at December 31, 2005. 

Post Approved Cadre In Post Vacancies 

Commissioner General 01 01 - 

Senior Deputy Commissioner General* 01 - 01 

Deputy Commissioner General* 05 05 - 

Senior Commissioner* 05 05 - 

Commissioner 22** 22 - 

Deputy Commissioner 90** 85 05 

Senior Assessor and Assessor 750** 212 538 

Senior Tax Officer and Tax Officer 1000** 555 445 

System Administrator 02 02 - 

System Analyst 06 01 05 

Accountant 06 06 - 

Combined Service 326 297 29 

K. K. S. 294 291 03 

Others 42 28 14 

Total 2550 1510 1040 

Note: * Newly created Posts. 

** Cadre was increased in December 2005. 

1.2 Training 

1.2.1 Overseas Training 

Following Officials were participated in Training Programmes, Seminars and Workshops (as 

indicated) held abroad during the year. 

Name of the Officer 

01 Mr. W. Tilakarante 

Commissioner 

Training Programme Seminar or 

Workshop 

Workshop on Tax Audits in Cash Based 

Economies 

Country 

Mauritius 

Duration 

12 Days 

02 Mrs. P. Karunaratne 


Workshop on Taxation of International 

Transactions 

Malaysia 

19 Days

6 

03 Mr. P. A. V. Premaratne 


04 Mrs. K. Dahanayake 


Asia Pacific Regional LTU Seminar Thailand 05 Days 

Developing E-Commerce & E-Business Singapore 12 Days 

05 Mrs. R.M.P.S.K. Rajapaksa 

Senior Assessor * 

Tax Analysis and Revenue Forecasting 

Programme 

USA 

26 Days 

06 Mr. D. M. S. Dissanayake 


Tax Analysis and Revenue Forecasting 

Programme 

USA 

26 Days 

07 Mr. M. G. Somachandra 


08 Mrs. H. M. D. Munasinghe 


Asia Pacific Regional LTU Seminar Thailand 05 Days 

Advancing Management Potential UK 47 Days 

09 Mr. P. G. K. Samaratunga 


Commonwealth Management 

Development Programme 

Malaysia 

40 Days 

10 Mr. T. M. Dayananda 


Principles of International and 

Comparative Taxation 

The 

Netherlands 

12 Days 

11 Mr. S. S. D. Weerasekara 

Senior Assessor 

Tax Enforcement Course Malaysia 12 Days 

12 Mr. Mahinda Gunaweera 


Information & Communication 

Technology Skills for Government 

Officials 

Singapore 

25 Days 

13 Mr. D. U. A. Jayawardhana 


International Seminar on Taxation 

(General Tax Course) II 

Japan 

75 Days 

14 Mr. Dayaratne Banda 


Study Tour to the Taxpayer Service 

Centre of India 

India 

02 Days 

15 Mrs. W. P. C. S. Ranaweera 

Assessor 

16 Mrs. R.A.R.P. Ranasinghe 

Senior Tax Officer 

Commonwealth Tax Inspectors Course UK 47 Days 

Data Base Management Systems India 54 Days 

* Promoted to the post of Deputy Commissioner with effect from 01-12-2005 

1.2.2 Training Programmes conducted by the Training Branch of the Department 

Details of Training Courses and Examinations conducted by the Training Branch, during the year 

are as follows: 

01. Training Courses conducted for Assessors. 

(a) 17 Assessors in Class II Grade II were trained for the First Departmental Examination. 

(b) 68 Assessors in Class II Grade II were trained for the Final Departmental Examination.

7 

02. Training Courses conducted for Tax Officers. 

(a) 15 Tax Officers in Class III Grade I were trained for the Examination to confirm in 

Class III Grade I and to qualify for the promotion to Class II Grade II. 

(b) One Tax Officer in Class III Grade II was trained for the Examination to confirm in 

Class III Grade II and to qualify for the promotion to Class III Grade I. 

03. Examinations conducted for Assessors: 

Name of the Examination Held on Number 

Sat 

Number 

Successful 

01 Final Departmental Examination for Assessors 07-02-2005 to 21 09 

in Class II Grade II 

14-02-2005 


in Class II Grade II (Repeat, 2 nd Attempt) 16-05-2005 


in Class II Grade II (Repeat, 3 rd Attempt) 01-07-2005 

04 Final Departmental Examination for Assessors 15-08-2005 01 01 

in Class II Grade II (Indirect Tax) 


in Class II Grade II (Repeat, 4 th Attempt) 16-08-2005 

04. Examinations conducted for Tax Officers. 

Name of the Examination Held on Number 

Sat 

Number 

Successful 

01 Examination for Tax Officers in Class III Grade 25-01-2005 57 48 

I to confirm in Class III Grade I, and to qualify 

for promotion to Class II Grade II. (Repeat, 2 nd 

Attempt) 



for promotion to Class II Grade II. (Repeat, 3 rd 

Attempt) 



for promotion to Class II Grade II. 



for promotion to Class II Grade II. (Repeat, 2 nd 

Attempt) 

05 Examination for Tax Officers in Class III Grade 

II to confirm in Class III Grade II, and to qualify 

for promotion to Class III Grade I. 

16-09-2005 01 01 

05. Seminars conducted for Officials of the Department. 

Subject 

Held on 

01 Receipts and Payments Accounts (Sinhala Medium) 14-03-2005 

02 A Seminar on How to Analyze the Cash-Flow Statements 08-04-2005 

03 Audit of Corporate Accounts 09-05-2005 


13-05-2005

8 


04 Finance Act, and Amendments to Inland Revenue Act, No. 38 of 2000 25-05-2005 

(Sinhala Medium) 

05 Finance Act, and Amendments to Inland Revenue Act, No. 38 of 2000 02-06-2005 

(Sinhala Medium) 

06 Seminar on Tax Compliance 11-08-2005 

07 Deviating from Tax Amnesties to Public Relations and Tax Education 30-08-2005 

08 Seminar on Tax Compliance Strategies and Applicability of Them 22-09-2005 

09 Seminar on Government Securities and Primary Dealers 23-09-2005 

10 Seminar on Operations in Foreign Currency Banking Unit in 

Commercial Banks 25-10-2005 

11 Examination of Forge Documents (Sinhala Medium) 13-12-2005 

1.3 Promotions 

Mr. R. P. L. Weerasinghe, Commissioner-Large Taxpayers Unit, was appointed Commissioner 

General on 01-01-2005. He retired on 10-07-2005 and Mr. P. P. D. P. Karunasekara, Additional 

Commissioner General, was appointed Commissioner General, with effect from 11-07-2005. 

Following Commissioners were promoted to posts of Deputy Commissioner General: 

Name 

Effective Date 

Mrs. I. K. Balasooriya 03-01-2005 

Mr. R. M. Jothipala 03-01-2005 

Mr. K. D. Upatissa 03-01-2005 

Mr. A. A. Wijepala 03-01-2005 

Dr. P. P. A. Hameed 03-01-2005 

Mr. R. A. D. H. Ranasinghe 15-03-2005 

Mr. S. Angammana 14-04-2005 

Mr. E. A. S. Edirisinghe 10-07-2005 

Mr. R. K. H. Kaluarachchi 29-08-2005 

Following Commissioners were promoted to posts of Senior Commissioner: 

Name 


Mr. E. M. M. Medagoda 01-12-2005 

Mr. H. M. Herath 01-12-2005 

Mr. V. D. G. P. Ubesiri 01-12-2005 

Mr. N. S. Wattaladeniya 01-12-2005 

Mr. P. Wickramasena 01-12-2005 

Following Deputy Commissioners were promoted to posts of Commissioner: 

Name 


Mr. K. M. S. Kandegedara 01-03-2005 

Mrs. A. Seneviratne 01-03-2005 

Mr. H. A. Somapala 15-03-2005 

Mr. W. P. Sirisena 14-04-2005 

Mrs. M. Samarasekara 10-07-2005

9 

Mr. K. L. S. Silva 29-08-2005 

Mr. H. B. A. Seneviratne 01-12-2005 

Mrs. D. M. Nandawathie 01-12-2005 

Mr. A. A. Amararatne 01-12-2005 

Mr. W. Thilakaratne 01-12-2005 

Mr. R. K. Premadasa 01-12-2005 

Mr. P. B. Madawala 01-12-2005 

Mr. H. M. Abeysinghe 01-12-2005 

Mr. P. D. Premaratne 01-12-2005 

Mr. H. M. Premaratne Banda 01-12-2005 

Mr. S. T. Gobalasingham 01-12-2005 

Mr. K. A. P. Kaluarachchi 01-12-2005 

Mrs. W. B. S. Shanthikumar 01-12-2005 

Mrs. L. Ramanayake 01-12-2005 

Mr. W. M. W. Kumarasiri 01-12-2005 

Mr. W. M. Mendis 01-12-2005 

Mrs. R. A. M. A. K. Herath 01-12-2005 

Following Senior Assessors were promoted to posts of Deputy Commissioner: 

Name 


Mr. D. B. Jayasekara 01-01-2005 

Mr. K. N. C. N. Perera 24-01-2005 

Mrs. W. Anulawathie 01-03-2005 

Mrs. S. Edirisinghe 01-03-2005 

Mr. I. M. B. Seneviratne Banda 01-03-2005 

Mrs. P. Fernando 01-03-2005 

Mr. J. M. Jayawardhana 01-03-2005 

Mr. M. Jayasekara 01-03-2005 

Mr. S. A. Hemapala 01-03-2005 

Mr. H. H. R. Somasiri 15-03-2005 

Mr. H. N. S. Siriwardhana 14-04-2005 

Mr. K. Rajaratnam 10-07-2005 

Mr. A. Sri Selvanayagam 13-07-2005 

Mr. H. D. P. N. Ranjith 29-08-2005 

Mrs. R. M. R. W. Manchanayake 01-12-2005 

Mr. D. M. L. I. Dissanayake 01-12-2005 

Mr. A. N. Guruge 01-12-2005 

Mrs. P. Rohini 01-12-2005 

Mrs. R. M. P. S. K. Rajapakse 01-12-2005 

Mr. A. A. D. U. Abeysinghe 01-12-2005 

Miss D. G. P. W. Goonathilake 01-12-2005 

Mr. J. P. D. R. Jayasekara 01-12-2005 

Mr. D. M. S. Dissanayake 01-12-2005 

Mr. M. G. Somachandra 01-12-2005 

Mrs. C. H. Weerasinghe 01-12-2005 

Mrs. H. M. D. Munasinghe 01-12-2005 

Mr. P. G. K. Samaratunga 01-12-2005 

Mr. G. V. Somasiri 01-12-2005 

Mrs. R. Wijesinghe 01-12-2005 

Mrs. K. M. S. Jayaweera 01-12-2005 

Mr. K. H. N. C. Perera 01-12-2005 

Mrs. K. D. M. R. Silva 01-12-2005 

Mrs. S. N. P. Abrew 01-12-2005

10 

Mr. K. K. Samarapala 01-12-2005 

Mr. D. B. Kannangara 01-12-2005 

Mrs. K. S. B. R. D. S. Karunaratne 01-12-2005 

Mr. K. G. Piyatissa 01-12-2005 

Mr. O. P. P. K. Sirisena 01-12-2005 

Mr. K. Dharmasena 01-12-2005 

Mr. H. M. G. Wijesinghe 01-12-2005 

Mrs. B. A. D. D. Herath 01-12-2005 

Mr. D. B. Dissanayake 01-12-2005 

Mr. K. D. N. P. Koralearachchi 01-12-2005 

Mr. T. M. Dayananda 01-12-2005 

Mr. W. S. K. de Costa 01-12-2005 

Mr. M. S. M. Fuward 01-12-2005 

Mr. P. M. Dissanayake 01-12-2005 

Mr. P. L. A. Liyanage 01-12-2005 

Mr. A. A. Dayaratne 01-12-2005 

Mr. J. Ratnayake 01-12-2005 

Mr. J. A. A. Parakrama 01-12-2005 

Mr. A. G. Sumanadasa 01-12-2005 

Mrs. K. P. M. Goonathilake 01-12-2005 

Mr. U. B. Keerthisinghe 01-12-2005 

Mr. H. M. P. B. Herath 01-12-2005 

Mr. S. P. Abeysinghe 01-12-2005 

Mr. B. G. Piyadasa 01-12-2005 

Mrs. Vijitha Paranamana 01-12-2005 

Mrs. G. Sumanasekara 01-12-2005 

Mr. I. K. Jinadasa 01-12-2005 

Mr. E. S. de Soyza 01-12-2005 

Mr. H. M. W. C. Bandara 01-12-2005 

Mr. D. R. S. Hapuarachchi 01-12-2005 

Mr. W. M. P. M. B. Wanigasekara 01-12-2005 

Mr. M. J. Gunasiri 01-12-2005 

Mr. D. K. Ranatunga 01-12-2005 

Mr. D. Rangalla 01-12-2005 

Mr. R. M. Jayasinghe 01-12-2005 

Mr. M. H. Denzil 01-12-2005 

Mr. U. B. Wakkumbura 01-12-2005 

Mr. J. A. G. Mahindaratne 01-12-2005 

Mrs. D. M. Padma Kumari 01-12-2005 

Mr. B. J. Jayaratne 01-12-2005 

Mr. M. L. M. Thahir 01-12-2005 

17 Senior Tax Officers were promoted to the post of Assessor (Class II Grade II), and 01 

Computer Operator was promoted to the post of System Controller. 

1.4 Retirements 

The following officers were retired from service during the year: 

Mr. K. Suseelar - Commissioner General 

Mr. R. P. L. Weerasinghe - Commissioner General 

Mrs. I. K. Balasooriya - Deputy Commissioner General

11 

Mr. R. M. Jothipala - Deputy Commissioner General 

Mr. K. D. Upatissa - Deputy Commissioner General 

Dr. P. P. A. Hameed - Deputy Commissioner General 

Mr. H. L. M. Fouz - Deputy Commissioner 

Mr. A. G. de Z. Jayathilake - Deputy Commissioner 

Mr. K. N. C. N. Perera - Deputy Commissioner 

Six Senior Assessors, Seven Assessors and Twenty seven Senior Tax Officers were also retired 

during the year. 

Mr. K. Suseelar 

Mr. K. Suseelar joined the Department of Inland Revenue in June 1968 as an Assistant Assessor. 

He was appointed Commissioner General on September 09, 2002. Having completed 37 years in 

the Inland Revenue Service he retired on January 01, 2005. During his long career in the 

Department he served with distinction for a considerable period of time in the Computer Service 

and Computer Development Unit, first as its Deputy Commissioner and then as its Commissioner. 

Mr. Suseelar, displayed his abilities in the field of negotiations of Double Tax Avoidance Treaties 

as well. He led the negotiations teams to Hong Kong, Qatar and South Africa, and concluded 

treaties with those countries. 

He followed a Taxation course in Japan in 1979 and has during his tenure of office participated in 

several overseas taxation programmes. 

Mr. R. P. L. Weerasinghe 

Mr. R. P. L. Weerasinghe began his career with the Department as an Assistant Assessor in 1970. 

He was appointed Commissioner General on January 01, 2005. He retired from the Inland Revenue 

Service in July 2005 after a long period of service spanning 35 years. He served with distinction in 

principal branches of the Department, particularly in the corporate Units of the Department. Mr. 

Weerasinghe was instrumental in the formulation of policy framework of Economic Service Charge 

introduced in 2004. 

He followed Tax Auditing and Investigation programme in Germany in 1985 and has during his 

tenure of office participated in several other taxation programmes and workshops abroad. He 

displayed talent in taxation of international transactions and was a member of negotiation teams of 

Double Tax Avoidance Agreements with Vietnam, UAE, Qatar and South Africa. 

Mrs. I. K. Balasooriya 

Having entered the Department of Inland Revenue in 1970 as an Assistant Assessor and completed 

34 years devoted service, Mrs. Balasooriya retired from service as a Deputy Commissioner 

General, in January 2005. She underwent training in Tax Administration in USA (California) in 

1988 and represented the Department at the 24 th Annual Technical Conference and the 9 th General 

Meeting of CATA held in Malaysia in 2003. Mrs. Balasooriya functioned as the Senior Tax 

Advisor to the Ministry of Finance for a short period time prior to her retirement.

12 

Mr. R. M. Jothipala 

Mr. Jothipala began his career with the Department as an Assistant Assessor in 1970, and 

completed a dedicated service of 34 years in the Department covering different subject areas. He 

retired in March 2005 as a Deputy Commissioner General. He followed a training programme in 

Tax Administration in USA (California) in 1988 and during his career has participated in a few 

other taxation programmes overseas. 

Mr. K. D. Upatissa 

Mr. Upatissa who joined the Department as an Assistant Assessor in 1970, retired from the Service 

in October 2005 counting 35 years service while functioning as a Deputy Commissioner General. 

During his long career in the Department he served with distinction in several key Branches of the 

Department. Mr. Upatissa followed a training programme in Tax Administration in USA 

(California) in 1988. 

Dr. P. P. A. Hameed 

Dr. Hameed commenced his career with the Department in 1970, as an Assistant Assessor. He 

served the Department for nearly 35 years, stepping to several positions in the tax administration, 

particularly the head of Corporate Units and Information Division, and eventually reaching the 

position of a Deputy Commissioner General. Dr. Hameed participated at the Programme on 

Exchange of Information and Bank secrecy held in Korea in the year 2002.

13 

CHAPTER 2 

REVENUE COLLECTION 

Collection of Revenue is the main objective of taxation and the quantum of which determines the 

overall success or failure of the Inland Revenue Department. Concerted effort is therefore made to 

fulfill the revenue requirement of the Government keeping in the line with the Mission of the 

Department. 

2.1 Number of Tax files 

The number of tax files handled by the Department during the year is shown in the Table 

01: 

Table 01 

Number of Registered Taxpayers in the Department as at 31-12-2005 

Persons Registered for Income Tax purposes 

* Resident Companies 21,644 

* Non-Resident Companies 370 

* State Corporations, Statutory Boards and State owned institutions 73 

* Individuals 120,570 

* Partnerships 12,632 

* Bodies of Persons etc. 2,262 

Total Number of Persons & Partnerships registered for Income Tax Purposes (Files) 157,551 

Employers Registered for the purpose of PAYE Scheme 9,766 

Persons and Partnerships registered for Economic Service Charge (ESC) 7,701 

Persons registered for the purpose of Value Added Tax (VAT0 22,852 

Persons registered for Debits Tax purposes 943 

Betting Levy Files 1,054 

Gaming Levy Files 7 

Total Number of Files handled by the Department as at 31-12-2005 199,874 

2.2 Number of Income Taxpayers 

The number of persons who registered with the Department as at the end of the year, in 

relation to Income Tax, is as follows: 

Table 02 

Number of Income Taxpayers – 2005 

Persons registered for Income Tax purposes 

Corporate 

* Resident Companies 21,644 

* Non-Resident Companies 370 

* State Corporations, Statutory Boards and State owned Institutions 73 

Non-Corporate 

* Resident and Non-resident Individuals 120,570 

* Partnerships 12,632 

* Bodies of Persons etc. (Co-op. Societies, Executors, Trustees, Clubs etc.) 2,262 

Employees paying income tax under Pay-As-You-Earn (PAYE) Scheme 205,089 

Total Number of Income Taxpayers 362,640

14 

2.3 Income Tax Return Filing Compliance 2001/2002 to 2004/2005 

Table 03 

Income Tax Return Compliance 2001/02 to 2004/05 

Year of 

Assessment 

Sector 

Compliance 

on Due 

Date 

% 

Compliance 

after one 

month from 

the due 

date 

% 

Compliance 

after four 

months from 

the due 

date 

% 

2001/2002 Corporate 32% 44% 52% 

Non-corporate 33% 46% 59% 

2002/2003 Corporate 31% 48% 58% 


2003/2004 Corporate 50% 58% 85% 


2004/2005 Corporate 37% 43% 75% 


2.4 Revenue Collection 

The total collection of revenue for the year 2005 reached Rs. 198.3 billion representing a 

growth of 20% over that of 2004. It is noteworthy that when revenue under each type of tax 

is compared with the corresponding estimates, targeted collection under each type of tax, 

except income tax, has been achieved sparing excesses. Collection under Income Tax 

together with Economic Service Charge which is mostly an advance against income tax, 

indicates only a marginal drop as against the target. It is, however, in excess of Rs. 4.2 

billion when compared to that of 2004. 

Overall collection of the Department for the year reached as much as 99% of overall 

estimate. 

Collection under each types of tax is shown in Table 04, and it is illustrated in Chart 01. 

Table - 04 

Total Revenue Collection - 2005 

Type of Tax 

Revenue Estimate 

Rs. 

Revenue Collection 

Rs. 

Collection as a % 

of Estimate 

Collection as a % 

of the Total Revenue 

Income Tax 55,911,000,000 42,154,887,322 75.40% 21.26% 

Economic Service Charge - 7,283,167,056 - 3.67% 

Value Added Tax 138,232,000,000 141,877,922,830 102.64% 71.55% 

Debits Tax 5,445,000,000 5,700,862,973 104.70% 2.87% 

Betting & Gaming Levy 153,000,000 196,371,909 128.35% 0.10% 

Share Transaction Levy 450,000,000 451,233,786 100.27% 0.23% 

Turnover Tax - 143,096,426 - 0.07% 

Stamp Duty - 8,961,348 - 0.0045% 

Estate Duty - 550,703 - 0.0003% 

Goods & Services Tax - 448,941,014 - 0.23% 

National Security Levy - 34,623,758 - 0.02% 

TOTAL 200,191,000,000 198,300,619,125 99.06% 100.00%

15 

Chart – 01 

Total Revenue Collection - 2005 

IT 

ESC 

150,000 

135,000 

120,000 

105,000 

VAT 

VAT 

DT 

B&GL 

Rs. Million 

90,000 

75,000 

60,000 

STL 

TT 

SD 

45,000 

30,000 

IT 

ED 

GST 

15,000 

0 

ESC 

DT B&GL STL TT SD ED GST NSL 

Type of Tax 

NSL 

2.5 Cash Flow in 2005 

The Cash Flow of the IRD during the year 2005 is shown in the Table 05, and Chart 02 

illustrates the cash flow from January to December 2005. 

Month 

Table - 05 

Cash Flow – 2005 

Revenue 

Collection 

Rs. Mn. 

Cumulative 


Collection Rs. Mn. 

January 13,158 13,158 

February 12,812 25,970 

March 12,594 38,564 

April 4,703 53,267 

May 5,731 68,998 

June 3,553 82,551 

July 15,359 97,910 

August 22,751 120,661 

September 19,820 140,481 

October 19,345 159,826 

November 18,380 178,206 

December 20,095 198,301

16 

Chart - 02 

Cash Flow – 2005 

200,000 

180,000 

160,000 

140,000 

Rs. Million 

120,000 

100,000 

80,000 

60,000 

40,000 

20,000 

0 

January 

February 

March 

April 

May 

June 

July 

August 

September 

October 

November 

December 

Revenue Collection 

Cumulative Revenue Collection 

2.6 Inland Revenue Contribution to the Government Revenue and Gross Domestic 

Product (GDP) 

Table 06 below shows the IRD’s contribution to the Government revenue and the GDP in 

2005 and its trend in last 4 years, while Chart 04 illustrates the IRD’s contribution to the 

Government revenue in last 5 years. 

Table 06 

Contribution to the Government Revenue and GDP at Current Factor Prices 

Year 

Government 


Rs. Million 

IRD's Collection 

Rs. Million 

% of IRD's 

Collection to 

Govt. Revenue 

GDP at Current 

Factor Prices 

Rs. Million 

% of IRD's 

Collection to 

GDP 

2001 234,296 133,230 56.86% 1,245,599 10.70% 

2002 261,887 137,609 52.55% 1,403,286 9.81% 

2003 276,465 139,044 50.29% 1,562,737 8.90% 

2004 311,473 164,803 52.91% 1,800,750 9.15% 

2005 379,747 * 198,301 52.22% 2,098,323 9.45% 

Source - Central Bank of Sri Lanka Annual Report 2005 

* Provisional Figures

17 

Chart 03 

Contribution of the IRD’s Collection to the Government Revenue – 2001 to 2005 

400,000 

350,000 

300,000 

Rs. Million 

250,000 

200,000 

150,000 

100,000 

50,000 

0 

2001 2002 2003 2004 2005 

Government Revenue 

IRD's Collection 

2.7 Inland Revenue Collection 2001 to 2005 

Figures in Table 07 represent the tax wise revenue collection of the IRD, from 2001 to 2005 

Table 07 

Inland Revenue Collection 2001 to 2005 – Tax wise Analysis 

2001 2002 2003 2004 2005 

Type of Tax Collection % Collection % Collection % Collection % Collection % 

Income Tax 33,614 25.23% 37,682 27.38% 38,602 27.76% 37,904.0 23.00% 42,154.8 21.26% 

Economic Service Charge - - - 4,052.8 2.46% 7,283.1 3.67% 

Value Added Tax - 35,181 25.57% 97,754 70.30% 117,030.9 71.01% 141,877.9 71.55% 

Debits Tax - 1,310 0.95% 3,601 2.59% 4,488.8 2.72% 5,700.8 2.87% 

Betting & Gaming Levy - 55 0.04% 56 0.04% 77.1 0.05% 196.4 0.10% 

Share Transaction Levy - - - - 451.2 0.23% 

Turnover Tax 1,119 0.84% 678 0.49% 4 0.00% 106.2 0.06% 143.1 0.07% 

Stamp Duty 8,415 6.32% 2,331 1.69% 69 0.05% 51.3 0.03% 8.9 0.00% 

Estate Duty 2 0.00% 2 0.00% - 0.4 0.00% 0.5 0.00% 

Goods & Services Tax 45,972 34.51% 31,511 22.90% (759) -0.55% 852.6 0.52% 448.9 0.23% 

National Security Levy 43,073 32.33% 28,859 20.97% (284) -0.20% 239.9 0.15% 34.6 0.02% 

Save the Nation 

Contribution 1,035 0.78% - - - - 

TOTAL 133,230 100% 137,609 100% 139,043 100% 164,804 100% 198,300 100%

18 

2.8 Income Tax Collection in 2005 

2.8.1 Corporate and Non-corporate Income Tax 

Table 08 shows the composition to Income Tax collection, and Chart 04 Illustrates the same 

with percentages. 

Table - 08 

Corporate and Non-corporate Income Tax Collection – 2005 

Sector Tax Collection (Rs.) % 

Corporate 19,711,949,809.16 46.76% 

Non-Corporate 22,442,937,513.30 53.24% 

Total 42,154,887,322.46 100% 

Chart - 04 

Income Tax Collection – 2005 

Corporate 47% 

Non-Corporate 

53% 

2.8.2 Source wise analysis of Income Tax Collection in 2005 

Table 09 

Income Tax Collection – 2005 

Source wise Analysis (Employees and Others) 

Source 

Employment 

Collection (Rs. Mn.) 

PAYE Scheme 5,132.4 

Self Assessment and Assessments 

with penalties for tax in default 691.4 5,823.8 

Others 

Self Assessment and Assessments 

with penalties for tax in default 22,658.1 

Withholding Tax on Interest, Rent & 

Specified Fees 12,375.6 

Deductions at Source 1,995.8 

Compounding Penalties 0.6 7,030.1 

Gross Collection 42,853.9 

Less: Refunds (698.9) 

Net Collection 42,155

19 

2.9 Economic Service Charge 

Table 10 shows the Economic Service Charge collection in 2005, and Chart 05 illustrates 

the same. 

Table 10 

Economic Service Charge Collection – 2005 

Sector Collection (Rs.) % 

Corporate Sector 6,675,035,489 91.65% 

Non-corporate Sector 608,131,567 8.35% 

Total 7,283,167,056 100% 

Chart 05 

Economic Service Charge Collection – 2005 

Noncorporate 

Sector 

8.35% 

Corporate 

Sector 

91.65% 

2.10 Value Added Tax Collection in 2005 

Table 11 shows the sector wise Value Added Tax gross collection and refunds in 2005. 

Table 11 

Value Added Tax Collection and Refunds - 2005 

Sector Gross Collection 

Rs. Mn. 

Refunds 

Rs. Mn. 

Net Collection 

Rs. Mn. 

Manufacturing 31,504 12,279 19,225 

Non-manufacturing 35,515 25 35,490 * 

Imports 87,180 17 87,163 

Total 154,199 12,321 141,878 

* Inclusive of VAT on Financial Services 

Table 12 shows the Value Added Tax (net) Collection sector wise, and it is illustrated by the 

Chart 06.

20 

Table 12 

Value Added Tax (Net) Collection – 2005 

Sector 

Net Collection 

(Rs. Mn.) % 

Manufacturing 19,225 13.55% 

Non-manufacturing 28,878 20.35% 

Financial Services 6,612 4.66% 

Imports 87,163 61.44% 

Total 141,878 100.00% 

Chart 06 

Value Added Tax Collection – 2005 

Manufacturing 

13.55% 

Non-Manufacturing 

20.35% 

Imports 61.44% 

Financial Services 

4.66% 

2.11 Betting & Gaming Levy Collection in 2005 

Table 13 compares the revenue estimate of Betting & Gaming Levy with the collection for 

the year, and it is illustrated in Chart 07. 

Table 13 

Collection of Betting & Gaming Levy - 2005 

Revenue Estimated Revenue Collected % 

(Rs.) 

(Rs.) 

153,000,000 196,371,909 128.35% 

Chart 07 

Betting & Gaming Levy Collection 2005 

200,000,000 

175,000,000 

Rupees 

150,000,000 

125,000,000 

100,000,000 

75,000,000 


Estimated 


Collection 

50,000,000 

25,000,000 

- 

Betting & Gaming Levy

21 

2.12 Debits Tax Collection in 2005 

Table 14 compares the revenue estimate of Debits Tax with revenue collection in 2005, and 

it is illustrated in the Chart 08. 

Table 14 

Debits Tax Collection - 2005 

Estimated Revenue (Rs.) Revenue Collection (Rs.) % 

5,445,000,000 5,700,862,973 104.70% 

Chart 08 

Debits Tax Collection 2005 

6,500,000,000 

5,500,000,000 

Rupees 

4,500,000,000 

3,500,000,000 

2,500,000,000 

Estimated 



Collection 

1,500,000,000 

500,000,000 

Debits Tax 

2.13 Share Transaction Levy 

2.13.1 Introduction 

Share Transaction Levy (STL) was introduced under Part II of the Finance Act, No. 

05 of 2005, with effect from 01-01-2005. It is a levy imposed on the turnover at the 

rate of 0.2% of every buyer and seller, in respect of every share trading transaction 

conducted through the Stock Exchange. The STL is collected by the relevant 

stockbroker, stock dealer or custodian bank, who is responsible for the settlement of 

such share transaction. The levy so collected should be paid to the Stock Exchange 

through which the share transaction took place, at the time of making settlement of 

such share transaction by the respective stockbroker, stock dealer or custodian bank. 

The stock exchange is required to remit the levy so collected, to the Inland Revenue 

Department.

22 

2.13.2 Collection of Share Transaction Levy in 2005 

The Table 15 shows the estimate for the year 2005 and the amount collected and 

Chart 09 illustrates the same. 

Table 15 

Share Transaction Levy - 2005 

Estimated Revenue Revenue Collection % 

Rs. 

Rs. 

450,000,000 451,233,786 100.27% 

Chart 09 

Share Transaction Levy Collection 2005 

Rs. Million 

500 

450 

400 

350 

300 

250 

200 

150 

100 

50 

0 

Estimated 


Rs. 450 M 


Collection 

Rs. 451.2 M 

Share Transaction Levy

23 

CHAPTER 3 

EXPENDITURE AND PRODUCTIVITY RATIO 

3.1 Comparison of the total expenditure incurred in the year 2005 with 2004. 

Table 16 

Total Expenditure – 2004 and 2005 

Description 2004 (Rs. ' 000.) % 2005 (Rs.' 000) % 

Recurrent Expenditure 

Emoluments 363,934 73.76% 467,061 59.18% 

Traveling 3,179 0.64% 4,105 0.52% 

Supplies & Equipments 14,602 2.96% 20,595 2.61% 

Repairs & Maintenance 15,600 3.16% 20,199 2.56% 

Contracted Services 54,009 10.95% 62,484 7.92% 

Transfers 721 0.15% 649 0.08% 

Other Recurrent Exp. 8,714 1.77% 42,195 5.35% 

Modernization Programme 6,409 1.30% - 

Sub Total 467,168 617,288 

Capital Expenditure 

Reconstruction and 

Improvements 7,827 1.59% 13,290 1.68% 

Acquisitions 5,861 1.19% 158,641 20.10% 

Modernization Project 12,549 2.54% - 

Sub Total 26,237 171,931 

TOTAL 493,405 100% 789,219 100% 

Chart 10 

Capital and Recurrent Expenditure – 2004 and 2005 

Capital 

Expenditure 

5% 

Capital 

Expenditure 

22% 

2004 2005 

Recurrent 

Expenditure 

95% 

Recurrent 

Expenditure 

78%

24 

3.2 Analysis of the Recurrent Expenditure in 2005 

Chart 11 

Recurrent Expenditure 2005 

Contracted Services 

10% 

Transfers 

0% 

Other Recurrent 

Expenditure 

7% 

Repairs & 

Maintenance 

3% 

Supplies & 

Equipments 

3% 

Traveling 

1% 

Emoluments 

76% 

3.3 Productivity Ratio 

The total expenditure of the Department in the year 2005 was Rs. 789,219,000, and the 

amount of Revenue collected was Rs. 198,300,619,125. The Productivity Ratio ( i.e. the 

revenue collected for every rupee of expenditure) therefore works out to 1:251. In other 

words, the cost of collection of Rs. 100 was 40 cents. 

3.4 Cost of Revenue Collection 

Table 17 

Revenue Collection, Total Expenditure and Cost of Collection 

Type of Tax 2001 2002 2003 2004 2005 

Income Tax 33,614 37,682 38,602 37,903.8 42,154.8 

Economic Service Charge - - - 4,052.8 7,283.2 

Estate Duty 2 2 - 0.4 0.6 

Stamp Duty 8,415 2,331 69 51.3 9.0 

Debits Tax - 1,310 3,601 4,488.8 5,700.9 

Turnover Tax 1,119 678 4 106.2 143.1 

Goods and Services Tax 45,972 31,511 (759) 852.6 448.9 

National Security Levy 43,073 28,859 (284) 239.9 34.6 

Value Added Tax - 35,181 97,754 117,030.9 141,877.9 

Save the Nation Contribution 1,027 - - - - 

Betting & Gaming Levy - - 56 77.1 196.4 

Share Transaction Levy - - - - 451.2 

Miscellaneous 8 55 - - - 

Total Collection 133,230 137,609 139,043 164,803.8 198,300.6 

Total Expenditure 483 870 450 493.4 789.2 

Cost of Collection per Rs.100, cents 0.36 0.63 0.32 0.30 0.40 

Cost of Collection per Rs. 100, excluding VAT on Imports, cents 0.71

25 

CHAPTER 4 

TAXES IN DEFAULT 

4.1 Figures in Table 18 represent the amounts of Taxes in default, amounts of taxes held over and 

collectible taxes in default, as at 31-12-2005. 

Table 18 

Taxes in Default as at 31-12-2005 

(Rupees) 

Type of Tax Tax in Default Tax Held over Collectible 

Tax in Default 

as at 31-12-2005 

% 

of total 

arrears 

Income Tax 25,740,798,116 5,142,460,255 20,598,337,861 21.39% 

Economic Service Charge 801,300,649 - 801,300,649 0.83% 

Value Added Tax 50,589,775,475 - 50,589,775,475 52.54% 

Surcharge on Income Tax 1,922,892,115 52,281,433 1,870,610,682 1.94% 

Wealth Tax 124,484,412 242,803 124,241,609 0.13% 

Surcharge on Wealth Tax 4,865,791 - 4,865,791 0.01% 

Gift Tax 18,650,679 - 18,650,679 0.02% 

Estate Duty 35,839,430 - 35,839,430 0.04% 

Stamp Duty 17,920 - 17,920 0.00% 

Goods & Services Tax 9,548,531,364 - 9,548,531,364 9.92% 

Turnover Tax 7,979,275,663 1,049,152,797 6,930,122,866 7.20% 

National Security Levy 5,636,102,927 - 5,636,102,927 5.85% 

Save the Nation Contribution 109,553,034 - 109,553,034 0.11% 

Betting & Gaming Levy 25,125,200 25,125,200 - - 

Compounding Penalty 14,814,124 - 14,814,124 0.02% 

Obsolete Taxes 2,712,220 - 2,712,220 0.00% 

TOTAL 102,554,739,119 6,269,262,488 96,285,476,631 100% 

Note: Total Tax in default represents cumulative balances under each type of tax. These balances in full 

are, however, not actually due per se. An arrears or default is created when an assessment is 

issued for what ever reason (viz. non-furnishing a Return, non-payment of Tax on the basis of the 

Return, under declaration etc.) Invariably, the relevant parties have lodged appeals against most 

of those assessments (except on those assessments made with concurrence of Taxpayers) and 

consequently, settlements are held up as Taxpayers have invoked their appeal rights, in certain 

cases up to higher appellate levels (Board of Review, Court of Appeal etc.). On the settlement of 

the appeals, depending on the out comes, any excess amount assessed has to be discharged. 

Further, these default amounts include (by definition) penalties added thereon for delays.

26 

CHAPTER 5 

INTERNATIONAL TAXATION 

5.1 Double Tax Treaties 

The main objective of Tax Treaties is to eliminate or reduce double taxation in international trade, 

and thereby to encourage the flow of investment, trade, technology and technical know how into 

the country. As at 31-12-2005 Sri Lanka has entered into such agreements with 35 countries, and 

concluded negotiations with 6 other countries. 

Action taken during the year 2005 

(a) 

Agreement with Hong Kong 

Having obtained the Parliamentary approval, the relevant Gazette Notification was issued. 

With the notifications issued by both contracting states, the Agreement entered in to force 

on 29-03-2005. 

(b) 

Agreement with Qatar 

Having obtained the Parliamentary approval, the relevant Gazette Notification was issued. 

Our constitutional requirements were thus completed and notification was issued. Await 

notification from Qatar. 

(c) 

Agreement with China 

Notifications were issued by both Contracting States and accordingly, the Agreement 

entered into force on 22-05-2005. 

(d) 

Agreement with Vietnam 

Agreement was signed at Government level and preparations were being made to present it 

for Parliamentary approval. 

(e) 

New Agreement with India 

Several rounds of negotiations were held at officials’ level between Sri Lanka and India, 

under the umbrella of Comprehensive Economic Partnership Agreement (CEPA), for a new 

Agreement. 

(f) 

SAARC Limited Multilateral Convention on Avoidance of Double Taxation and 

Mutual Administrative Assistance in Tax matters. 

The Agreement was signed at Government level. Arrangements were being made to present 

the Agreement for Parliamentary approval.

27 

5.2 IRD’s Representations in relation to international tax matters 

Name of the Officer Programme/Seminar/Workshop Country Duration 

01 Mr. R. P. L. Weerasinghe 

Commissioner General 

CATA Management Committee 

Meeting 

UK 

02 Days 

02 Mr. P. P. D. P. Karunasekara 

Commissioner General 

4 th Round of Technical Level 

Negotiations on new DTR 

India 

03 Days 

03 Mr. A. A. Wijepala 

Deputy Commissioner General 

(i) International Tax Dialogue 

(VAT Conference) 

Italy 

03 Days 

(ii) Tax Administration Programme 

Korea 

13 Days 

04 Mr. R. A. D. H. Ranasinghe 


OECD Global Forum on Taxation 

and 10 th Annual International 

Taxation Meeting on Tax Treaties 

and Transfer Pricing 

France 

03 Days 

05 Mr. E. A. S. Edirisinghe 


06 Mr. E. M. M. Medagoda 

Senior Commissioner 

07 Mr. V. G. D. P. Ubesiri 

Senior Commissioner 

International Seminar on Taxation 

(Senior Tax Course) III Japan 27 Days 

26 th CATA Annual Technical 

Conference Canada 05 Days 

15 th Tax Conference Japan 04 Days 

08 Mr. H. B. A. Seneviratne 

Commissioner 

(i) OECD Global Forum on 

Taxation and 10 th Annual 

International Taxation Meeting 

on Tax Treaties and Transfer 

Pricing 

(ii) 2 nd Round Technical Level 


(iii) 4 th Round Technical Level 


France 

India 

India 

03 Days 

03 Days 

03 Days 

09 Miss D.G. P.W. Goonathilake 


International Tax Dialogue (VAT 

Conference) 

Italy 

03 Days 

10 Mrs. B. A. D. D. Herath 


3 rd Meeting of the Sub-Group on 

Avoidance of Double Taxation 

Nepal 

01 Day 

11 Mrs. R. P. H. Fernando 

Assessor 

4 th Round of Technical Level 


India 

03 Days

28 

CHAPTER 6 

LEGISLATION 

6.1 Following legislation was enacted during the year. 

(i) The Finance Act, No. 05 of 2005 which introduced the - 

‣ Social Responsibility Levy (SRL) 

‣ Share Transaction Levy (STL) 

(i) Inland Revenue (Amendment) Act, No. 8 of 2005 

(ii) Value Added Tax (Amendment) Act, No. 06 of 2005. 

(iii) 

Finance (Amendment) Act, No. 07 of 2005 which introduced provisions for 

imposition of Withholding Tax on the registration of Motor Vehicles, and to amend 

the law related to Economic Service Charge. 

(iv) Betting and Gaming Levy (Amendment) Act, No. 09 of 2005. 

6.2 Rulings given during the year. 

Relevant 

Description Ruling Number Date 

Section 

Income Tax 

Section 4 Benefit Valuation on Vehicles Rul/2005IT/0008 07-07-2005 

Owned by Employee 

Section 4 Business of hiring vehicles carried Rul/2005IT/0011 08-09-2005 

on by an employee 

Section 7 Promotional Shares Rul/2005IT/0006 25-04-2005 

Section 10 Exemption from Income Tax on Rul/2005IT/0013 12-10-2005 

NRFC gift scheme “Ran 

Kahawanu Wasana” 

Section 13 Government Subsidy on Sale of Rul/2005IT/0009 11-07-2005 

Solar Home Systems 

Section 15(aa) Exemption of Profits and Income Rul/2005IT/0016 16-11-2005 

under Section 15(aa) 

Section 23 What is a ‘Train Engine’- is it a Rul/2005IT/0010 11-07-2005 

motor vehicle? 

Section 24 Expenditure on Overseas Travel Rul/2005IT/0020 16-11-2005 

and Advertising, Incurred out side 

Sri Lanka 

Section 29 Limitation of Deduction of losses Rul/2005IT/0019 16-11-2005 

to 35% of Total Statutory Income 

Section 29 Deduction of Interest Rul/2005IT/0012 08-07-2005 

Section 51 Fees received in foreign currency Rul/2005IT/0015 03-11-2005 

for services rendered outside Sri 

Lanka 

Section 73 Residence of Individuals Rul/2005IT/0002 05-04-2005 

Section 81 Tax liability to Income Tax of 

Non-resident Shipping Companies 

Rul/2005IT/0003 05-04-2005

30 

6.4 Legal action taken during the year 

6.4.1 Prosecution against non-submission of Returns 

352 cases were filed against non-submission of Returns 

Penalties were imposed in respect of 157 cases, and collected Rs. 398,000. 

6.4.2 Legal action taken to recover taxes in default: 

Prosecution in Colombo District Court – 389 cases 

Prosecution in Magistrate Courts – 04 cases 

Prohibition of defaulters leaving the Island – 04 cases 

6.4.3 Cases before Colombo District Court: 

Number of cases filed for recovery of tax in default – 389 cases 

Amount of tax collected - Rs. 12,631,853. 

Number of Warrants outstanding at the end of the year - 12,002. 

Total number of cases pending at the end of the year - 17,014

31 

CHAPTER 7 

AUDITS, ADDITIONAL TAX COLLECTION AND APPEALS 

Amidst of a severe staff shortage, the Department could maintain the audit functions in a satisfactory level 

resulting in collection of an additional tax amounting to Rs. 5.17 billion, in the year. 

7.1 Particulars of Audits and Additional Tax Collection during the year. 

Number of Audit cases commenced during 

the year 2005 

Number of Audit cases finalized during the 

year 2005 

Total amount of additional tax assessed 

during the year 2005 (Rs. Mn.) 

Total amount of additional tax collected 

during the year 2005 (Rs. Mn.) 

Income Tax PAYE Value Added 

Tax (Except 

VAT on 

Financial 

Services) 

VAT on 

Financial 

Services 

2,507 44 981 30 

1,767 35 740 28 

3,059.2 31 4,107.5 267.1 

2,258.32 10.7 2,650 267.1 

7.2 Appeals 

Appeals to the Commissioner General 

Income Tax 

Value Added Tax 

Opening balance as at 01-01-2005 2,439 163 

Less: 

Adjustments made in January 2005, for 

Appeals settled in 2004 (2,101) (113) 

Balance as at 01-02-2005 338 50 

Number of Appeals lodged during the year 608 53 

Number of Appeals settled during the year 570 48 

Balance as at 31-12-2005 376 55 

7.3 Board of Review 

Number of appeals pending before the Board of Review as at 01-01-2005 102 

Number of appeals lodged during the year 03 

Number of cases taken up for hearing 12 

Number of orders issued on conclusion of hearing 02 

Number of appeals outstanding as at 31-12-2005 103 

Stated cases -

32 

8.1 Taxpayer Services Unit (TSU) 

CHAPTER 8 

TAXPAYER SERVICES AND TAXPAYER EDUCATION 

Taxpayer Services Unit was established in the ground floor of the Head Office building and 

deployed competent officials with a view to provide a better service to the taxpayers and public in 

general. Every publication of the Department is available for sale or otherwise at this Unit. Issuing 

temporary VAT registration numbers, giving brief clarifications on tax matters etc. are some 

services provided by this Unit. 

8.2 Tax Seminars etc. 

Four Post-Budget Seminars were conducted in November and December. Particulars of those are 

as follows: 

Seminar conducted on 09-11-2005 in Colombo (Budget day evening) 

Seminar (second) conducted on 08-12-2005 in Colombo 

Seminar (third) conducted in Tamil medium on 20-12-2005 in Colombo 

Seminar (fourth) conducted in Galle on 22-12-2005

33 

CHAPTER 9 

INLAND REVENUE DEPARTMENT MODERNIZATION PROGRAMME 

Fiscal Management Reform Programme (FMRP) Project Implementation Unit: 

The process of the restructuring the Inland Revenue Department, which was geared by the Government 

recently, was continued during the year. A project implementation Unit headed by a Project Director has 

been established to perform functions in this regard. 

During the year, 15 Inland Revenue Officers were sent on a study tour to visit the Revenue Department of 

Thailand under the auspices of the Project. The names of those Officers and designations they held at the 

time of the visit are given below. 

1. Mr. A. A. Wijepala – Commissioner 

2. Mr. K. D. Upatissa – Commissioner 

3. Mr. E. A. S. Edirisinghe – Commissioner 

4. Mr. E. M. M. Medagoda – Commissioner 

5. Mr. N. S. Wattaladeniya – Deputy Commissioner 

6. Mr. A. A. Amararatne – Deputy Commissioner 

7. Mr. P. D. Premaratne – Deputy Commissioner 

8. Mr. H. M. Premaratne Banda – Deputy Commissioner 

9. Mr. M. J. Gunasiri – Senior Assessor 

10. Mr. D. Rangalla – Senior Assessor 

11. Mr. V. Piyasoma Perera – Assessor 

12. Mr. L. Udayasiri – Senior Tax Officer 

13. Mr. Gamini Jayananda – Tax Officer 

14. Mr. P. H. Gunawardena – Tax Officer 

15. Mr. K. N. Ariyathilake – System Administrator 

To ensure the ethical behavior and proper conduct of Officers of the Department as required under 

Establishment Code, Financial Regulations etc., a “Code of Ethics and conduct” was prepared and 

issued to the Officers of the Department during the year. 

Further, “Taxpayer Charter”, a document containing rights and Obligations of the Taxpayer under 

the tax system, was published during the year.

Performance Report 2005 - Department of Inland Revenue

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