Vision - Inland Revenue Department

i

Vision

To be a taxpayer friendly tax administrator delivering excellent service to

the tax paying public, with well-trained and dedicated staff facilitated by

fully automated system.

Mission To collect taxes in-terms of relevant tax and other related laws,

by encouraging voluntary compliance while deterring tax

evasion and tax avoidance, and

To enhance public confidence in the tax system by administering relevant tax and other related legislation fairly, friendly and expeditiously and thereby facilitate and foster a beneficial tax culture.

Strategic Goals

• To improve voluntary compliance by taxpayers with the

tax laws through programs, which encourage and assist in

that and detect those who do not comply and, where

necessary, take appropriate corrective action.

• To improve the effectiveness of the Department by the

application of efficient work methods, technology and

better utilization of available resources.

• To enhance the productivity and professionalism of the

staff through management and technical training, work

experience, and thereby to enable them to contribute more

effectively towards the fulfillment, by the Department, of

its mission.

ii

PRINCIPAL OFFICIALS

Mr. K.M.S. Kandegedara Commissioner General of Inland Revenue

Mr. V.D. P. Ubayasiri Senior Deputy Commissioner General

Information & Communication Technology and NBT

Mrs. M. Samarasekara Deputy Commissioner General

Indirect Tax Administration

Mr. K. L. S. Silva Deputy Commissioner General

Tax Surveillance & Risk Management & BOI Enterprises, Collection & Legal

Mr. H. B. A. Senevirathne Deputy Commissioner General

Tax Policy Planning & Development, Legislation, Rulings and International affairs

Mrs. D. M. Nanadawathie Deputy Commissioner General

Direct Tax Administration

Mr. H.M.Abesinghe Deputy Commissioner General

Human Resources Management

Mr. P.D. Premarathna Senior Commissioner

Legal, Stamp Duty, Appeals and Secretary to the Board of Review

Mr. S.T. Gobalasingham Senior Commissioner

Zone 3, Tax Policy Planning, Legislation and Rulings

Mr. K. A. P. Kaluarachchi Senior Commissioner

LTU & Corporate Tax

Mrs. W. B. S. Shanthikumar Senior Commissioner

Internal Audit

Mrs. L. Ramanayaka Senior Commissioner

Zone 1

Mr. W.M. Mendis Commissioner

Data processing (Information Technology 1)

Mr. A.L.A. Sirisena Commissioner

Nations Building Tax

iii

Mrs. H.M.C.I. Gunasekara Commissioner

Human Resource Development

Mr. W.V.P. Karunarathna Commissioner

Strategic & Operational Planning, Stamp Duty & Taxpayer services

Mr. P.A.V. Premarathna Commissioner

LTU

Mrs. K. Dahanayaka Commissioner

VAT, ESC, Betting and Gaming Levy

Mr. K.A.G. Abayarathne Commissioner

Corporate Tax

Mr. D.B. Jayasekara Commissioner

Zone – 1

Mrs. W Anulawathie Commissioner

Human Resource Management

Mrs. S. Edirisingha Commissioner

PAYE, WHT (Interest) & Unit 3

Mr. I.M.B Senevirathna Commissioner

Investigation

Mr. J.M. Jayawardhana Commissioner

Appeals

Mr. A. Sri Selvanayagam Commissioner

Collection and Special Collection

Mrs. R.M.R.W Manchanayaka Commissioner

Zone 2 & WHT (Specified fees)

Mr. D.M.L.I. Dissanayake Commissioner

Zone 3

Mr. A. N. Guruge Commissioner

VAT Refunds

Mrs. P. Rohini Commissioner

Internal Audit & Assessment Control

Mrs. R.M.P.S.K Rajapaksha Commissioner

Information

Mr. A.A.D.U. Abesinghe Commissioner

Procurement & Supplies and Economic Research & Planning

v

Table of Contents The Summary of the Performance during the Year 2010……….. vii

PART I - HUMAN RESOURCE MANAGEMENT AND DEVELOPMENT 1

Chapter 1- Human Resources 1

1.1 Approved Cadre, The number in post and vacancies 1

1.2 Promotions 2

1.3 Retirements 2

1.4 Disciplinary Action 4

1.5 Training 4

PART II – TAX ADMINISTRATION

Chapter 2 - Collection of Revenue 8

2.1 Number of Taxpayers & Tax files 8

2.2 Total Revenue Collection 9

2.3 Total Revenue – Cash flow 11

2.4 Collection of Revenue – Self Assessment and Other 12

2.5 Inland Revenue Contribution to the Government Revenue and GDP 13

2.6 Return Compliance 14

2.7 Income Tax Collection 15

2.8 Value Added Tax Collection 16

2.9 Economic Service Charge (ESC) Collection 18

2.10 PAYE Collection 19

2.11 Withholding Taxes (on interest and specified fees) 19

2.12 Stamp Duty Collection 20

2.13 Betting & Gaming Levy Collection 20

2.14 Debits Tax Collection 21

2.15 Construction Industry Guarantee Fund Levy Collection 22

2.16 Nation Building Tax (NBT) Collection 22

2.17 Inland Revenue Collection 2006 to 2010 23

Chapter 3 - Expenditure and Productivity Ratio 26

3.1 Comparison of the total expenditure incurred during the year with 2008 , 2009 and 2010 27

3.2 Analysis of the Recurrent Expenditure in 2010 28

3.3 Productivity Ratio 28

Chapter 4 – Taxes in Default 30

Chapter-5 -Audits, Additional Tax Charged and Collected, Refunds, Recovery Action and Appeals 32 5.1 Audits 32 5.2 Appeals 33 5.3 Board of Review 33 5.4 Post VAT refund audits 34

5.5 Recovery Action 34 5.6 Refunds 34 PART III -

Chapter 6 - International Relations 36 6.1 Double Tax Avoidance Treaties 36 6.2 Affairs related to Double Tax Treaties during the year 2010 37

6.3 Participations at International Taxation Matters Abroad 38

Chapter 7 - Legislation 39 7.1 Approved Charities 39

7.2 Rulings Given During the Year 40

Chapter 8 - Other 41 8.1 Tax Payer Service Unit 41 8.2 Details of the Directions and clearance certificates issued 41

8.3 Analytical Reports 42

8.4 Activities in North and East 42

vii

The Summary of the Performance during the Year 2010………..

Inland Revenue Department (IRD) could fulfill the government objective of collecting

revenue for development of the country during the year, along with the end of the

gruesome terrorism which lasted for almost three decades. The total revenue

collected by the IRD during the year 2010 was Rs. 422,512 million. It is a growth of

Rs. 69.5 million or 19.68% when compared to the figures in year 2009. It is also a

51.69% contribution to the total government revenue and 7.54% of the annual gross

domestic production.

The successful steps taken by the IRD to enhance compliance in furnishing tax

returns have resulted in an increase in return compliances relation to every tax

compared to year 2009. Furnishing of non- corporate income tax returns on the due

date reached 53% during the year of assessment 2009/2010 as against 48% recorded

in the year of assessment 2008/2009. The compliance rate of furnishing returns on

due date, has increased up to 66% while it was 58% during the year of assessment

2008/2009, with regard to the corporate sector.

Many new files could be opened with the initiatives taken by Information Branch and

Taxpayer Service Branch. Accordingly, 9,287 new income tax files and 766 PAYE tax

files (Employers) could be opened and 14,957 persons were temporally registered for

VAT. Number of 1V return forms issued on information received was 22,552.

During the year, by regulating tax audits, undisclosed income and turnover

amounting to Rs. 142,814 million could be disclosed. Additional taxes imposed

during the year on such amounts were Rs. 15,711 million. (Inclusive of setting off

refunds against arrears)

Further actions were taken to provide training on Code of Ethics for all the officers of

the Inland Revenue service. Moreover, a series of seminars and lectures was

conducted for providing awareness on tax matters, for the public and the staff. The

activities of the regional office in Jaffna which did not function properly for decades

due to the conflict situation in Northern and Eastern Provinces were formally

restored subsequent to the appointment of staff and making the public aware of taxes

by conducting seminars.

The project for the expansion of the Automatic Processing System for recovery of all

types of taxes was initiated during the year with increasing the number of computers

and other relevant equipment.

The head quarters of the IRD which was severely damaged by the terrorist attack in

February 2009, was renovated with sophisticated facilities and some branches which

had been operating in other buildings were relocated in the head quarters.

viii

Taxes under respective enactments administered by the IRD during the year

Taxes imposed under respective enactments administered by the IRD during the year

are as follows:

Tax Enactments

Income Tax Inland Revenue Act. No. 10 of 2006 as amended by Act No.10 of 2007, 9 of 2008 and 19 of 2009

Value Added Tax (including VAT on Financial services, Advance Tax on VAT and Optional VAT)

Value Added Tax Act. No. 14 of 2002 as amended by Act No 7 of 2003, 13 of 2004, 6 of 2005,8 & 49 of 2006, 14 of 2007, 15 of 2008 and 15 of 2009

Economic Service Charge Economic Service Charge Act. No. 13 of 2006 as amended by Act No 15 of 2007, 11 of 2008 and 16 of 2009

Debits Tax Debits Tax Act. No. 16 of 2002 as amended by Act No 05 of 2003, 12 of 2007 and 17 of 2009

Nation Building Tax Nation Building Tax Act. No.9 of 2009 as amended by Act No 32 of 2009

Betting and Gaming Levy The Betting and Gaming Levy Act. No. 40 of 1988

Stamp Duty Stamp Duty Act. No. 43 of 1982 and the Stamp Duty (Special Provisions) Act. No. 12 of 2006 as amended by Act No 10 of 2008

Share Transaction Levy Finance Act. No. 5 of 2005 and Finance Act. No. 13 of 2007

Construction Industry Guarantee Fund Levy

Social Responsibility Levy Finance Act. No. 5 of 2005, Finance Act No. 11 of 2006 and Finance Act. No. 8 of 2008

Turnover Tax (Northern Province) The Turnover Tax Act. No. 69 of 1981 as amended

IRD continued to deal with the work of assessment and collection of following

taxes, which were in force earlier and have since been repealed

Tax Imposed under

National Security Levy The National Security Levy Act. No. 52 of 1991 as amended

Goods and Services Tax The Goods and Services Tax Act. No. 34 of 1996 as amended

Save the Nation Contribution The Save the Nation Contribution Act. No. 5 of 1996 as amended

Surcharge on Wealth Tax The Surcharge on Wealth Tax Act. No. 25 of 1982 and Act No. 8 of 1989

Surcharge on Income Tax The Surcharge on Income Tax Act. No. 26 of 1982, Act No. 12 of 1984, Act No. 7 of 1989 as amended

Estate Duty The Estate Duty Act. No. 13 of 1980 as amended

1

Performance Report 2010

PART-I

HUMAN RESOURCE MANAGEMENT AND DEVELOPMENT

Chapter 1- Human Resources

1.1 Approved Cadre, the number in post and vacancies The following table shows the approved cadre of the Department, the actual number in post

and the vacancies, as at 31 December 2010

Cadre of the Department as at 31.12.2010

Grade Approved

Cadre Number in

Post Vacancies

Commissioner General 1 1 -

Senior Deputy Commissioner General 1 1 -

Deputy Commissioner General 6 5 1

Senior Commissioner 5 5 -

Commissioner 22 19 3

Deputy Commissioner 90 85 5

Senior Assessor 750

54 129

Assessor 567

Assessor (Supernumerary) - 2 -

Senior Tax Officer 1000

158 402

Tax officer 438

Combined Services

Director (Administration) 1 1 -

Accountant 7 7 -

Public Management Assistant(Supra) 2 2 -

Translator 9 7 2

Librarian 11 1 1 -

Librarian 111 1 - 1

Public Management Assistant 306 266 40

Budget Assistant 2 2 -

Transport officer 1 - 1

Driver 74 66 8

KKS 319 304 15

Other

Engineer 1 1 -

System Analyst 6 1 5

System Manager 2 2 -

System Controller 3 3 -

System Operator 11 3 8

Data entry Operator 18 8 10

Stamp Clerk 1 - 1

Receptionist 4 3 1

Supply Assistant 2 - 2

Building Supervisor 1 - 1

Storeman 3 - 3

Carpenter 1 1 -

Total 2651 2013 638

2


1.2 Promotions

� Mr. K. M.S. Kandegedara, Deputy Commissioner General, was appointed to the rank of Commissioner General of Inland Revenue with effect from May 31, 2010.

� Mr. H.M. Abesinghe, Senior Commissioner was promoted to the rank of Deputy Commissioner General with effect from June 16, 2010.

� The following Commissioners were promoted to the rank of Senior Commissioner

Name Date of promotion

• Mrs. W. B. S. Shanthikumar 05.05.2010

• Mrs. L. Ramanayaka 31.05.2010

• Mr. W.M. Mendis 27.12.2010

� The following Deputy Commissioners were promoted to the rank of Commissioner

Name Date of promotion

• Mr. A. N. Guruge 10.01.2010

• Mrs. P. Rohini 03.04.2010

• Mrs. R.M.P.S.K Rajapaksha 05.05.2010

• Mr. A.A.D.U. Abesinghe 31.05.2010

• Ms. D.G.P.W. Gunathilake 03.11.2010

• Mr. J.P.D.R. Jayasekara 05.11.2010

� 06 Senior assessors were promoted to the rank of Deputy Commissioner with effect from

May 12, 2010

� 02 Assessors were promoted to the rank of Senior Assessor with effect from May 02, 2010

and July 07, 2010

1.3 Retirements

The following officers were retired from service during the year.

� Mr. E.M.M. Medagoda Commissioner General

� Mr. E.A.S. Edirisinghe Additional Commissioner General

� Mr. H.M. Premarathna Banda Senior Commissioner

� Mr. S.A. Hemapala Commissioner

� Mr. K. Rajarathnam Commissioner

� Mr. S. Rajapaksha Commissioner

� Mr. W.M.W.Kumarasiri Commissioner

� Mr. K.D.M.R. Perera Deputy Commissioner

� Mr. A.B.P. Karunarathne Deputy Commissioner

3


Other Retirements

� Senior assessors – 05 � Assessors – 18 � Translator - 01 � Public Management Assistants – 06 � Drivers – 01 � K K S – 05

Mr. E.M.M. Medagoda

Mr. E.M.M. Medagoda was appointed Commissioner General of Inland Revenue on

June19, 2009. He began his career with the Department on September 01, 1976 as an

Assessor and held several important positions in the tax administration. During his

tenure of office spanning 33 years, Mr. Medagoda underwent training in Japan

participating in the Junior Tax Program held in 1985. He also followed VAT training

Course held in Indonesia in 1995. He represented the Department at the seminar on

Exchange and Information held in Korea in 1997, 26th Annual Technical Conference of

CATA held in Canada in 2005 and the 12th Annual International Taxation meeting on

Tax Treaties held in France in 2007, study tour for FMRP project held in Hongkong &

Philippines in 2007. Mr. Medagoda led the delegation in the negotiation and

conclusion of the Double Tax convention with Saudi Arabia.

Mr. E.A.S. Edirisinghe

Mr. E.A.S. Edirisinghe joined the Department on September 01, 1976 as an Assessor. He

served in various capacities with dedication and reached the rank of Additional

Commissioner General in 2009. He retired from service on October 01, 2010 having counted a

period of 33 years in the Inland Revenue service. Mr. Edirisinghe, during the tenure of his

office, underwent training and participated in several overseas taxation programs including

Tax Administration program held in California in 1990, and General Tax administration

course held in Malaysia in 2000, It is Mr. Edirisinghe’s dedication and devotion that led to

timely completion of the refurbishment work of the Inland Revenue building within a short

period of time.

Mr. H.M. Premarathne Banda

Mr. H.M. Premarathne Banda joined the Department on May 05, 1980 as an Assessor. At the

time of his retirement, which on May 04, 2010, he was functioning as Senior Commissioner

Secretariat. Mr. Premarathne Banda counted 30 years of dedicated service in the Department.

He played a dedicated role in the last restructuring program of the Department.

4


1.4 Disciplinary Action

Category Balance o/s as at 01.01.2010

Commenced during the year

Concluded during the year

Balance o/s as at 31.12.2010

Assessor 5 - - 5

Tax officer 3 - 2 1

1.5 Training

1.5.1 In House Training

Training Branch of the Department conducts training courses and examinations for

Assessors and Tax officers, regularly. This is aimed at enhancing their knowledge and

improving their analytical skills, particularly in Taxation and Accountancy. More weight is

placed in providing the training on subjects that are required to fulfill various service

requirements of officers for their confirmation in the respective grades. Details of personnel

trained and the examinations conducted during the year are as follows:

� Training for Assessors.

Course No of Trainees

Training classes conducted for Assessors in Class 11 Grade 11

(promoted according to the Administrative Tribunal Case No.

AAT/26/2008 (PSC), on 12.10.2009) for the first departmental

examination

10

� Training for Tax Officers

Course No of Trainees

Training classes conducted for Tax Officers in Class 111 Grade 11 for

the conformation in Class 111 Grade 1 and eligibility for the

promotion to Class 11 Grade 11

� Sinhala medium

� English medium

� Tamil medium

375

37

20

5


� Seminars, Work Shops etc.

Subject No. of seminars, workshops

held during the year Training programs on “Management and Good Governance” for Deputy Commissioners

3

Seminars on “Code of Ethics” for all Assessors and Tax Officers

3

Seminars on “Tax related subjects and relevant topics for office work”

8

Training sessions on “Tax Procedure” 8

1.5.2 Overseas Training

Arrangements were made for several officials of the Department to participate in

training programs, seminars and workshops held abroad with a view to expose them

to the advances made in the administration of Tax Laws and best practices of other

countries in order to maintain a level of professionalism as Tax administrators.

Accordingly, 33 officers were participated in such training programs during the

year. Details of such officers who were sent abroad for training and the training

programs they participated are as follows:

Name and Designation of the Officer

Name of the Program Country of Training

Duration

1 Mrs. L. Ramanayake Senior Commissioner

International seminar on Taxation (Senior Course)

Japan 30.08.2010-22.09.2010

2 Mr. D.M.L.I Disanayake Commissioner

Practical aspect of international Tax Planning

Netherlands 18.102010-22.10.2010

3 Mr. A.N. Guruge Commissioner

Practical aspect of international Tax Planning

Netherlands 18.102010-22.10.2010

4 Mr. H.M.W.C. Bandara Deputy Commissioner

Interpretation and Application of Tax treaties & Transfer pricing fundamentals(IBFD)

Netherlands 22.02.2010-26.02.2010

5 Mr. H.M. Dencil Deputy Commissioner


Netherlands 22.02.2010-26.02.2010

6 Mr. D.M.S. Disanayake Deputy Commissioner


Netherlands 22.02.2010-26.02.2010

7 Mr.W.K.K. Jayarathne Deputy Commissioner


Netherlands 22.02.2010-26.02.2010

8 Mr. P.K.Pathmanaden Deputy Commissioner

Interpretation and Application of Tax treaties & Transfer pricing

Netherlands 22.02.2010-26.02.2010

6


fundamentals(IBFD)

9 Ms. R.K.C Chithralatha Deputy Commissioner


Netherlands 22.02.2010-26.02.2010

10 Ms. R.M.R.W. Munchanayake Deputy Commissioner

LHDNM_OECD Practical Workshop on the Negotiation of Tax Treaties

Malaysia 08.03.2010-12.03.2010

11 Mr. D.U.A. Jayawardena Deputy Commissioner r

Workshop on Taxation of International Transaction(TOTI)

Malaysia 03.05.2010-21.05.2010

12 Mr. E. S. De Soysa Deputy Commissioner

Tax administration Development (KOICA)

Korea 15.07.2010-30.07.2010

13 Mr. T. Rajapakshe Deputy Commissioner


Korea 15.07.2010-30.07.2010

14 Mr. R.A.N. Rajapakshe Deputy Commissioner


Korea 15.07.2010-30.07.2010

15 Mr. M. Gunaweera Deputy Commissioner


Korea 15.07.2010-30.07.2010

16 Mr. R. M. Dingiri Banda Deputy Commissioner


Korea 15.07.2010-30.07.2010

17 Mr. S.M.A. Bandara Deputy Commissioner


Korea 15.07.2010-30.07.2010

18 Ms. D.W.M. Wijekoon Deputy Commissioner


Korea 15.07.2010-30.07.2010

19 Ms. L.M.C. Weerakoon Deputy Commissioner


Korea 15.07.2010-30.07.2010

20 Ms. R.K.C. Chithralatha Deputy Commissioner


Korea 15.07.2010-30.07.2010

21 Ms. T.M.J.N ThalAramba Deputy Commissioner


Korea 15.07.2010-30.07.2010

22 Ms. K.G.C. Priyadarshanie Deputy Commissioner


Korea 15.07.2010-30.07.2010

23 Mr. W.M. N. Wickramasinghe Deputy Commissioner

Principles of International & Co-operative Taxation (IBFD)

Netherlands 16.08.2010-27.08.2010

24

Mr. N.M.P.N.B. Wanigasekara Deputy Commissioner


Netherlands 16.08.2010-27.08.2010

25 Mr. J.A.A. Parakrama Deputy Commissioner


Netherlands 16.08.2010-27.08.2010

26 Mr. D.M.R. Disanayake Senior Assessor

Transfer Pricing Aspects of Business Restructurings

Singapore 14.07.2010-16.07.2010

7


27 Mr. H.T.K.F. Peris Senior Assessor


Singapore 14.07.2010-16.07.2010

28 Ms. W.P.C.S. Ranaweera Senior Assessor


Singapore 14.07.2010-16.07.2010

29 Mr. B.K. Saman Santha Senior Assessor


Singapore 14.07.2010-16.07.2010

30 Ms. Swarna Liyanage Senior Assessor

Tax Analysis and Revenue Forecasting Programme (FMRP)

USA 27.06.2010-23.072010

31 Mr. S.W.P.Y. silva Assessor

Master’s Degree Programme in International development (KOICA)

Korea 17.02.2010-30.02.2011

32 Mr. M.G. Karunarathne Assessor

GTC:Project Management for E Government Promotion (JAICA)

Japan 05.04.2010-10.09.2010

33 Ms. S.I. Asanthi Assessor

Master’s Degree Programme in Public Policy & Management

Japan commenced on 05.04.2010

34 Mr. L.K. Rathnayake Assessor

Commonwealth Tax Inspectors Course(CTIC)

UK 02.08.2010-10.09.2010

8


PART II

TAX ADMINISTRATION

Chapter 2 - Collection of Revenue

The Department of Inland Revenue being the main contributor to the Government’s

revenue is entrusted with an immense responsibility of collecting revenue to the

Government. The Department collected net revenue of Rs. 422,512,163,644 (including

Social Responsibility Levy) during the year. This sum shows an increase of Rs.69.5

billion (or 19.68%) over that of year 2009. This revenue was built up by attending to

affairs of 864,873 taxpayers, including several withholding agents through whom

certain taxes were collected by way of deduction at source, out of which 530,213

employees were paying income tax (by deduction at source) under PAYE scheme.

2.1 Number of Taxpayers & Tax files

The number of persons registered with the Department for the payment of tax, as at the end of

the year, is given in Table 01.

Number of Taxpayers and Tax Files as at 31-12-2010

Income Tax

Corporate

Resident Companies

29,833

Non-Resident Companies

576

State Corporations, Statutory Boards and State owned institutions 54 30,463

Non Corporate

Individuals

192,451

Partnerships

16,578

Bodies of Persons etc. 1,107

Employees paying income tax under Pay-As-You-Earn (PAYE) Scheme (as at 31-03-2010)

530,213 740,349

Total Income Taxpayers 770,812

Other Tax Payers

Persons and Partnerships registered for Economic Service Charge(ESC) 11,936

Persons registered for Value Added Tax (VAT) 31,271

Persons registered for Value Added Tax on Financial Services 152

Persons registered for Optional VAT 3,950

Persons registered for Nation Building Tax (NBT) 14,577

Persons registered for Debits Tax 911

9


Betting Levy Files 933

Gaming Levy Files 4 63,734

Total Tax payers 834,546

Employers Registered under PAYE Scheme 14,354

Withholding Tax on Interest (Withholding Agents) 1,793

W H T on Specified Fees (Regular monthly schedule senders) 6,816

Stamp Duty (Regular quarterly schedules senders) 7,364 30,327

Total Number of tax files/ tax payers as at 31-12-2010 864,873

Table 01

*Not include employees given in incomplete declarations furnished by their respective

employers

Note:

(i) A separate file is not generally maintained in the Department in respect of any employee

from whose remuneration tax is deducted under PAYE Scheme, unless such employee has

any other income.

(ii) Individuals whose income is taxed at source as a final tax (such as interest on deposits,

Treasury Bills, Dividends, and Rewards etc) are not included.

(iii) 640 Non-Governmental Organizations and 4,648 Government employees with

maintaining files have been included in the above statistics

2.2 Total Revenue Collection

The total revenue collection for the year, amounted to Rs. 422 billion shows an increase of Rs.

69.5 billion or 19.68% over that of the previous year. This achievement could be attributable

mainly to wide reforms undertaken in tax administration, which also led to mending the

loopholes in the tax system.

The ratio of the total Inland Revenue contribution to the Government revenue in the year was

51.69%. The collection of revenue indicates 100% achievement of expectation reflecting only a

marginal drop in collection of Income tax and Value Added Tax. Even when compared with

the estimate of Rs. 434.61 billion for the year, the revenue for the year was short only by Rs.

2.10 billion. The collection of outstanding (default) taxes for the year under review was Rs.

13.0 Billion (the collection of default tax in 2009 was Rs. 15.6 Billion). This is somewhat

noteworthy as the refurbishment of the Inland Revenue building, which was damaged in the

10


previous year, completed only in March 2010 and the scattered offices re-occupied the

building only in the middle of the year.

The revenue from VAT has gone up by 28% in 2010 over that of previous year. This was

mainly due to the increasing the volume of importation of some luxury items. However, the

collection of income tax of Rs.117.57 billion during the year indicates a short fall of Rs 7.7

billion over that of the year 2009. The main reason for the drop in revenue from Income tax

could be due changes in policies.

Table 02 shows the tax wise analysis and the table 03 shows the cash flow of the total revenue

collection for the year 2010

Total Revenue Collection – 2010

Type of Tax Revenue

Estimate Rs: (Revised)

Revenue Collection Rs:

Collection as a % of Estimate

Collection as a % of Total

Revenue

Income Tax 120,040,000,000 117,575,259,945 98% 27.87%

Economic Service Charge 15,000,000,000 18,047,723,176 120% 4.28%

Debits Tax 9,559,000,000 10,843,436,359 113% 2.57%

Betting & Gaming Levy 300,000,000 294,841,046 98% 0.07%

Share Transaction Levy 2,375,000,000 2,272,957,122 96% 0.54%

Stamp Duty 4,204,000,000 4,439,842,693 106% 1.05%

Value Added Tax 222,628,000,000 219,563,122,247 98% 51.97%

Goods & Services Tax 40,000,000 38,534,018 96% 0.01%

Turnover Tax 300,000,000 388,294,514 129% 0.09%

National Security Levy 15,000,000 23,222,185 155% 0.01%


780,000,000 829,785,134 106% 0.20%

Nation Building Tax 45,362,000,000 46,022,517,148 101% 10.83%

Total Revenue 420,603,000,000 420,339,535,587 100% 99.48%

Social Responsibility Levy 1,300,000,000 2,172,628,059 167% 0.52%

Total Revenue (Including SRL) 421,903,000,000 422,512,163,646 100% 100.00%

Table 02


2.3 Total Revenue – Cash flow

Month

January

February

March

April

May

June

July

August

September

October

November

December

Table -03

0

50,000

100,000

150,000

200,000

250,000

IT

ESC

Re

ve

nu

e C

oll

ect

ion

Rs

Mil

lio

ns

Total Revenue Collection

IT ESC DT BGL

Cash flow

Cash Flow- 2010

Month

Revenue Collection

(Including SRL) Rs:

Cumulative Revenue Collection Rs:

28,684,753,511 28,684,753,511

33,360,985,619 62,045,739,130

25,632,333,259 87,678,072,389

32,410,069,287 120,088,141,676

32,486,436,610 152,574,578,286

29,875,187,606 182,449,765,892

35,798,647,762 218,248,413,654

41,063,059,288 259,311,472,942

44,389,906,062 303,701,379,004

39,793,567,617 343,494,946,621

43,184,763,385 386,679,710,006

35,832,453,640 422,512,163,646

ESCDT

BGL STL SD

VAT

GST TT NSL

Tax Type

Chart 01

Total Revenue Collection - 2010

BGL STL SD VAT GST TT NSL CIGFL

11


28,684,753,511

62,045,739,130

87,678,072,389

120,088,141,676

152,574,578,286

182,449,765,892

218,248,413,654

259,311,472,942

303,701,379,004

343,494,946,621

386,679,710,006

422,512,163,646

CIGFL

NBT

SRL

CIGFL NBT SRL


2.4 Collection of Revenue –

During the year, out of the total revenue collection (excluding VAT and NBT on Imports),

4.4% was collected as non s

collection.

Table 04 shows the comparison of figures.

Analysis of Collection under Self Assessment and other.

2008(Rs. ‘000)

Self Assessment

Income Tax 106,748,623

VAT(Excluding VAT on Imports)

97,674,946

NBT (Excluding NBT on Imports)

0

Others 29,263,312

Total 233,686,881

% to the Total Revenue

(Excluding VAT and NBT on Imports)

95.88%

Table 04

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000R

ev

en

ue

Mil

lio

ns

Revenue Collection (Including SRL) Rs:

– Self Assessment and Other


non self assessment revenue. In 2009 this was 5.79% to the total revenue

Table 04 shows the comparison of figures.

Collection under Self Assessment and other.

2008(Rs. ‘000) 2009 (Rs. ‘000)

Assessment Other

Self Assessment

Other Self

Assessment

106,748,623 5,316,698 117,529,249 7,821,560 110,451,338,127

97,674,946 4,478,467 96,423,173 7,074,945 115,100,917,240

0 0 12,338,569 63,186 18,981,743,493

29,263,312 257,808 28,625,908 716,620 38,642,159,496

233,686,881 10,052,973 254,916,899 15,676,311 283,176,158,356

95.88% 4.12% 94.21% 5.79%

Month

Chart 02

Cash Flow- 2010

Revenue Collection (Including SRL) Rs: Cumulative Revenue Collection Rs:

12


ssessment revenue. In 2009 this was 5.79% to the total revenue

2010 (Rs. ‘000)

Self Assessment

Other

110,451,338,127 7,123,921,818

115,100,917,240 4,884,494,247

18,981,743,493 328,332,130

38,642,159,496 709,104,809

283,176,158,356 13,045,853,004

95.60% 4.40%



2.5 Inland Revenue Contribution to the Government

Table 05 shows the contribution of the Inland Revenue Department to the Government

revenue and the GDP in 2010 and its trends in last 4 years. Chart 03 illustrates these

contributions. Total Government revenue in 2010 has increased to Rs

Report of Ministry of Finance & Planning

Revenue collection to the Government revenue, recording as

slight decline in the Department’s contribution, it is still r

revenue collection.

Contribution to the Government Revenue and GDP at Current Prices of Major Economic Activities

Year Governments

Revenue Rs. Mn **

Collection Rs.

2006 477,833

2007 565,051

2008 655,260

2009 699,643

2010 817,280

Source – * Central Bank of Sri Lanka (Annual Report

Table 05

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

900,000

2006

Re

ve

nu

e

Contribution to the Government Revenue

Inland Revenue Contribution to the Government Revenue and GDP



contributions. Total Government revenue in 2010 has increased to Rs

Report of Ministry of Finance & Planning – 2010) while the percentage of the total Inland

Revenue collection to the Government revenue, recording as 51.69%. Though, there was a

slight decline in the Department’s contribution, it is still remained above 50% of the total

Contribution to the Government Revenue and GDP at Current Prices of Major Economic

IRD’s Collection Rs.

Mn

% of IRD’s Collection to

Govt. Revenue

GDP at Current Prices of Major

Economic Activities Rs.

Mn *

253,319 53.01% 2,938,680

308,205 54.54% 3,578,688

344,570 52.59% 4,410,682

353,015 50.46% 4,835,293

422,512 51.69% 5,602,321

Central Bank of Sri Lanka (Annual Report- 2010) **Ministry of Finance and Planning (Annual Report

2007 2008 2009Year

Chart 4


Governments Revenue IRD’s Collection

13

Revenue and GDP



contributions. Total Government revenue in 2010 has increased to Rs 817,280 Mn (Annual

2010) while the percentage of the total Inland

%. Though, there was a

emained above 50% of the total

Contribution to the Government Revenue and GDP at Current Prices of Major Economic

Current Prices of Major

Activities Rs.

% of IRD’s Collection to

GDP

8.62%

8.61%

7.81%

7.30%

7.54%

) **Ministry of Finance and Planning (Annual Report- 2010)

2010


IRD’s Collection

14


2.6 Return Compliance

The programs for enhancing taxpayer compliance in timely filing tax returns and paying taxes

on self-assessment basis continued during the year. Offering benefits to individual taxpayers

to enhance voluntary compliance towards the tax laws, such as awarding Privilege Cards

(Gold & Silver), granting tax concessions on importation of motor vehicles, discounts on early

tax payments were effectively continued.

Accordingly, for the year of assessment 2009/10, Income Tax Return Compliance rate has

increased when compared with the previous year of assessment. Filling Corporate Income tax

returns on the due date reached 52% as against 49% recorded in the previous year. As regards

the Non-corporate Sector, the compliance rate of furnishing returns on the due date has

increased to 41% from 39% in the previous year, and after one month compliance reached 66%

in corporate sector and 53% in non-corporate sector.

• Table 06 shows the Income Tax Return Compliance rates on due date, and on a date

after one month from the due date for the years from 2005/06 to 2009/10.

• Table 07 shows the rates of return compliance on other taxes.

Income Tax Return Compliance 2005/06 to 2009/10

Year of Assessment

Sector Compliance on

Due Date

Compliance within one

month from the due date

2005/2006 Corporate 34% 44%

Non-corporate 33% 44%

2006/2007 Corporate 36% 42%


2007/2008 Corporate 37% 55%

Non- corporate 27% 50%

2008/2009 Corporate 49% 58%


2009/2010 Corporate 52% 66%


Table 06

Return Compliance on Other Taxes

VAT ESC Debit Tax

NBT Stamp Duty

PAYE

Year 2010

94% 81% 100% 98% 99% Year of Assessment

2009/10 51%

Table 07


2.7 Income Tax Collection

Income tax revenue declined by 6.2

tax revenue was reflected in the income tax collected from withholding tax on interest. The

interest rates of deposits were reduced during the year. As a result of reducti

deposit, investors moved to

of the total revenue of the Department for the year, and that was

2008 – 32.52%).

2.7.1 Income Tax Collection

The contribution from the corporate sector to the total income tax collection of Rs.

Billion was amounted to Rs.

contributed Rs. 60.41 Billion or

collection, and chart 04 illustrates it.

Corporate & Non

Sector

Corporate

Non-Corporate

Table 08

Notes- * includes dividend tax of Rs:

* * includes WHT deducted and remitted from interest income

Sector

Non-Corporate

51.38%

Corporate & Non

tax revenue declined by 6.2% to Rs. 117,575 Million in 2010. This slowdown of Income


interest rates of deposits were reduced during the year. As a result of reducti

deposit, investors moved towards share market. The Income tax collection accounts for

of the total revenue of the Department for the year, and that was 35.51% for the year 2008. (In

ollection – Sector wise clarification

The contribution from the corporate sector to the total income tax collection of Rs.

Billion was amounted to Rs.57.15 Billion or 48.62% whereas the non corporate sector

Billion or 51.38%. Table 08 shows the composition of Income Tax

collection, and chart 04 illustrates it.

Corporate & Non-Corporate Income Tax Collection – 2010

Tax Collection (Rs) %

57,159,980,481* 48.62%

Corporate 60,415,279,464** 51.38%

117,575,259,945 100%

* includes dividend tax of Rs: 5,645Mn

* * includes WHT deducted and remitted from interest income and services rendered by Corporate

Chart 5

Corporate & Non-Corporate Income Tax Collection

2010

Corporate Non-Corporate

15

This slowdown of Income


interest rates of deposits were reduced during the year. As a result of reduction rate of

The Income tax collection accounts for 27.83%

% for the year 2008. (In

The contribution from the corporate sector to the total income tax collection of Rs. 117.57

% whereas the non corporate sector

the composition of Income Tax

services rendered by Corporate

Corporate

48.62%

Corporate Income Tax Collection

16


2.7.2 Source-wise Analysis of Income Tax collection

Table 09 shows the source wise composition (employment and others) of income tax

collected during the year

Income Tax Collection – 2010

Source wise Analysis (Employees and Others)

Source Collection (Rs,Mn)

Employment

PAYE Scheme 16,032.11

Self assessment and Assessments with penalties with tax in default

279.83 16,311.94

Others

Self assessment and Assessments with penalties with tax in default

57,669.69

With holding tax on interest, rent & specified fees 38,694.03

Deductions at source 5,646.92

Compounding penalties 0 102,010.64

Gross Collection 118,322.58

Less: Refunds -747.33

Net collection 117,575.25

Table 9

2.8 Value Added Tax Collection

Reflects an increase of 28% over that of the previous year which was Rs 171.11 Billion. Even

when compared with the estimate of Rs: 222.62 Billion for the year, the revenue for the year

reduced by Rs 3.06 Billion only. Increasing the volumes of importation in motor vehicles

including luxury items helped to increase the VAT revenue. The part of VAT collected on

domestic supplies shows a slight increase over that of the previous year. The total domestic

VAT collected for the year was 120 Billion and this amount was an increase of 16.5 Billion over

that of the year 2009 which was Rs 103.5.Billion. The total VAT collected on imports during

the year 2009 was Rs 67.6 Billion and in the year, 2010, it was Rs 99.5 Billion.

Table 10 shows the Sector wise classification of Value Added Tax collection and the

contribution to the GDP.

Sector wise Analysis of VAT Contribution to GDP

Sector Net Collection (Rs) % % of VAT Collection to GDP

2010 2009

Manufacturing Sector 31,705,003,722.00 14.44% 0.57 0.58

Non Manufacturing Sector 88,280,407,765.00 40.21% 1.58 1.56

On Imports 99,577,710,759.00 45.35% 1.77 1.4

Total 219,563,122,247.00 100% 3.91 3.54

Table 10

17


Table 11 shows the Value Added Tax Gross Collection and Refunds, and the net Collection,

sector wise, which is illustrated by Chart 05.

Value Added Tax Gross Collection and Refunds

2009 2010

Sector Net Collection

(Rs. Mn) Gross Collection

(Rs. Mn) Refunds

Net Collection (Rs. Mn)

Manufacturing 28,220.54 39,282.04 7,577.04 31,705.00

Non- Manufacturing

-Services 54,267.71 59,664.36 1,292.61 58,371.75

-Financial Services 20,949.92 29,826.27 29,826.27

-Optional VAT 61.95 75,279.58 82.38 89,573.01 82.38 88,280.40

Imports 67,619.45 99,577.83 0.12 99,577.71

Total 171,117.57 228,432.88 8,869.77 219,563.11

Table 11

2.8.1 Industry-wise Analysis

Table 12 shows the domestic VAT industry-wise analysis, such as banking, insurance, hotel

& restaurant, construction, electricity & gas, imports, financing and their contribution to the

total VAT revenue.

Manufacturing Sector 14.46%

Non Manufacturing Sector 40.27%

Imports 45.27%

Chart 05

Value Added Tax Collection - 2010

18


Gross Domestic VAT – Manufacturing and Service Sectors

Year 2008

(Rs.Mn) %

Year 2009

(Rs.Mn) %

Year 2010

(Rs.Mn) %

Banking 14,708 13.10% 15,669 14.00% 21,391 36.52%

Insurance 3,689 3.30% 2,674 2.40% 3,370 26.02%

Hotel & Restaurant 3,324 3.00% 2,495 2.20% 3,882 55.63%

Construction 8,178 7.30% 6,401 5.70% 6,077 -5.07%

Electricity & Gas 391 0.30% 1,723 1.50% 151 -91.23%

Imports 10,166 9.10% 7,687 6.90% 11,914 54.99%

Financing 10,717 9.60% 10,664 9.50% 13,354 25.23%

Communication 5,411 4.80% 4,140 3.70% 7,111 71.77%

Petroleum Product 1,556 1.40% 5,533 4.90% 2,438 -55.94%

Beverage –Alcoholic 7,484 6.70% 8,650 7.70% 10,887 25.86%

Services not classified 7,057 6.30% 1,560 1.40% 7,085 354.26%

Manufacturing not classified 6,012 5.40% 5,971 5.30% 6,507 8.99%

VAT on Financial Services & Others 33,260 29.70% 38,733 34.60% 25,817 -33.35%

Total 111,954 100 111,899 100 119,985 7.23%

Table 12

Import and supply of light weight electrical and electronic items under the certain HS code

were exempted from VAT with effected from 01.06.2010

2.9 Economic Service Charge (ESC) Collection

During the year, 1,541 new ESC files were opened increasing the total to 14,355 as at

31.12.2010.

The Department collected Rs. 18,048 Mn. as ESC during the year, and its contribution to the

total collection was 4.27%. It recorded 120 percent growth of the collection as against the

estimate for the year.

Table 13 shows sector - wise analysis of Corporate and Non Corporate of Economic Service

Charge collection for the year 2010 and Chart 06 illustrates it.

Economic Service Charge Collection- 2010

Sector Collection %

Corporate Sector 16,350,031,690.09 90.60%

Non Corporate Sector 1,697,691,485.67 9.40%

Total 18,047,723,175.76 100%

Table 13

19


Corporate Sector

90.60%

Non Corporate Sector

9.40%

Chart 6

Economic Service Charge Collection 2010

2.10 PAYE Collection

Gross revenue collected under PAYE scheme, during the year, was Rs.16, 312 Million (in 2009–

Rs.: 14,536 Mn.) which is part of Income Tax collection.

The number of employees paying income tax under Pay-As-You-Earn (PAYE) scheme

recorded 530,213. (Not including the number of employees in the incomplete declarations

furnished by certain employers) and the number of employers registered under PAYE Scheme

was 14,534.

Analysis of Tax under PAYE and Level of income

Range of Income Total Gross

Remuneration No. of

Employees Tax under PAYE

Paid

Below 300,000

Tax not deducted 41,469,355,614.32 281,972

Tax deducted 182,998,224.49

300,001 - 600,000 45,325,091,275.86 106,540 709,935,978.75

600,001 - 800,000 28,487,940,494.67 41,083 845,578,174.05

800,001 - 1,000,000 21,216,809,207.74 23,075 961,216,067.33

1,000,001 - 1,200,000 12,511,456,616.07 58,441 785,680,069.35

1,200,001 - 1,400,000 6,944,988,664.48 5,513 631,577,156.07

1,400,001 -1,900,000 10,538,688,391.96 6,376 1,260,750,680.93

Above 1,900,000 27,542,672,331.25 7,213 6,502,363,136.23

Total 194,037,002,596.35 530,213 11,880,099,487.20

Note: This information is based on records in the completed returns furnished by the employers for the Y/E 2009/2010

Table-14

2.11 Withholding Taxes (on interest and specified fees)

WHT on interest recorded a collection of Rs. 29,422,008,983/- during the year, which consists

Rs. 22,325,326,102/- on Treasury Bills and Bonds (Rs. 35,785,982,991/- for the year 2009) and

20


the balance from other instruments (deposits etc). WHT revenue on interest declined by Rs.1,

834 Mn against the estimated for the year. Due to the reduction of interest rate of deposit by

the Central Bank, investors moved to the share market. This may be a reason for the drop of

the WHT revenue of interest.

Rs. 9,239,680,706/- Mn. was collected as WHT on Specified Fees (Rs 8,610,067,557/- Mn for the

year 2009) through 6,816 permanent withholding taxpayers sending monthly schedules

during the year. Number of 80,520 monthly schedules received from them, recording 98.4%

compliance rate. The facility of directions for non-deduction available to ESC payers resulted

in drop of the WHT revenue on specified fees against the estimated for the year, (Rs

11,344Mn).

2.12 Stamp Duty Collection

Rs 4,440 Mn. generated from Stamp Duty during the year as against the estimate of Rs. 4,204

Mn. This shows that 105% of the estimate is achieved. The total collection of Stamp Duty

increased by 33.41% when compared to year 2009.

The Department conducted advisory and supervisory visits with view to enhance the tax base

and accordingly 156 places were visited in the year 2010. Numbers of regular registered

compounding agents of Stamp Duty were 7364, and out of this 6,758 have furnished schedules

recording a 99 % compliance.

2.13 Betting & Gaming Levy Collection

During the year, collection of Betting and Gaming levy was Rs.294, 841,046/-. This reflects a

marginal decline by Rs. 5,158,954/-when compared with the estimated for the year. However,

this collection showed an increase of 9.8Mn than the previous year.

Prosecution actions were taken during the year against the number of 27 defaulters by the

Betting and Gaming Levy Branch.

Table 15 compares the Revenue Estimate of Betting and Gaming Levy with the Revenue

Collected in the year.

Collection of Betting & Gaming Levy -2010

Estimated Revenue (Rs.)

Actual Collection (Rs.)

%

300,000,000 294,841,046 98.28%

Table 15

21


292

293

294

295

296

297

298

299

300300.00

294.84Re

ven

ue

Mill

ion

s

Chart 7

Collection of Betting & Gaming Levy -2010

Estimated Revenue Actual Collection

2.14 Debits Tax Collection

Debits Tax generated Rs. 10,843Mn and constituted 2.58% of the total revenue collection

during the year. The Debits Tax collection could increase the target by Rs 1, 284Mn set for the

year and it reflects 35% increase over the corresponding figure in 2009.

Table 16 compares the revenue estimate of Debits Tax with the revenue collected during the

year, and the Chart 08 illustrates it.

Debits Tax Collection – 2010

Estimated Revenue (Rs)

Revenue Collection (Rs)

%

9,559,000,000 10,843,436,359 113.00%

Table 16

8,800

9,000

9,200

9,400

9,600

9,800

10,000

10,200

10,400

10,600

10,800

11,000

9,559

10,843

Re

ven

ue

M

illio

ns

Chart 8

Debits Tax Collection – 2010

Estimated Revenue (Rs) Revenue Collection (Rs)

22


2.15 Construction Industry Guarantee Fund Levy Collection

Revenue collection from Construction Industry Guarantee Fund Levy exceeded the estimate

by Rs. 49,785,134/-. With its contribution of Rs 829,785,134/- to the total revenue. As a

percentage of the estimate, it recorded the rate of 106% during the year. This increase shows

the success of policy change made by introducing withholding system to this levy. 171

Construction Levy payers have been registered for paying this levy and all have submitted the

declarations on time with due payments, recording 100% compliance.

2.16 Nation Building Tax (NBT) Collection

Collection from NBT for the year exceeded the estimate by 660 Mn and contributed 10.89% to

the total revenue collection. Total number of tax payers registered for NBT as at 31. 12. 2010

was 14,627. Out of the companies registered for NBT are 8,783 and the rest are individuals and

partnerships. NBT collection has recorded a 100% achievement of the estimate for the year.

NBT revenue increased by 69% to 46,022 Mn in 2010.

Analysis of NBT collection -2010

Sector Net Collection

(Rs.)

Manufacturing 7,714,130,983.00

Services 11,595,944,639.00

Imports 26,712,441,526.00

Total 46,022,517,148.00

Table 17

Nation Building Tax Collection – 2010

Estimated Revenue (Rs)

Revenue Collection (Rs)

%

45,362,000,000 46,022,517,147 101%

Table 18

23


45,000

45,100

45,200

45,300

45,400

45,500

45,600

45,700

45,800

45,900

46,000

46,100

45,362

46,023

Re

ven

ue

Mill

ion

s

Chart 9

Nation Building Tax Collection – 2010

Estimated Revenue (Rs) Revenue Collection (Rs)

Importation of gold was exempted from NBT with effect from 01.03.2010

2.17 Inland Revenue Collection 2006 to 2010

Figures in Table 19 represent the tax wise classification of revenue collection of the Department,

from 2006 to 2010.

Inland Revenue Collection 2006 to 2010 – Tax wise Analysis

Type of Tax

2006 2007 2008 2009 2010 Colln.

%

Colln.

%

Colln.

%

Colln.

%

Colln.

% (Rs. Mn)

(Rs. Mn)

(Rs.Mn) (Rs.Mn) (Rs.Mn)

Income Tax 71,481 28.22 94,965 30.81 112,065 32.52 125,350 35.51 117,575 27.83

Economic Service Charge 8,853 3.49 12,203 3.96 14,476 4.02 14,207 4.02 18,048 4.27

Value Added Tax 164,071 64.77 186,991 60.67 202,984 58.91 171,118 48.47 219,563 51.97

Debits Tax 6,255 2.47 7,187 2.33 8,410 2.44 8,036 2.29 10,843 2.58

Betting & Gaming Levy 282 0.11 268 0.09 270 0.08 269 0.07 295 0.07

Share Transaction Levy 420 0.17 412 0.13 449 0.13 560 0.16 2,273 0.53

Turnover tax 233 0.09 461 0.15 535 0.16 337 0.1 388 0.09

Stamp Duty 1495 0.59 4,026 1.31 3,751 1.09 3,327 0.94 4,440 1.05

Estate Duty 0.6 0 0 0 0 0 0 0 0

24


Goods & Services Tax 136 0.05 142 0.05 127 0.04 56 0.01 39 0.00

National Security Levy 93 0.04 105 0.03 68 0.02 17 0.004 23 0.00


24 0.01 56 0.02 230 0.07 571 0.16 830 0.20

NBT 0.00 0.00 0 0 0 0 27,205 7.71 46,022 10.89

Social Responsibility Levy

0.00 0.00 1,389 0.45 1,206 0.35 1,962 0.56 2173 0.52

253,344 100 308,205 100 344,571 100 353,015 100 422,512 100

Table 19

Sector wise Analysis of Revenue Collection from Files attached to Large Tax Payers

Units and International Unit.

Revenue collections of Large Taxpayers Units constitute more than 60% of the total revenue of

the department. Table 20 shows the sector wise analyses of revenue collection of total files attach

to Large Taxpayers units and International Unit during the year 2009 and 2010.

0

50,000

100,000

150,000

200,000

250,000

2006 2007 2008 2009 2010

Re

ve

nu

e

Year

Chart 10

Inland Revenue Collection 2006 to 2010 – Tax wise Analysis

Income Tax Economic Service Charge

Mil

lio

ns

25


Sector 2009 2010

Agriculture 704,119,455 1,167,684,186

Alcohol & Beverages 11,527,949,430 14,695,070,049

Bank, Investment companies, Money lending and leasing

35,203,988,610 37,854,812,051

Construction 7,094,371,316 7,021,604,471

Exporter 2,917,606,556 3159568179

Fishing 44,427,117 28,837,488,

Whole sale and retail 1,661,587,754 1,805,155,650

Hotels 2,561,735,140 3,418,001,062

Importer 9,851,540,316 13,748,377,671

Manufacturing 27,339,464,561 33,705,571,254

Mining and quarrying 54,138,113 117,462,782

Poultry 829,992,325 1,128,088,357

Petroleum 6,276,098,545 4,015,857,366

Services 17,790,195,720 20,203,463,006

Telecommunication & Broadcasting 13,905,890,184 15,712,721,165

Tobacco 9,572,741,877 9,848,082,546

Trade 6,514,903,536 4,015,470,034

Table 20

26


Chapter 3 - Expenditure and Productivity Ratio

Total expenditure of the Department in the year was Rs.1, 597 Mn which recorded a 42%

decrease when compared with the previous year figure Rs.2, 759 Mn. Out of the total

expenditure, 90% or Rs.1, 442 Mn was incurred as recurrent expenditure which was a

decrease by 4% as against that of 2009 which was Rs 1,495 Mn. Expenditure on

emoluments increased by 1% to 1,081 Mn from 1,072 Mn in 2009. This was the largest

single expenditure item which accounted for 67.68% of total expenditure and 75% of

recurrent expenditure.

The capital expenditure during the year recorded a huge decrease of 88% compared to

2009 and reached Rs. 155 Mn. (That was 1,263Mn in 2009). Out of the total expenditure

of the Department, 10% represents capital expenditure; that ratio was 46% in the

previous year.

The Internal Audit

Audits carried out by the Internal Audit Branch included examining of all payment

vouchers relating to capital and, recurrent expenditure including incentive payments,

daily vehicle running charts (maintained by the head office and regional offices), pay

sheets, the board of survey reports , the Appropriation Account for the year 2009 and

bank reconciliation 2010. In addition to these activities, examining the action taken to

recover the amounts due on dishonored cheques, revenue accounts relating to VAT and

Income Tax, checking the unsettled imprest for the year 2008, Public Servants Advance

Account for the year 2009 and the refund of taxes were the other main tasks performed

by the Internal Audit Branch. After carrying out the above audit procedures, 72 Internal

Audit quarries were raised.

27


3.1 Comparison of the Total Expenditure incurred during the year with 2008 , 2009 and 2010

Total Expenditure- 2008, 2009 and 2010

Description 2008

(Rs:’000) %

2009 (Rs:’000)

% 2010

(Rs:’000) %

Recurrent Expenditure

Emoluments 1,045,957 74.89% 1,072,170 38.85% 1,081,102 67.68%

Traveling 17,612 1.26% 9,512 0.34% 7,647 0.48%

Supplies &Equipments 48,685 3.49% 51,652 1.87% 55,603 3.48%

Repairs & Maintenance 32,822 2.35% 32,401 1.17% 21,650 1.36%

Contracted Services 133,650 9.57% 318,665 11.56% 264,372 16.55%

Transfers 11,494 82% 11,501 0.42% 11,309 0.71%

Other Recurrent Exp. - 0.00% - 0.00% - 0.00%

Modernization Programme - 0.00% - 0.00% - 0.00%

Sub Total 1,290,220 1,495,901 1,441,684

Capital Expenditure

Reconstruction and Improvements 34,985 2.51% 1,095,330 39.69% 131,178 8.21%

Acquisitions 68,910 4.93% 155,947 5.65% 15,636 0.98%

Capacity Building 12,382 0.45% 8,964 0.56%

Skill Development 2,483 0.18% - 0.00% - 0.00%

Sub Total 106,378 1,263,659 155,778

Total 1,396,598 100% 2,759,561 100% 1,597,462 100%

Table 21

Note :WHT (IT ) deductedby the department during the year-2010 -3.4 Mn VAT (withheld) by the department during the year-2010 – 6.4 Mn

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

2008 2009 2010

Th

ou

san

ds

Year

Chart 11

Total Expenditure- 2008, 2009 and 2010

Recurrent Expenditure Capital Expenditure


3.2 Analysis of the Recurrent Expenditure in 20

3.3 Productivity Ratio

The total expenditure of the Department in the year w

revenue collected was Rs. 421,838,781,198/

collected for every rupee of expenditure) therefore, works out to 264:1. In other words,

the cost of collection for Rs. 100 was 38 cents. The Cost of collection per Rs.

excluding VAT and NBT on Imports accounted 54 Cents (In the previous year this

amounts were 78 cents and Rs 1/

Table 22 provides a classification of Revenue Collection, Total Expenditure and the cost

of collection from the year 2008

Revenue Collection, Total Expenditure and Cost of Collection (Rs. Mn

Revenue Collection

Income Tax

Economic Service Charge

Value Added Tax

Debits Tax

Betting & Gaming Levy

Share Transaction Levy

Traveling

0.48%

Supplies &

Equipments

3.48%

Repairs &

Maintenance

1.36%

Contracted Services

16.55%

Transfers

0.71%

Analysis of the Recurrent Expenditure in 2010

The total expenditure of the Department in the year was Rs. 1,597,461,930/

evenue collected was Rs. 421,838,781,198/-. The Productivity Ratio (i.e. the revenue


the cost of collection for Rs. 100 was 38 cents. The Cost of collection per Rs.


amounts were 78 cents and Rs 1/- respectively).


of collection from the year 2008 to the year 2010.

Revenue Collection, Total Expenditure and Cost of Collection (Rs. Mn

2008 2009

112,065.30 125,350.80

Economic Service Charge 14,475.90 14,207.30

202,984.40 171,117.60

8,410.10 8,036.00

Betting & Gaming Levy 269.7 268.5

Share Transaction Levy 448.9 560.2

Traveling

0.48%

Transfers

0.71%

Chart 12

Recurrent Expenditure - 2010

28

as Rs. 1,597,461,930/- and the

. The Productivity Ratio (i.e. the revenue


the cost of collection for Rs. 100 was 38 cents. The Cost of collection per Rs. 100,



Revenue Collection, Total Expenditure and Cost of Collection (Rs. Mn)

2009 2010

125,350.80 117,575.26

14,207.30 18,047.72

171,117.60 219,563.12

8,036.00 10,843.44

268.5 294.84

560.2 2,272.96

Emoluments

67.68%

29


Turnover Tax 535.3 336.7 388.29

Stamp Duty 3,750.60 3,327.90 4,439.84

Estate Duty 0 0 0

Goods & Services Tax 126.7 55.7 38.53

National Security Levy 67.6 17.2 23.22

Construction Industry Guarantee Fund Levy 229.9 570.9 829.79

Social Responsibility Levy 1206.4 1,962.10 2,172.63

Nation Building Tax 27,204.60 46,022.52

Total 344,570.80 353,015.50 422,512.16

Expenditure

Recurrent Expenditure

Emoluments 1,045.90 1,072.10 1,081.10

Traveling 17.60 9.50 7.65

Supplies & Equipment 48.70 51.70 55.60

Repairs & Maintenance 32.8 32.4 21.65

Contracted Services 133.7 318.7 264.37

Transfers 11.5 11.5 11.31

Others 0.00 0.00 0.00

Capital Expenditure

Reconstruction & Improvements 34.9 1,095.30 131.18

Acquisitions 68.9 156 15.64

Capacity Building - 12.4 8.96

Skill Development 2.5 -

Total Expenditure 1,396.50 2,759.60 1,597.46

Cost of Collection per Rs.100, Rs. 0.4 0.78 0.37

Cost of Collection per Rs. 100, excluding VAT & NBT on imports 1 0.54

Table 22

30


Chapter 4 - Taxes in default

Table 23 shows the amounts of taxes in default, the taxes held over and the collectible

taxes in default excluding Penalty, as at 31.12.2010

Analysis of the default taxes – as at 31.12.2010

Type of Tax Gross Tax in

Default Total Penalty

(Rs.)

Total Default Taxes

Excluding Penalty (Rs.)

Disputed Tax excluding

Penalty (Rs.)

Collectible Tax

excluding Penalty (Rs.)

Income Tax 93,494,467,703 34,037,193,473 59,457,274,230 48,100,045,531 11,357,228,699

Surcharge on Income Tax

1,457,828,113 475,330,848 982,497,265 732,264,138 250,233,127

Value Added Tax 95,139,970,990 30,576,910,300 64,563,060,690 51,310,827,335 13,252,233,355

Economic Service Charge

6,763,068,561 2,880,014,896 3,883,053,665 2,451,952,043 1,431,101,622

Wealth Tax 90,433,504 90,433,504 82,987,632 7,445,872

Surcharge on Wealth Tax

3,189,029 3,189,029 3,120,276 68,753

Gift Tax 13,926,258 13,926,258 10,375,990 3,550,268

Income Tax (WHT on Interest)

2,188,745,265 657,881,339 1,530,863,926 1,506,732,855 24,131,071

Stamp Duty 66,384,917 15,783,405 50,601,512 50,601,512

Goods & Services Tax

1,271,238,390 1,271,238,390 1,053,549,520 217,688,870

Turnover Tax 7,096,278,529 2,294,175,952 4,802,102,577 4,329,120,997 472,981,580

National Security Levy

5,014,000,101 1,457,051,336 3,556,948,765 3,311,674,612 245,274,153

Save the Nation Contribution

52,833,300 12,120,842 40,712,458 38,439,961 2,272,497

Compounding Penalty

13,471,224 13,471,224 13,471,224 -

Obsolete Taxes 182,264,807 182,264,807 13,774,618 168,490,189

Social Responsibility levy

4,885,827 4,885,827 97,763 4,788,064

Nation Building Tax

1,578,287,884 428,570,109 1,149,717,775 795,463,870 354,253,905

Total 214,431,274,402 72,835,032,500 141,596,241,902 113,753,898,365 27,842,343,537

Table 23

31


Under the supervision of the Special Collection Unit, the Department was able to collect

Rs.11.52 billion of default taxes out of the outstanding taxes as at 31.12.2008 during the

year, as against the target set only at Rs.15 Billion for the year. Furthermore, taxes in

default amounting to Rs 13,045 Mn. were collected during the year, including dues on

assessments during the year 2010. Table 24 and 25 shows the amounts of default taxes

collected during the year.

Collection of arrears during the year out of the default taxes as at 31.12.2010

Target of collection

of default Taxes (Rs.)

Amount collected

during the year (Rs.)

Progress of the collection

15,000,000,000 11,523,381,984 76.82%

Table 24

Analysis of Revenue Collection of Default Taxes 2008-2010

Non Self Assessment

2010(Rs. ‘000) 2009 (Rs. ‘000) 2008 (Rs. ‘000)

Income Tax 6,844,105,711 7,821,560 5,316,698

VAT(Excluding VAT on imports) 4,884,494,247 7,074,945 4,478,467

Others 1,317,253,046 779,806 257,808

Total 13,045,853,004 15,676,311 10,052,973

% to the Total Revenue (Excluding VAT and NBT on Imports)

4.40% 5.79% 4.12%

Table 25

32


Chapter 5 - Audits, Additional Tax Collections, Refunds, Recovery Action and

Appeals

5.1 Audits

Audits and investigations are undertaken with a view to achieve the widest possible

coverage of the taxpayer population, in terms of business activity, entity type and

business size. It has been, however, found that the utilization of the investigation

resources in the area of large taxpayers is more productive than in the others. The

number of audits carried out during the year was less than the previous year, since

officers had to engage in work of shifting offices to the refurbished Head Office

Building after the terrorist attack from the temporary relocated premieres. However,

audit functions were carried out in a satisfactory level resulting in collection of an

additional tax amounting to Rs. 8 Billion, in the year. Number of Audits conducted

and additional tax collected are shown in the table 26 and 27. Out of the total

additional tax agreed, 92% (9.8Billion) additional revenue has been imposed on

Corporate Sector.

Particulars of Audits and Additional Tax Collection during the year.(Rs.000.)

Income

Tax PAYE VAT ESC NBT Other Total

Total amount of additional tax assessed during the year

9,302,813 53,154 5,896,476 1,280,547 200,680 679,925 17,413,595

Total amount of additional tax collected during the year

8,605,278 43,159 5,133,092 1,093,388 157,330 679,057 15,711,304

Number of Audit cases commenced during the year 2010

6,463

Number of Audit cases finalized during the year 2010

6,179

* Penalty due on Additional Tax has not been included. Table 26

Classification of Additional Taxes by Corporate and Other units (excluding penalty)

Description

Additional Income/Turnover Assessed & Agreed

(Rs)

Additional Tax Assessed & Agreed (Rs.000) Additional Tax Collected (Rs)

(Includes Refunds claims setoff)

Corporate - LTU

Corporate - Other

Other Units

Total

Income Tax 72,135,907 7,090,523 1,477,644 734,646 9,302,813 8,605,278

VAT 28,684,930 3,014,596 873,552 2,008,328 5,896,476 5,133,092

ESC 33,348,630 990,715 249,179 40,653 1,280,547 1,093,388

PAYE 2,303,924 33,204 19,950 53,154 43,159

NBT 2,169,054 64,324 42,666 93,690 200,680 157,330

Others 4,172,324 675,165 4,760 679,925 679,057

Total 142,814,769 11,868,527 2,667,751 2,877,317 17,413,595 15,711,304

Table 27

33


5.2 Appeals Appeals to the Commissioner General

During the year, the Department has finalized 2,075 appeals received against the

assessment issued and the analysis of appeal position is as follows:

Analysis of the Appeal Received and Settlement

Income Tax

Value Added Tax

Others Total

Balance as at 01.01.2010

Units (as per APL 2) 430 692 53 1175

Appeal Branch (as perAPL2) 44 48 15 107

CGIR' s Hearing 45 56 33 134

Registered (as per APL 2) during the year 610 566 100 1276

Finalized

Determined ( CGIR) 83 164 45 292

Units (APL 4) 761 998 117 1876

Appeal Branch 69 43 9 121

Submitted for CGIR's hearing 63 246 36 345

Balance as at 31.12.2010

Units (as per APL 2) 279 260 36 575

*Appeal Branch (as per APL2) 82 102 28 212

CGIR' s Hearing 25 138 24 187

*Files received to Appeal branch during the year 170 343 58 571

Table 28

5.3 Board of Review

The position regarding the appeals made to the Board of Review was as follows:

Number of appeals pending before the Board as at 01-01-2010

99

Number of appeals lodged during the year

• Income Tax 14

• VAT 16

• GST 1

• Penalty 1

• BTT 4 36

Number of orders issued on conclusion of hearing

37

Number of appeals outstanding as at 31-12-2010

98

The Board of Review took up 33 cases for hearing during the year, and 37 orders were issued on conclusion as indicated above.

Cases stated during the year for the opinion of the Court of Appeal – 22

34


5.4 Post VAT refund audits

Special VAT audit branch of the Department completed 177 cases (files) as post VAT

refund audits during the year covering 3,987 taxable periods, resulting in the

collection of Rs.1,211,609,295/- as additional tax. Numbers of 7 cases were reported to

legal branch for prosecution actions under Section 67 of the Value Added Tax Act.459

cases of Post VAT refund in the other units have been selected for audit and 494 cases

were completed with outstanding cases as at 31.12.2009.

5.5 Recovery Action

Following table shows the number of cases attended and notices issued for recovery of

taxes during the year.

Recovery Action

Cases Notices

Issuing Seizer Notices 3366 3120

Prosecution Action 1736 1635

Other Action 1034 899

Table 29

5.6 Refunds

An analysis of refunds made during the year (excluding the refunds, which were set

off against outstanding taxes) is as follows:

Type of Tax

2010 2009

Amount of Refund Rs:

% to Net Revenue

Collection of each tax

Amount of Refund Rs:

% to Net Revenue

Collection of each tax

VAT 8,869,784,827.36 4.05% 8,400,766,072.00 4.91%

Debit Tax 1,814,672.89 0.02% 8,988,276.00 0.11%

Stamp Duty 2,162,855.00 0.05% 2,138,676.00 0.06%

Co-operate Income Tax 609,584,440.29 1.07% 95,672,184.00 0.19%

PAYE 43,757,498.00 0.27% 90,319,430.00 0.63%

WHT (On Interest 10%) 3,542,706.80 0.01% 3,461,417.00 0.01%

WHT (On Specified Fees) 28,804,937.75 0.31% 26,675,308.00 0.31%

Other Non Corporate Income Tax

61,638,570.34 1.12% 114,100,114.00 2.21%

Total 9,621,090,508.43 2.28% 8,472,121,477.00 0.02%

Table 30

35


The Department received 1,046 VAT refund claims (with bank guarantee) during the

year and (together with the balance cases remained as at 31.12.2009) 1,549 cases were

finalized during the year, Accordingly, Rs 2,173 Million was refunded in the year.

VAT refund claims totaling to 24,250 (without bank guarantee) were received during

the year and 14,732 cases were finalized by refunding Rs. 6,541 Million in the year.

Out of the total amount refunded during the year a sum of Rs: 312 Mn has been

transferred / set off against outstanding taxes.

In addition to the refunds 2,005 Credit Vouchers were issued on claims received

up to 30.11.2010. The refunds include the Input tax of Rs.2, 223 Million refunded

in relation to supplies made to the special projects (number of cases 2,234).

Furthermore, 1643 valid refund cases of Income Taxes were completed during the

year.

36


PART III

Chapter 6 - International Relations

6.1 Double Tax Avoidance Treaties

Countries enter into Double Tax Treaties to eliminate or mitigate the incidence of

juridical double taxation and fiscal evasions in the international trade (or transactions).

These Treaties are particularly important for developing countries as they play a great

role in attracting foreign investments, expertise, modern technology etc.

Sri Lanka has as at 31-12-2010 entered into tax treaties with 38 countries as referred to

in the Table-31.

The countries with which double tax treaties are in force as at 31-12-2010

Country Date of

Signing the Agreement

Gazetted Operative in Sri Lanka From the

Year of Assessment

Gazette No.

Date

1 Australia 18-Dec-89 657/2 08-Apr-91 1992/93

2 Bangladesh 24-Jul-86 448/13 07-Apr-87 1989/90

3 Belgium 03-Feb-83 292/6 09-Apr-84 1984/85

4 Canada 23-Jun-82 253/8 13-Jul-83 1986/87

5 China 11-Aug-03 1374/20 06-Jan-05 2006/07

6 Denmark 22-Dec-81 228/15 20-Jan-83 1980/81

7 France 17-Sep-81 210/17 17-Sep-82 1982/83

8 Finland 18-May-82 253/8 13-Jul-83 1981/82

9 Germany 13-Sep-79 113 31-Oct-80 1982/83

10 Hong Kong (Limited) 26-Mar-04 1374/21 06-Jan-05 2005/06

11 India 27-Jan-82 210/17 17-Sep-82 1980/81

12 Indonesia 03-Feb-93 789/10 21-Oct-93 1995/96

13 Iran 25-Jul-00 1187/16 06-Jun-01 2002/03

14 Italy 28-Mar-84 322/4 05-Nov-84 1978/79

15 Japan 12-Dec-67 14803/5 29-May-68 1969/70

16 Korea 28-May-84 342/11 29-Mar-85 1980/81

17 Kuwait 05-Feb-02 1245/19 18-Jul-02 2002/03

18 Malaysia 16-Sep-97 1028/21 22-May-98 99/2000

19 Mauritius 12-Mar-96 958/10 15-Jan-97 1998/99

20 Nepal 06-Jul-99 1116/6 26-Jan-00 2001/02

21 Netherlands 17-Nov-82 281/13 26-Jan-84 1979/80

37


22 Norway 01-Dec-86 464/4 27-Jul-87 1989/90

23 Oman (Limited) 26-Jul-94 881/7 26-Jul-95 1979/80

24 Pakistan 15-Oct-81 210/17 17-Sep-82 1983/84

25 Philippines 11-Dec-00 1237/7 21-May-02

2010/11 1256/27 02-Oct-02

26 Poland 25-Apr-80 130 27-Feb-81 1984/85

27 Qatar 07-Nov-04 1422/10 05-Dec-05 2008/09

28 Romania 19-Oct-84 371/9 15-Oct-85 1986/87

29 Russia 02-Mar-99 1101/22 15-Oct-99 2003/04

30 Saudi Arabia (Limited) 16-Dec-99 1101/23 15-Oct-99 1983/84

31 Singapore 29-May-79 57/11 10-Oct-79 1977/78

32 Sweden 23-Feb-83 297/28 18-May-84 1985/86

33 Switzerland 11-Jan-83 292/6 09-Apr-84 1981/82

34 Thailand 14-Dec-88 571/16 18-Aug-89 1990/91

35 U.A.E. (Limited) 07-Jul-92 824/13 23-Jun-94 1979/80

U.A.E. (Comprehensive) 24-Sep-03 1346/1 21-Jun-04 2004/05

36 U.K. 21-Jun-79 60/23 02-Nov-79 1977/78

37 U.S.A 14-Mar-85 398/4 22-Apr-86

2004/05 U.S.A. Protocol 20-Sep-02 1298/8 21-Jul-03

38 Vietnam 26-Oct-05 1455/9 24-Jul-06 2007/08

Table -31

6.2 Affairs related to Double Tax Treaties during the year 2010 -

Treaty with Saudi Arabia

The approval of the cabinet was obtained on 09-06-2010 for signing the agreement at

Government level and for presenting for Parliamentary approval.

Agreement with Seychelles

The approval of the cabinet was obtained on 01-01-2010 for signing the agreement at

Government level and for presenting for Parliamentary approval.

Agreement with Bahrain

Documents were prepared on official papers in English, Sinhala and Arabic for the

purpose of signing at Government Level.

Agreement with South Africa

Awaited for signature at Government level.

38


6.3 Participations at International Taxation Matters Abroad

No

Name and

Designation of the

officer

Name of the

Programme Country Duration

01 Mr. H.B.A. Senevirathne

DCGIR

31st CATA Annual

Technical Conference 2010

Abuja-Nigeria 10.10.2010-

16.10.2010

02 Mr. K.A.P. Kaluarachchi

SCIR

- do - Abuja-Nigeria 10.10.2010-

16.10.2010

03 Mr. P.G.K.

Samarathunga

DC


16.10.2010

04 Mr. O.P.P.K. Sirisena -

DC


16.10.2010

05 Mr. H.M.G. Wijesinghe-

DC


16.10.2010

06 Mr. M.S.M. Fuward

DC

International Tax Dialogue

Conference on “Taxing

Micro and Small Business”

The Philippines 02.03.2010-

05.03.2010

07 Mr. P.M. Dissanayake-

DC





05.03.2010

08 Mr. J. Rathnayake

DC





05.03.2010

Table -32

39


Chapter 7 - Legislation

7.1 Approved Charities

The following institutions were declared as approved charities during the year.

S/N Name and Address of the Organization Gazette Number

Date

(i)

Fund for the construction of Sri Dhammarathi Ruhunu Temple of sacred Tooth Relic & Pirivena Monastery Building for Conducting meditation training in Kithalgama west, Thihagoda, Mathara.

7/1638 22.01.2010

(ii)

Prithipura Infant Home, Prithipura Society, Prithipura Road, Hendala, Waththala.

7/1638 22.01.2010

(iii)

Building Renovation Fund of Midddeniya Ancient Viharaya, Middeniya PuranaMaha Viharasthanabhiwardhana Sabawa, Midddeniya Ancient Viharaya, Middeniya.

1672 17.09.2010

(iv)

Shanthi Niwasa of the Missionaries of Charity, Missionaries of Charity, St. Jhon’s way, Modara, Colombo 15.

1667 13.08.2010

(v)

Jagaddala Development Center for the children of the Jagaddala social welfare institute, Sri Punyawardhanaramaya, Jagaddala social welfare institute, Kindelpitiya, Bandaragama

1660 24.06.2010

(vi)

Monastery Building Fund of Botale Sri Gotabaya Rajamaha Viharaya, Sri Gotabaya Rajamaha Viharaya, Botale, Ambepussa.

1676 15.10.2010

The total number of charitable institutions that were performing as at 31.12.2010 is 563.

40


7.2 Rulings Given During the Year

Relevant section of the Act Description Ruling Number

Section 16(2)(b) of (IT Act No 10 of 2006)

Clarification on exemption on primary process of agricultural produce – Coconut fiber

Ref Rul/IT/2008/10

Section 20,21 and 21A (IT Act No 10 of 2006)

Extension of the last date for the investment

Ref 2/2010/2

Section 26(1)(r) (IT Act No 10 of 2006)

Deductibility of management fees of plantation companies

Ref ACT/12/1

Section 44 (IT Act No 10 of 2006)

Liability on the sale of shares Ref Rul/IT/2008/7

Section 61(1)(b)(iii) of (IT Act No 10 of 2006)

Income tax on dividends not distributed

Ref ACT/12/1

Section 78(IT Act No 10 of 2006)

Taxation of Co-ownership Ref Rul/IT/2008/1

Section 78 and Section 113 (IT Act No 10 of 2006)

set off of withholding tax (WHT) paid against partnership tax payable

Ref ACT/12/1

Value Added Tax Act No 14 of 2002

The WHT charged by the western Province Provincial Council

Ref ACT 17/9

Value Added Tax Act No 14 of 2002

Management fee subscriptions etc collected by management corporation of condominium properties

Ref ACT 17/9

ESC Act No 13 of 2006 Clubs or associations referred to in the section 101 of the Inland Revenue Act No 10 of 2006

Ref ACT/2/2004/6

ESC Act No 13 of 2006 Government assisted private schools

Ref ACT 12/1

41


Chapter 8 - Other

9.1 Tax Payer Service Unit

The Taxpayer Service Unit has made facilities for the taxpayers and the public to obtain

services conveniently. The Unit is equipped with officers to assist every person seeking help

or information. Relevant enactments, departmental publications, paying-in slips, forms etc.

are available in this Unit. To avoid possible delays and inconveniences, arrangements made to

issue Taxpayer Identification numbers (TINs) and temporary VAT Numbers at this Unit were

continued with improve of results. Accordingly, this Unit issued 14,957 Temporary

Identification Numbers, 3,478 Income Tax registrations, 14,957 Temporary VAT certificates

and 766 PAYE registrations during the year 2010. Furthermore, 118 clearance certificates were

issued for non-taxpayers and 14 awareness programs / seminars were organized and several

leaflets were prepared during the year for the benefit of taxpayers. As an average,

approximately 125 persons obtained services from Taxpayers Service Unit per day during the

year.

8.2 Details of the Directions and clearance certificates issued by the Department are as

Follows:

Description 2010 2009

Directions issued

• to employers in respect of PAYE deduction 4,679 6,276

• to banks for WHT on interest 1 148

• in relation to specific Fees 7,845 7,542

Clearance Certificates Issued

• in relation to withdrawals balances from Provident Fund 613 5,252

• in relation to persons leaving the country 49 83

Privilege Cards Issued

• Gold Cards 203 366

• Silver Cards 79 120

42


8.3 Analytical Reports

The Economic Research and Policy Unit of the Department performed different types of

researches by analyzing data received from various sources such as Central Bank, Census &

Statistics Department etc.

The following reports were prepared during the year.

1. Report on withholding tax on interest

2. Revenue proposal for tea sector

3. Report on Tax liability of agencies of foreign employment bureau

4. Report on Tax liability of Mineral water

5. Report on Tax liability of Affiliated University

6. Bench Marks for 04 selected industries/ services. (Plastic manufacture, restaurants, paint

industry, storage and warehouse)

7. Comparison of Share Transaction Levy, received with the actual transactions at the

Colombo Stock exchange

8. Report on Advanced VAT

(i) Whether Government Institution comply with the statutory provisions of the VAT

Act

(ii) Returns furnished by the taxpayers are true and correct

(iii) Whether the computer system is given the correct tax credit on Advanced VAT.

9. Quarterly VAT refund reports (31.12.2009, 31.03.2010, 30.06.2010, 30.09.2010)

10. Monthly and Quarterly Tax Bulletins (up to 30.10.2010)

8.4 Activities in North and East

Jaffna Regional office

This is the first regional office opened in the year 1963. The administrative districts of

Jaffna, Killinochchi and Mulathivu are coming under the purview of this regional

office. Due to the war situation prevailed in the North; the office was not properly

functioned up to year 2009.

Revenue collection during the year 2009 and 2010 in Jaffna Regional office

IT ESC TT Total 2009 9,096,666 1,605,749 65,873,760 76,576,175

2010 12,735,396 1,807,274 149,376,892 163,919,562

43


New files opened during the year 2010 and 2009

Tax type 2010 2009

Income tax

Individual 367 126

Partnership 39 31 BTT 1441 213

Total 1847 370

Batticaloa Regional office

The administrative districts of Ampara and Batticaloa are coming under the purview

of the regional office. The normal functioning of this office was not so affected as in

the case of Jaffna regional office. However the office functioned without a deputy

commissioner for a period of five years till 2009 and a permanent deputy

commissioner was appointed only in February 2010. The activities of the unit were

accelerated by opening new files and collecting more taxes.

Revenue collection during the year 2009 and 2010 in Batticaloa Regional office

IT ESC TT Total

2009 33,713,487 15,144,553 105,870,850 154,866,041

2010 40,598,798 20,633,404 5,853,861 67,116,906

New files opened during the year 2010 and 2009

Tax type 2010 2009

Income tax

Individual 646 662

Partnership 18 13

ESC 17 29 Optional VAT 0 35 Total 681 739

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sum

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Asse

ssing

Div

ision

s

Vision - Inland Revenue Department

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Transcript of Vision - Inland Revenue Department