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Monday, July 15, 2024

Key revenue-generating agencies in the country—Customs, Inland Revenue Department, and Excise—plan a 2-day token strike

Numbers.lk @numberslka.

Key revenue-generating agencies in the country—Customs, Inland Revenue Department, and Excise—plan a 2-day token strike on July 4-5 against the proposed Revenue Authority Act.

The ongoing work-to-rule action by Customs, opposing amendments to the Customs Ordinance, is already causing delays in the clearance of imported goods at the ports. This strike will further exacerbate these delays.

The Joint Chambers of Commerce urge Customs officers to call off both the ongoing work-to-rule action and the planned strike on July 4-5. They state that the work-to-rule action has caused significant delays in clearing import cargo, resulting in supply chain disruptions, and delays in production and delivery.

It seems that the main opposition by the Trade Unions to the bill/amendments is that they are not given enough consideration or the opportunity to be involved in the drafting process of these bills by the Ministry.

The government has been on a roll in the last 2 years, passing 75+ new laws without giving deserved scrutiny in some cases. These bills are usually presented to the parliament and passed after a couple of days of debate without much scrutiny.

Technical people who draft these amendments often lack the understanding of practical implications of such amendments. When it’s tied to revenue, businesses and lawyers quickly find loopholes in these acts to delay or avoid paying due taxes.

The government has created massive loopholes in the past by meddling with existing legal frameworks, pushing amendments without proper consideration of the whole legal framework and allowing businesses to use the loopholes to avoid paying taxes or getting penalized, significantly hampering revenue collection. Two famous examples are: Over the years, with various amendments, the IRD legal framework in Sri Lanka allowed individuals to submit up to four appeals without paying taxes, leading to a backlog that can take up to 15 years to process, piling up taxes due upto 943 billion+ rupees.

The Foreign Exchange Act, which was enacted in 2017 after repealing the 1953 Exchange Control Act. The 1953 act regulated foreign exchange transfers. But the 2017 act created a loophole, making it not a violation to not receive goods after sending foreign currency abroad. This loophole caused massive forex outflow from the country during the economic crisis period.

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