An audit has uncovered that as of December 2022, the Inland Revenue Department is grappling with a massive LKR 369 billion in tax arrears. Of this amount, LKR 255 billion remains uncollected due to various issues.
The National Audit Office’s report reveals that the department’s Legacy and RAMIS computer systems have displayed an outstanding tax balance of LKR 114 billion, with some of these arrears dating back approximately 13 years. Despite value-added tax (VAT) being collected by private and public institutions, the funds have not been properly remitted to the government.
The audit highlights that the government has missed out on LKR 22 billion in potential tax and fine collections due to the Inland Revenue Department’s inadequate performance over the past five and a half years. It criticizes the department for failing to act efficiently, resulting in nearly 20% of VAT-related income becoming irrecoverable.
Additionally, the audit notes that 1,603 appeals totaling LKR 9 billion have not been resolved, some exceeding the two-year period after being received by the department. The report also points out that despite 46 cases aimed at recovering LKR 296 million in arrears, the Legacy system failed to record these arrears accurately.
Auditor General WPC Wickramaratne has urged authorities to conduct a thorough investigation based on this audit report. He has recommended an inquiry into whether any officials have fraudulently, negligently, or willfully failed to recover the due taxes and fines, thereby impeding the efficiency of the recovery process.
