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VAT being levied as penalty causes Rs 125 million loss to govt



By Saman Indrajith

The government suffered a loss of Rs 125.5 million owing to a mistake committed in levying taxes on coal imported for the Norochcholai Thermal Power Plant, says the Second Report of the Committee on Public Accounts presented to parliament on Wednesday by Committee’s Chairman Prof. Tissa Vitarana.

The report says: It was observed that, Sri Lanka Customs has conducted a customs investigation and Rs. 205 million of penalty had been imposed and recovered regarding under payment of Rs.187, 068,787/- in respect of under calculated and paid value added tax (VAT) due to non-calculation of transport and other costs in importing the coal required for the Norochcholai Thermal Power Plant by Lanka Coal Company (PVT) Ltd., as per the provisions of Gazette Notification No.1994/18 dated 23 November 2016.

“The Committee observed that only Rs. 61.5 million was credited to the Government Revenue and as a result the Government lost Rs. 125.5 million due to the fact that VAT has been levied as a penalty instead of being levied as an additional tax, 50% of the fine levied amounting to Rs. 102.5 million has been given as rewards to the officers and 20% amounting to Rs. 41 million has also been credited to the officers’ welfare Management and Compensation Fund.”

The Committee has observed that the Inland Revenue Department, one of the three major contributors to nearly 90% of government revenue, has a large unresolved tax arrears and the government incurs a huge loss due to the delay in settling the arrears.

“Out of the computer programs of the Inland Revenue Department in this regard, the amount of tax in arrears pertaining to the institutions identified with respect to the Legacy system as at 30 March 2021 is Rs. 18 billion. Out of this amount, only Rs. 424 million has been recovered in cash. The amount of Rs.10 billion had been settled in the form of suspensions, tax and penalty deductions, penalty cuts, journal transfers and tax refunds.

However, it was revealed that, the Special Unit set up to settle the tax in arrears related to the Legacy system has settled a large amount of tax and the outstanding tax balance of this unit as at 31.03.2021 is Rs.79 billion only,” says the report.

It says: “According to the RAMIS (Revenue Administration Management Information System) system, the tax in arrears on that day was Rs. 87 billion. Of this amount, only Rs 4 billion had been recovered in cash. The amount of Rs. 60 billion was settled in the form of suspensions, tax and penalty deductions, penalty cuts, journal transfers and tax refunds. The Committee drew its attention to the fact that taxes classified under the category of ‘Recoverable Taxes’ were not in a position to be collected without any actual problems and the Committee observed that an overestimation of the taxes that could be levied due to this does not indicate the true situation.”

Presenting the report to the House, its chairman Prof Vitarana said that the committee had probed accounts of 16 public institutions and he was shocked to see the findings of some investigations.

The committee has observed that there was a loss of ability to reduce the road accidents by half due to the shortcomings of the technical equipment required to the Police who play a significant role in road safety and the necessity to transform the National Council on Road Safety into a National Commission.

“It costs between Rs. 1 million and Rs. 10 million to treat a person subject to a road accident and it was revealed before the Committee that a National Council for Road Safety consisting of representatives from 17 Governmental and Non-Governmental Organizations have been appointed to work on establishing a safe road network for all. The Committee emphasized that there is an urgent need to transform this National Assembly into a Commission.

The Committee also stressed that the Sri Lanka Police was found to be lacking in technical equipment to prevent road accidents and that the relevant parties should take immediate action in this regard and provide the necessary items as soon as possible.”

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GL: Suspension of IMF bailout highlights failure to meet anticipated revenue targets



Prof. G.L

By Shamindra Ferdinando

Top Opposition spokesperson Prof. G. L. Peiris yesterday (02) said that the government should take full responsibility for the suspension of USD 2.9 bn IMF bailout over Sri Lanka’s failure to achieve the anticipated revenue mobilisation.

The former External Affairs Minister found fault with the government for tax concessions granted to investors and the failure on its part to collect taxes, in spite of reaching an agreement with the IMF in that regard.

Referring to the declaration made by IMF delegation head Peter Breuer that the second tranche of about $330m would be delayed pending Staff-Level Agreement, Prof. Peiris pointed out that Sri Lanka and the lending agency had reached a staff-level agreement in early September last year.

Sri Lanka received the first tranche of USD 330 mn in the third week of March this year in terms of the Extended Fund Facility (EFF), spread over a period of four years.

While pointing out that revenue mobilisation had improved, the IMF said revenue was expected to fall short of initial projections by nearly 15 percent by the end of this year.

Addressing the media at the Nawala Office of Nidahasa Jathika Sabhawa, Prof. Peiris said that though the government tried to put on a brave face, the consequences of the indefinite delay could be quite catastrophic. He said the suspension of the programme could undermine debt restructuring talks with external creditors, governments, lending agencies and the commercial market.

Prof. Peiris said that the suspension of the programme, just after the release of the first tranche, was a matter for serious concern as the unexpected development could cause further erosion of investors’ confidence in the Sri Lankan economy.

Sri Lanka has obtained IMF assistance on 16 occasions.

Chairman of the Sectoral Oversight Committee on National Economic and Physical Plans Mahindananda Aluthgamage on Sunday told The Island the country was paying a very heavy price for the failure on the part of the Inland Revenue, Customs and Excise Department to collect the due taxes. Alleging that unpaid income taxes alone, over the past 15 years, amounted to a staggering Rs 904 bn, whereas revenue collecting authorities so far managed to collect Rs 1,643 bn though they were given a target of Rs. 3,101 bn for this year.

Prof. Peiris said that corruption in the public sector procurement process undermined the economic recovery process. The government defeated the Opposition moved no-confidence motion against Health Minister Keheliya Rambukwella over corruption in the public health sector, Prof. Peiris said, asserting that the IMF must be aware of how the government encouraged waste, corruption, irregularities and mismanagement.

Prof. Peiris urged the government to take tangible measures to address the concerns of the IMF. Unfortunately, the government sought to deceive the public by claiming that the process was on track and would proceed following staff-level agreement, he said. He asked whether the government wanted the people to believe there would be staff-level agreements before the release of each tranche.

Prof. Peiris said that the government should correctly identify the warning issued by the IMF. It would be the responsibility of the Wickremesinghe-Rajapaksa government to take remedial measures without further delay.

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LPBOA demands bus fare hike



By Rathindra Kuruwita  

Lanka Private Bus Owners Association (LPBOA) head, Gemunu Wijeratna on Monday (02) said they needed a five percent increase in bus fares following Sunday’s diesel price hike.

On Sunday, CPC, LIOC and Sinopec increased diesel prices by 10 rupees per litre.

Wijeratna said that the private bus owners had not increased bus fares when diesel prices were increased by 35 rupees per litre recently.

“With the latest price increase, short distance buses will lose Rs 1,000 a day. Long distance buses will lose Rs 2,500 a day. We can’t lose money like this. We want at least a five percent bus fare hike,” he said.

School transport providers have decided not to increase their charges.

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Discourse on crisis in Lankan health sector at CSR



A discourse on the crisis in Sri Lankan health sector, under the theme ‘What ails the health sector? What solutions?’ is scheduled to be held at 4.00 p.m. on Thursday, 05 October 2023, at the Centre for Society & Religion (CSR) Auditorium, 281, Deans Road, Colombo 10, under the auspices of the Socialist Study Circle. The speakers will be Dr. Vinya Ariyaratne, Consultant Community Physician, President, Sri Lanka Medical Association, Dr. Ananda Wijewickrama, Consultant Physician, National Institute of Infectious Diseases and Ravi Kumudesh President, Academy of Health Professionals. The discourse is open to the public.

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