The government has decided to waive interest and fines on overdue income tax if the outstanding amounts are paid within six months.
According to Section 19 of the technical section of this year’s budget, unpaid taxes from 2022 to 2023 will be exempt from penalties under the Inland Revenue Act No. 24 of 2017 and the Tax Act No. 14 of 2022, provided they are settled within the given timeframe.
Pubudu Jayagoda, Education Secretary of the Frontline Socialist Party, criticized this decision, stating that it could result in a loss of Rs. 500 billion in interest on overdue income tax.
Under Section 159 of the current tax law, unpaid taxes incur a 1.5% monthly interest rate (18% annually) along with a 25% fine.
Citing an example, Jayagoda alleged that Mendis Company evaded Rs. 1.5 billion in income tax, excluding excise duties. The interest on this unpaid amount over five years would amount to approximately Rs. 100 million, which the company would normally be required to pay. However, under the new relief measure, the government is forgoing this interest, requiring only the Rs. 150 million in unpaid taxes to be paid.
Jayagoda condemned the move as a massive financial loss and a betrayal of the people, highlighting that billions in public funds would be lost due to the exemption.
He revealed these concerns during a press conference.
