Annual Report 2008 - Ministry of Finance and Planning

4. Reform Initiatives
184
SALIENT FEATURES OF KEY BILLS PENDING TO
BE PASSED BY PARLIAMENT
Default Taxes (Special Provisions) Bill
In the backdrop of a notable level of taxes in default which
have got accumulated in the books of the Inland Revenue
Department consequent to there being no mechanism to
write off taxes which are obviously non recoverable due to
bankruptcies etc. or amounts that represent accumulated
taxes in default of government institutions, most of which
are presently non operational or redundant, the 2008
Budget proposed to introduce a special Act to provide for
a streamlined and speedier process to recover or write - off
such identified taxes in default, in a time bound manner.
The proposed Act will be applicable to taxes charged or levied
on or before 31st December 2007 or where an installment
payment plan has been agreed upon between a defaulter
and the Inland Revenue Department but not honoured, in
relation to laws listed out in the Schedule to the proposed
Act, and also where such taxes have been in default for over
two years.
There will be a Supervisory Committee appointed to expedite
the recovery process. This Committee will be required to
respond to any communication from the Commissioner
General of Inland Revenue (CGIR) relating to writing-off
such taxes in default, recommend to write-off such taxes in
default to the CGIR and advise the CGIR/ Minister on any
matter referred by them to the Committee. There will also
be a dedicated Default Tax Recovery Unit setup under the
purview of the CGIR with a Deputy Commissioner General
placed in charge of the Unit, to expedite the process.
In order to take a stock of the present position of taxes in
default, the CGIR is required to prepare a report within six
months from the date of appointment of the Committee,
identifying separately such tax defaulters which are
either Public Corporations, Government Owned Business
Undertakings acquired by or vested in the Government
under the Business Undertakings (Acquisition) Act No. 35
of 1971, such Government Owned Business Undertakings
established as Corporations in terms of Conversion of
Business Undertakings into Public Corporations Act No.
22 of 1987, Government Ministries and Departments,
pertaining to which the statutory period specified for the
recovery under any law set out in the Schedule has lapsed.
The CGIR is required to make available such information
after verification, to the Committee. Three months thereafter,
the CGIR is required to either write-off such taxes in arrears
or take such other action as provided for in the Act.
Notwithstanding any secrecy provisions contained in any
law under which such taxes in default have been levied,
information on any taxes so written -off is required to be
published in the gazette within thirty days from the date
such write-off, to ensure transparency. Further, in the event
of any write - off, there will be no refunds allowed even if a
part payment had been made previously.
Other than in a situation where the CGIR had already
instituted action in a Court under a law set out in the
Schedule in terms of which a tax had been levied, the CGIR
is required to notify to the defaulter the amount of taxes in
default, requesting that such taxes be settled within sixty
days of the notice. At this point, a defaulter may prior to
the expiry of the sixty days, request CGIR to permit him to
settle the taxes in default in installments, or raise objections
with regard to the taxes in default referred to in the notice.
The CGIR upon receiving a request to permit for installment
payments may permit to make the entire payment in a given
manner within three years from the date of such agreement,
after having informed the Committee in that regard. In the
event of an objection on the taxes in default, the CGIR needs
to make a determination within sixty days and where the
objection involves a re-determination of the tax liability, the
CGIR can discharge any amount excessive. If a person fails
to respond to a notice within the allowed period or fails to
pay according to an agreed installment plan for over thirty
Ministry of Finance and Planning Sri Lanka
Annual Report 2008