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Is tax burden or responsibility – IV

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A preliminary policy outline to strengthen tax compliance and revenue sustainability in Sri Lanka

Since the introduction of mandatory tax registration for those earning over Rs. 100,000 per month, tax file numbers have grown significantly, from 437,547, in 2022, to 1,002,029 by the end of 2023. This is part of the government’s broader effort to increase state revenue as a percentage of GDP and stabilise the economy. However, according to another source, as of November 2023, Sri Lanka had approximately 500,196 registered individual taxpayers, marking a significant increase from 204,467 earlier that year. A spokesman had revealed that as of 2025 the number of active tax files as one million though. Given the country’s population of around 22 million, this equates to about 2.3% of the total population. Assuming a workforce of approximately nine million, the tax file coverage among the working population is roughly 5.6%.

This coverage is considerably lower than regional and global averages. In the Asia-Pacific region, the average tax-to-GDP ratio was 19.3% in 2022, while the OECD average stood at 34.0%. Although direct comparisons of taxpayer registration rates are limited, the low tax-to-GDP ratio in Sri Lanka suggests a narrower tax base, compared to these regions.

Sri Lanka’s recent initiative to recover LKR 780 billion in tax arrears—highlighted by the launch of ” The National Tax Week”—reflects a timely and urgent response to the country’s ongoing fiscal crisis. While such awareness campaigns are commendable, global evidence and comparative experiences suggest that they are insufficient on their own. Without addressing deeper structural issues, the impact is likely to be short-lived. This preliminary policy outline proposes an initial outline for comprehensive reform of the tax administration system. It emphasises the need to institutionalise legal clarity, build public trust, integrate modern technology, and implement responsive enforcement mechanisms as foundational pillars for achieving sustained tax compliance and effective revenue mobilisation.

Policy Problem

Sri Lanka’s tax system suffers from:

*  Extremely low tax file coverage— regional average of 19% in the Asia-Pacific and far behind the 35% average observed in advanced economies.

*  Extremely low collection targets

*  High evasion and avoidance rates

*  A weak enforcement culture

*  Limited digital integration

*  Public distrust in governance

*  Inadequate institutional autonomy

These issues have led to a disconnect between legal tax obligations and behavioural compliance, resulting in unsustainable collection costs and underperformance in revenue generation.

Policy Objectives

*  Increase voluntary and enforced tax compliance.

*  Set realistic collection targets

*  Mandatory tax identification number (TIN) linked with ALL business activities.

*  Modernise legal and technological frameworks.

*  Reduce the cost of tax collection while enhancing fairness and transparency.

*  Strengthen institutional capacity and public trust in tax governance.

Policy Recommendations

1. Strengthen Legal Frameworks Against Tax Avoidance

*  To expand tax file coverage, Sri Lanka should implement a phased strategy that combines mandatory tax identification number (TIN) and enhanced third-party data integration across public and private institutions—particularly targeting the informal sector and emerging professionals.

*  Enact robust General Anti-Avoidance Rules (GAAR).

*  Codify clearer distinctions between tax avoidance and tax evasion to support judicial consistency and deter strategic misreporting.

2. Invest in Digital Integration and Predictive Analytics

*  Build a fully integrated tax ecosystem linking registration, filing, audits, payments, and cross-agency data (e.g., Customs, Banking).

*  Utilise machine learning and predictive analytics to proactively flag high-risk taxpayers (as per OECD’s “Tax Administration 3.0” model).

*  Upgrade interoperability with other fiscal authorities to address discrepancies and automate compliance.

3. Expand Taxpayer Education Using Behavioural Insights

*  Institutionalise continuous taxpayer education beyond “Tax Week.”

*  Use behavioural economics—e.g., nudges, simplified messages, reminders, and peer-comparison framing—to influence compliance positively.

*  Target both formal and informal sectors with tailored communication strategies and multilingual outreach.

4. Enhance Institutional Capacity and Autonomy

*  Empower IRD staff with training programmes, and technical capacity through international partnerships (e.g., with OECD or IMF).

*  Establish a politically independent tax appeals tribunal with transparent, time-bound procedures.

*  Legislate operational autonomy for the IRD.

5. Implement a Tiered and Responsive Enforcement Strategy

*  Apply a “compliance pyramid” that begins with persuasion and escalates to sanctions and litigation only when required.

*  Publicise successful enforcement actions—especially involving prominent cases—to enhance deterrence and public credibility.

*  Streamline audit processes and adopt risk-based targeting to focus limited enforcement resources.

6. Promote Transparency and Anti-Corruption Reforms

*  Publish annual public expenditure and tax collection reports in accessible formats.

*  Conduct third-party audits and disclose outcomes to the public.

*  Strengthen anti-corruption agencies and promote institutional accountability to increase tax morale.

Sri Lanka can adapt more effective policies/principles contextually by aligning legal reforms, digital tools, and cultural communication within its local governance framework. (See Draft Action Plan.)

Implementation

*  Establish a cross-agency Tax Reform Steering Committee to oversee implementation progress, review quarterly reports, and recommend course corrections.

*  Engage independent auditors annually to assess performance and transparency.

The Tax Reform Steering Committee (TRSC) should be established to oversee the effective implementation of tax reform initiatives outlined in the government’s Action Plan. Its primary purpose is to provide strategic guidance, ensure coordination among key agencies, and monitor progress toward enhancing revenue collection and improving tax administration. The committee will focus on strengthening legal and institutional frameworks, promoting digital infrastructure, improving taxpayer education, and ensuring effective enforcement and governance.

Key responsibilities include tracking reform milestones, facilitating cooperation between the Inland Revenue Department, Ministry of Finance, Customs, Justice, and other stakeholders, identifying and addressing challenges, promoting transparency, and reviewing progress to inform policy adjustments. The TRSC will be chaired by the Ministry of Finance and includes senior representatives from relevant government departments and advisory input from civil society. It will meet quarterly, report annually to the finance minister, and operate for at least three years, with administrative and financial support from the Ministry of Finance and potential donor funding.

Complementing this, a targeted communication plan aims to build public awareness, encourage voluntary compliance, set realistic collection targets and foster stakeholder engagement. Messaging focuses on fairness, simplification of compliance, support for taxpayers, and the government’s commitment to tackling tax evasion. The campaign will use mass media, digital platforms, community outreach, and direct communication tools. Activities include a national awareness campaign, annual Tax Week events, regular social media engagement, stakeholder forums, and transparent public reporting, all designed to support the successful rollout of tax reforms.

Monitoring and Evaluation

*  Track media reach and public engagement metrics (e.g., social media analytics, event attendance).

*  Conduct periodic surveys to assess taxpayer awareness, attitudes, and satisfaction.

*  Review feedback from stakeholder consultations to adapt communication strategies.

*  Report findings to the Tax Reform Steering Committee for continuous improvement.

While initiatives like Tax Week are commendable, Sri Lanka must move beyond campaign-style tax collection toward an integrated, rules-based, and behaviourally-informed system. A modern tax regime is not merely a technical instrument but a reflection of the state’s governance quality, fairness, and legitimacy. This preliminary draft proposal urges the government to embed fairness, digitalisation, and institutional integrity into tax reform to ensure long-term economic resilience and inclusive development.

(The writer, a senior Chartered Accountant and professional banker, is Professor at SLIIT, Malabe. He can be contacted at saliya.a@slit.lk and www.researcher.com)



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Features

Proactive peacemaking becomes a paramount need

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Wasting wars: Some war-displaced people in Lebanon. BBC

It may be some time before the full impact of food inflation is felt in the West. Until such time the world would continue to keep itself in suspense over whether the Trump administration is in earnest when it seeks to convey the impression that it is backing a negotiated solution in West Asia.

As is usually the case, consumer stress would be one of the final determinants of political change. To the degree to which the average US consumer somehow ‘muddles through’ and puts the food on the table, to the same extent would the Republican sections of the US public in particular be tolerant of the Trump administration’s inconsistent handling of the West Asian war and the main issues stemming from it. That is, there would be no grave popular disaffection and a demand for political change in the short term.

However, the indications are that the Trump administration’s support base is suffering some erosion in the wake of the current economic crisis. While reports indicate that Democratic sections are firming-up their opposition to the political centre, Republican support for Trump is also showing signs of waning, we are given to understand.

The above developments are probably why Trump is on record as having given Israeli Prime Minister Benjamin Netanyahu a ‘dressing down’ recently on his seeming intransigence on the question of giving negotiations a chance in West Asia. The show of displeasure could be really aimed by Trump at containing the impatience of the American public.

However, the current ground situation in the Middle East, particularly the uncontained bloodshed, is likely to impress on the thinking sections of the world that more than temporary political change is needed in West Asia and the US.

A well thought out political solution that addresses all the contentious issues at the heart of the Middle East conflict is what enlightened opinion would demand, and very rightly. Right now, the ‘peace efforts’ initiated by the Trump administration give the impression of being piecemeal solutions at best.

There have been, of course, numerous initiatives in the past aimed at bringing permanent peace to the Middle East. These failed mainly because they did not address in full the root causes of the conflict.

At bottom the Middle East conflict is mainly about race and religious hate bred by socio-economic and material inequalities. For instance, if the Palestinian people were not displaced and deprived of land occupied by them at the time of the founding of the Israeli state, ethnic enmities would not have grown to the current unmanageable proportions.

When addressing the above questions, though, it must be remembered that the Israelis too were a displaced people who were entitled to land and a state of their own in the Middle East. Basically, out of these seemingly irreconcilable and conflicting demands have grown the Middle East imbroglio.

Middle East peace is considerably about reconciling these demands and arriving at a solution that would ensure the creation of two states that would opt for peaceful co-existence thereafter.

As long as the US does not see the need for a non-partisan solution that addresses the needs of both ethnicities and religions and goes all-out, as it were, to have it implemented, the Middle East would continue to bleed.

However, staunching the blood flow through the creation of two states would be only half the job done, though a very important part of it. More pernicious, pervasive and difficult to remedy are the inter-ethnic and inter-religious hatreds that have been unleashed over the decades.

However, if substantial, long-lasting peace is to be fostered in the region the latter ‘demons’ would need to be exorcised from the hearts and minds of the communities concerned. No doubt an uphill task but one that must be undertaken by those who wish the region well.

The UN would need to put its ‘best foot forward’ in such undertakings but it is time that it dawned on the international community and other caring quarters that Middle East peace, and all other such uphill challenges, require proactive peacemaking on the part of all civilized sections for their effective management. That is, public involvement in peacemaking too is a must.

Since hatreds are harboured in the human consciousness the enmities embedded in the latter need to be managed and defused judiciously alongside other undertakings in a peace process. In the case of West Asia, such enmities could be even spread globe-wide besides being multi-dimensional. For instance, it ought to be thought-provoking that Iran is insistent on a peace initiative that would also include Lebanon.

Besides security considerations it is also ethnic and religious affiliations that account for Iran making this demand. For instance, the Shias are a numerically important religious community in Lebanon and they provide a significant number of Hizbollah fighters, who are in a vital sense carrying out a ‘proxy war’ for Iran. It also needs to be factored in that Iran is a Shia-majority country.

Thus trans-border religious affiliations could add to the complexities and enormity of ethno-religious conflicts. However, the task of managing centuries-long enmities needs to be launched and prodded on with by peacemakers since a downing of arms alone would not guarantee substantive peace.

It is not realized sufficiently that the process of ending hatreds begins with mutual apologies by antagonists to a conflict for the harm inflicted on each other. This would be anathema in some ears but there is no getting away from the requirement. It is the vital first step to permanent peace anywhere.

In fact there could be no reconciliation worth speaking of without such mutual apologies. It is a point worth re-iterating in these times when even the government of Sri Lanka is voicing the need for national reconciliation. Well, without the words, ‘I am sorry’, there could be no permanent end to enmities – they would do well to remember.

The above requirements may not go down very well with governments, but they resonate in the hearts and minds of most people, since they are inheritors of religious traditions of some kind.

This is a principal reason why peacemaking works well when publics too are involved in them. The effectiveness of such campaigns increases several fold when they have a Mahatma Gandhi or a Jawaharlal Nehru at their helm. A strong proactive involvement by the public in peace could lead to the emergence of such leaders at some point in these campaigns.

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Dialog Brings Sri Lanka’s Largest Digital Vesak Experience to Matara

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From left to right: Hon. Saroja Savithri Paulraj, Hon. Sunil Handunnetti, and Lasantha Theverapperuma experience the Dialog 5G Ultra-powered VR tours.

Official Digital Partner of the 2026 ‘Dakshina Prabha’ National Vesak Zone

Dialog Axiata PLC, Sri Lanka’s #1 connectivity provider, collaborated with the Ministry of Buddha Sasana, Religious and Cultural Affairs to bring one of Sri Lanka’s largest and most technologically advanced Vesak experiences to the ‘Dakshina Prabha’ National Vesak Zone. The three-day celebration, in Matara attracted more than hundred thousand visitors, who engaged with a series of innovative digital activities powered by Dialog 5G Ultra, including Artificial Intelligence (AI) and Virtual Reality (VR) experiences, digital pandols and a Data Dansala. The opening ceremony was attended by Hon. Sunil Handunnetti, Minister of Industry and Entrepreneurship Development and Hon. Saroja Savithri Paulraj, Minister of Women and Child Affairs, along with distinguished guests and Dialog’s senior management.

One of the key attractions at the venue was the Dialog 5G Ultra-powered Virtual Reality (VR) experience, which attracted more than 35,000 participants. The activation enabled devotees to virtually visit and pay homage to sacred Buddhist sites, including the Jaya Sri Maha Bodhi in India and the Atamasthana in Anuradhapura, directly from the Vesak zone in Matara.

Visitors receive complimentary mobile data through Dialog’s QR-powered Data Dansala.

Dialog also conducted an AI Digital Vesak Greeting Card Competition from 21 May to 01 June 2026, attracting numerous entries from across the country. The shortlisted designs were showcased across 20 large LED screens throughout the venue and across Matara City, and were also made available for download via mobile devices. Further, through the use of AI, traditional Jathaka Katha were reimagined in a digital format, demonstrating how technology can be used to preserve and enhance cultural and religious heritage. Together, these initiatives blended traditional Vesak celebrations with emerging technologies, offering visitors a unique and immersive way to engage with Vesak traditions.

 Extending the spirit of Vesak through connectivity, Dialog conducted a special Data Dansala powered by its QR Reload platform, enabling visitors to receive complimentary mobile data by scanning QR codes placed across the venue. In addition to the Matara National Vesak Zone, similar Data Dansala activations were also conducted at the Gangaramaya and Bauddhaloka Vesak zones in Colombo.Visitors also had the opportunity to create personalised Vesak-themed digital photos through an AI Photo Booth, generating AI-enhanced portraits using their own photographs and adding a contemporary digital element to the Vesak celebrations.

Visitors watch AI-generated Jathaka Katha

Commenting on the initiative, Hon. Sunil Handunnetti, Minister of Industry and Entrepreneurship Development, said, “The 2026 Dakshina Prabha Vesak Festival marked the first time AI-powered digital innovations were incorporated into a National Vesak Festival in Sri Lanka. Presenting Buddhist stories and teachings through technology created a new and engaging way for visitors to connect with these traditions. We thank Dialog for supporting this initiative and for working closely with us to bring our vision to life. Their contribution played an important role in making this first-of-its-kind event a reality.”

 Lasantha Theverapperuma, Group Chief Marketing Officer of Dialog Axiata PLC said, “We thank the Government of Sri Lanka for the opportunity to support the 2026 Dakshina Prabha National Vesak Festival and for embracing technology as part of this year’s celebrations. As the Official Digital Partner, we were privileged to contribute through our Dialog 5G Ultra and AI capabilities, creating new ways for visitors to engage with Vesak traditions while preserving their cultural significance for future generations.”

Beyond supporting the National Vesak Zone in Matara, Dialog also enhanced the Gangaramaya and Bauddhaloka Vesak zones through a range of digital activations during the Vesak season. The company additionally continued its sustainability initiatives, including the Thirasara Aloka Poojawa, which illuminated rural places of worship through solar-powered lighting solutions.

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Beauty, elegance and talent…for women

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Universal Woman is an international pageant focused on “beauty, elegance, and talent” for women, positioning itself as a platform to shape global ambassadors. The 2026 edition will be held in Cambodia, and Sri Lanka will be there, as well.

According to reports coming my way, contestants, at the international event, will work with industry trailblazers, under international standards.

Sri Lankan supermodel, runway and pageant trainer Chulpadmendra Kumarapathirana, is the National Director for Universal Woman Sri Lanka 2026.

With over two decades in the industry, Chula was crowned Miss Sri Lanka 2006, and has since shaped the next generation of titleholders through her Colombo-based Chulpadmendra Catwalk Studio, widely regarded as one of the country’s leading modelling academies.

The team behind Universal Woman Sri Lanka 2026

A former host of Derana Miss Sri Lanka for Miss World 2008 and a judge for Miss Universe Sri Lanka 2025, Chula now serves as National Director for Universal Woman Sri Lanka 2026, leading the franchise’s search for Sri Lanka’s delegate to the international final in Cambodia.

Applications for Universal Woman Sri Lanka 2026 are being taken, via WhatsApp: 077 659 4994, says Chula.

The judging panel for Universal Woman Sri Lanka 2026 includes Senaka De Silva, Pageant Aesthetic Advisor & Chairperson of the Judging Panel, Angela Seneviratne, Caroline Jurie, Rozelle Plunkett, and Suraj Mapa.

Universal Woman Sri Lanka 2026 officially began its journey with a first round of auditions, held in Colombo, marking the start of an exciting new chapter in Sri Lanka’s pageant industry.

Launching the first round of auditions

The platform aims to empower women while selecting an intelligent, confident, and inspiring representative to compete at the Universal Woman International Pageant 2026 in Cambodia, this September.

Universal Woman Sri Lanka now moves forward with the vision of creating one of the country’s most prestigious and empowering pageants while preparing to crown a queen who will proudly represent Sri Lanka on the international stage.

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