{"id":242128,"date":"2025-06-06T16:14:53","date_gmt":"2025-06-06T10:44:53","guid":{"rendered":"https:\/\/www.colombotelegraph.com\/?p=242128"},"modified":"2025-06-22T12:24:29","modified_gmt":"2025-06-22T06:54:29","slug":"significance-of-presidents-tax-week-initiative","status":"publish","type":"post","link":"https:\/\/www.colombotelegraph.com\/index.php\/significance-of-presidents-tax-week-initiative\/","title":{"rendered":"Significance Of President&#8217;s Tax Week Initiative"},"content":{"rendered":"<p class=\"p1\"><span style=\"color: #ff6600;\"><strong>By\u00a0<a style=\"color: #ff6600;\" href=\"https:\/\/www.colombotelegraph.com\/?s=Asoka+S.+Seneviratne\">Asoka S. Seneviratne<\/a>\u00a0\u2013<\/strong><\/span><\/p>\n<div id=\"attachment_236887\" style=\"width: 160px\" class=\"wp-caption alignright\"><img loading=\"lazy\" decoding=\"async\" aria-describedby=\"caption-attachment-236887\" class=\"size-thumbnail wp-image-236887\" src=\"https:\/\/www.colombotelegraph.com\/wp-content\/uploads\/2024\/05\/Prof.-Asoka.S.-Seneviratne-150x150.jpg\" alt=\"\" width=\"150\" height=\"150\" srcset=\"https:\/\/www.colombotelegraph.com\/wp-content\/uploads\/2024\/05\/Prof.-Asoka.S.-Seneviratne-150x150.jpg 150w, https:\/\/www.colombotelegraph.com\/wp-content\/uploads\/2024\/05\/Prof.-Asoka.S.-Seneviratne-45x45.jpg 45w\" sizes=\"auto, (max-width: 150px) 100vw, 150px\" \/><p id=\"caption-attachment-236887\" class=\"wp-caption-text\">Prof. Asoka.S. Seneviratne<\/p><\/div>\n<p class=\"p2\"><i>\u201cThis is not just a tax drive; this is a renewal of the social contract\u201d ~ <\/i>President Anura Kumara Dissanayake<\/p>\n<p class=\"p4\">Anura Kumara Dissanayake (<span style=\"color: #ff6600;\"><a style=\"color: #ff6600;\" href=\"https:\/\/www.colombotelegraph.com\/?s=Anura+Kumara+Dissanayake\">AKD<\/a><\/span>), in his role as Minister of Finance, recently launched a tax week. In my view, it is not merely a revenue initiative. Rather, it acts as a national call for fairness, responsibility, and rebuilding trust between citizens and the government. By cultivating a culture of voluntary compliance, eliminating corruption in tax administration, and expanding the tax base with equity at its core, the government is laying the foundation for a new social contract. Every rupee collected should represent justice, rather than acting as a burden, in a society that demands accountability and provides opportunity. This article aims to elaborate on the above, ensuring that AKD\u2019s initiatives yield the desired outcome.<\/p>\n<p class=\"p3\"><span style=\"color: #ff6600;\"><b>The Theme of the Tax Week <\/b><\/span><b><\/b><\/p>\n<p class=\"p4\">President Anura Kumara Dissanayake&#8217; s recent &#8220;Tax Week&#8221; initiative in Sri Lanka focuses on the theme of &#8220;Equity, Efficiency, and Enforcement&#8221; (EEE) in tax policy. This campaign highlights the government\u2019s commitment to reforming the tax system to be more progressive, transparent, and digitally integrated, aiming to boost revenue collection while ensuring fairness. Equity entails progressive tax relief for low- and middle-income earners. In this context, the government has raised the tax-free threshold for monthly incomes from LKR 100,100,000 to LKR 150,000, 000, providing significant relief to lower-income earners. Additionally, graduated tax exemptions have been introduced for higher income brackets, ensuring that those with greater earnings contribute a fairer share. In terms of efficiency, the digitalization of tax collection is at the forefront. Therefore, plans are in place to digitize the Value-Added Tax (VAT) collection process, thus improving efficiency and transparency in the tax system. Furthermore, implementing Point-of-Sale (POS) systems across VAT-registered businesses is a key initiative to facilitate digital transactions and reduce reliance on cash. Finally, enforcement involves strengthening tax compliance. In this regard, a more interventionist approach has been suggested to recover uncollected revenue, emphasizing the need for the IRD to collect the full tax revenue. Note that collaborative efforts among the IRD, Customs, and the Excise Department are being encouraged to tackle tax evasion effectively. Given all the above, the broader economic objectives of these tax reforms are part of a wider strategy to increase Sri Lanka&#8217;s tax-to-GDP ratio from approximately 9% to 15. 1% by 2025. This aligns with the government\u2019s goals of achieving fiscal sustainability, reducing reliance on external debt, and promoting social equity. In summary, the &#8220;Tax Week&#8221; initiative reflects the Sri Lankan government\u2019s dedication to creating a fairer and more efficient tax system, which is crucial for the nation\u2019s economic recovery and long-term stability.<\/p>\n<p class=\"p6\"><span style=\"color: #ff6600;\"><b>Why Sri Lanka\u2019s Tax-To-GDP Matters <\/b><\/span><\/p>\n<p class=\"p7\">Understanding and comparing Sri Lanka\u2019s tax revenue and GDP in the context of other Asian countries is essential. This understanding will provide clarity on the concerns raised by the Minister of Finance regarding the tax drive, as mentioned above. In 2007, the tax-to-GDP ratio peaked at 12.2%, while in 2015, it was recorded at 15.2%. Sri Lanka\u2019s revenue-to-GDP ratio declined significantly after 2019, primarily due to tax cuts (e.g., the reduction of VAT from 15% to 8%) and the economic fallout from COVID-19 and the 2022 crisis, which reduced tax revenue to 8.3%.<\/p>\n<p class=\"p8\">Due to COVID-19 and VAT reduction, there was a significant decline to 7.4% in 2022, the lowest in the period. Along with the IMF bailout program and efforts to improve revenue collection, it reached or recovered a rate of 9.8% in 2023. The above figures highlight the volatility in Sri Lanka&#8217;s tax revenue relative to its GDP, underscoring the challenges in maintaining consistent fiscal health.<span class=\"Apple-converted-space\">\u00a0 <\/span>Compared with the above, the performance of some Asian countries can be presented as follows:<img loading=\"lazy\" decoding=\"async\" class=\"aligncenter size-full wp-image-242130\" src=\"https:\/\/www.colombotelegraph.com\/wp-content\/uploads\/2025\/06\/Tax-Revenue-as-a-Percentage-of-GDP-for-selected-Asian-countries-in-2023.jpg\" alt=\"\" width=\"900\" height=\"818\" srcset=\"https:\/\/www.colombotelegraph.com\/wp-content\/uploads\/2025\/06\/Tax-Revenue-as-a-Percentage-of-GDP-for-selected-Asian-countries-in-2023.jpg 900w, https:\/\/www.colombotelegraph.com\/wp-content\/uploads\/2025\/06\/Tax-Revenue-as-a-Percentage-of-GDP-for-selected-Asian-countries-in-2023-300x273.jpg 300w, https:\/\/www.colombotelegraph.com\/wp-content\/uploads\/2025\/06\/Tax-Revenue-as-a-Percentage-of-GDP-for-selected-Asian-countries-in-2023-768x698.jpg 768w\" sizes=\"auto, (max-width: 900px) 100vw, 900px\" \/><\/p>\n<p class=\"p8\">The statistics above highlight that Sri Lanka&#8217;s tax revenue-to-GDP ratio is among the lowest in Asia, underscoring the need for continued fiscal reforms and improved tax administration to boost revenue collection. In other words, Sri Lanka\u2019s government revenue-to-GDP ratio is consistently low in Asia, historically hovering around 8\u201312%, while most peer countries range between 14% and 20%. This fiscal weakness is a fundamental cause of Sri Lanka\u2019s debt crisis and has become a central focus of current economic reforms.<\/p>\n<p class=\"p2\"><span style=\"color: #ff6600;\"><b>Challenges: The Narrow Tax Base<\/b><\/span><\/p>\n<p class=\"p1\">Narrow Tax Base: Many sectors and individuals are excluded from the formal tax system, resulting in a small segment of the economy or population paying taxes. Numerous individuals, businesses, and sectors remain outside the formal tax framework\u2014either unregistered, underreporting income, or not taxed at all. Additionally, in Sri Lanka, a narrow tax base stems from a significant informal economy (e.g., small vendors, three-wheeler drivers, freelancers, professionals, or businesses that don\u2019t declare their full income). Tax exemptions or holidays granted to specific companies or sectors also diminish tax revenue. This situation illustrates that weak data systems cannot effectively track real income or assets.<\/p>\n<p class=\"p1\">The next concern is, why does a narrow tax base cause a problem? A narrow tax base means that a relatively small number of individuals shoulder the tax burden, which is both unfair and unsustainable. In this situation, the government struggles to raise enough revenue for public services, leading to high borrowing or an over-reliance on indirect taxes (such as VAT), which disproportionately impact the poor. This is indeed a significant issue in Sri Lanka. Addressing the narrow tax base issue in Sri Lanka requires comprehensive, fair, and innovative reforms. The objective is to integrate more people and businesses into the formal tax system while maintaining public trust and fostering economic growth.<\/p>\n<p class=\"p2\"><b> <\/b><span style=\"color: #ff6600;\"><b>Seven<\/b><b> <\/b><b>Solutions for Broadening the Tax Base<\/b><\/span><\/p>\n<p class=\"p1\">The narrow tax base is at the heart of the issue with the low tax rate; addressing problems related to this narrow tax base is crucial. I can offer seven solutions as follows. <b>First<\/b>, formalize the informal economy. To encourage small businesses, street vendors, freelancers, and self-employed workers to register with the Inland Revenue Department (IRD), provide simplified tax systems (such as a turnover-based small taxpayer scheme) to lessen the compliance burden, and offer incentives like easier access to loans, licenses, pensions, and more for registered taxpayers. <b>Second<\/b>, enhance taxpayer identification, particularly the Tax Identification Number (TIN), and improve data integration. Additionally, leverage National Identity Numbers (NIC), mobile data, banking records, and land\/property ownership to identify potential taxpayers while integrating systems among the Inland Revenue Department (IRD), Customs Department, Motor Vehicle Department, and local authorities. T<b>hird<\/b>, use technology to monitor income by promoting e-invoicing, digital receipts, and online tax filing, employing artificial intelligence (AI) and big data analytics to uncover patterns of tax evasion. Furthermore, mandate digital payment systems for high-turnover businesses (e.g., supermarkets, pharmacies). <b>Fourth<\/b>, eliminate unnecessary tax exemptions. In this regard, review and cut outdated or unfair tax holidays, especially for large companies that do not create jobs or exports, and ensure that religious institutions, NGOs, and cooperatives are not misused as tax shelters. <b>Fifth,<\/b> strengthen tax administration by training IRD revenue staff in modern auditing and customer service, introducing performance-based incentives for tax officers to broaden the tax base, and combating corrupt practices and bribery within the system. <b>Sixth<\/b>, enhance public trust through transparency. This includes showing the public how tax money is spent (e.g., through dashboards and reports) and promoting the idea that &#8220;tax is not a punishment, but a contribution to economic growth and development.&#8221; Currently, public awareness of this aspect is low, as many, including senior politicians, neglect to clearly explain what economic growth and development are. Instead, they often use the two terms interchangeably. These two concepts are closely connected: without economic growth, there can be no economic development. This also means inviting ordinary citizens to participate in decisions about how the government should collect and spend public money, especially during the national or local budget process. <b>Seventh,<\/b> progressive and fair tax policies are critically important. In this respect, introduce or increase wealth taxes, capital gains taxes, and property taxes. Ensure the system is progressive, so that higher-income earners contribute a larger share. As of June 2025, Sri Lanka&#8217;s taxation framework includes a Capital Gains Tax (CGT) of 10%, while wealth taxes and comprehensive national property taxes are in various stages of proposal and implementation.<\/p>\n<p class=\"p2\"><span style=\"color: #ff6600;\"><strong>Determinants of success for Tax Week<\/strong><\/span><\/p>\n<p class=\"p3\">The President\u2019s tax awareness initiative is a timely and commendable effort that addresses a critical gap in public understanding, strengthening the foundation for a fair and sustainable revenue system. It reflects both leadership and foresight, offering citizens the knowledge needed to actively participate in building a just, transparent, and self-reliant economy. Given all the above, this initiative represents a bold and necessary step in transforming Sri Lanka\u2019s tax culture. It is not merely a campaign\u2014it is a nation-building exercise rooted in accountability, civic responsibility, and long-term economic resilience. In short, an informed taxpayer is a powerful partner in national progress. The President\u2019s initiative brings clarity, trust, and momentum to our fiscal future.<\/p>\n<p class=\"p1\"><span style=\"color: #ff6600;\"><b>Key Determinants for a Successful Tax Week Initiative listed below: <\/b><\/span><\/p>\n<p><span style=\"color: #ff6600;\"><b>i. Public Awareness &amp; Education<\/b><\/span><\/p>\n<p>* People must understand why taxes matter \u2014 not just as an obligation, but as a contribution to public goods like health, education, and infrastructure.<\/p>\n<p>* A strong media campaign, community outreach, and education materials are essential.<\/p>\n<p class=\"p1\"><span style=\"color: #ff6600;\"><b>ii. Public Trust in Government<\/b><\/span><\/p>\n<p>* Citizens are more willing to pay taxes if they trust that funds will be used responsibly.<\/p>\n<p>* Demonstrating transparency, reducing corruption, and publishing clear reports on how tax money is spent are crucial.<\/p>\n<p class=\"p1\"><span style=\"color: #ff6600;\"><b>iii. Simplified Tax Processes<\/b><\/span><\/p>\n<p>* Tax filing must be easy, accessible, and digital-friendly, especially for small businesses and the self-employed.<\/p>\n<p>* One-stop platforms, mobile apps, or community tax help centers can make a big difference.<\/p>\n<p class=\"p1\"><span style=\"color: #ff6600;\"><b>iv. Visible Enforcement Against Evasion<\/b><\/span><\/p>\n<p>* Tax Week should include visible action against high-profile tax evaders to show that everyone is accountable.<\/p>\n<p>* This sends a strong message that the system is fair and consistent.<\/p>\n<p class=\"p1\"><span style=\"color: #ff6600;\"><b>v. incentives for Voluntary Compliance<\/b><\/span><\/p>\n<p>* Introduce short-term penalty waivers, early payment discounts, or even public recognition for exemplary taxpayers.<\/p>\n<p>* Taxpayer of the Year\u201d awards or tax lottery systems can motivate people.<\/p>\n<p class=\"p1\"><span style=\"color: #ff6600;\"><b>vi. Inclusion of the Informal Sector<\/b><\/span><\/p>\n<p>* Offer simple tax schemes or flat rates for informal workers (e.g., vendors, three-wheelers, freelancers).<\/p>\n<p>* Link tax registration with benefits like access to credit or government tenders.<\/p>\n<p class=\"p1\"><span style=\"color: #ff6600;\"><b>vii. Political Will and Leadership<\/b><\/span><\/p>\n<p>* Success depends heavily on active involvement by leadership, especially AKD\u2019s commitment to fairness and accountability.<\/p>\n<p>* Cross-ministerial support (finance, justice, local government) is also critical.<\/p>\n<p class=\"p3\"><span style=\"color: #ff6600;\"><b>vii. Data-Driven Targeting<\/b><\/span><\/p>\n<p>* Use national databases (land registry, vehicle ownership, mobile banking) to identify untapped taxpayer groups.<\/p>\n<p>* Target messaging and enforcement efforts accordingly.<\/p>\n<p class=\"p1\"><span style=\"color: #ff6600;\"><b>ix. Legislative Support<\/b><\/span><\/p>\n<p>* Ensure necessary laws and regulations are in place (e.g., for taxing rental income or enforcing audits).<\/p>\n<p>* Parliament must support the initiative with adequate legal and budgetary resources.<\/p>\n<p class=\"p1\"><span style=\"color: #ff6600;\"><b>x. International Credibility<\/b><\/span><\/p>\n<p>* A successful Tax Week conveys a clear message to the IMF, World Bank, and development partners that Sri Lanka is committed to domestic revenue mobilization.<\/p>\n<p>* This can help secure better financial support terms.<\/p>\n<p class=\"p1\">The success of Tax Week hinges on combining education, transparency, technology, and strong leadership to foster a culture of shared responsibility and fair contribution.<\/p>\n<p class=\"p2\"><span style=\"color: #ff6600;\"><b>Summary<\/b><\/span><\/p>\n<p class=\"p1\">President Anura Kumara Dissanayake\u2019s \u201cTax Week\u201d initiative, launched in his capacity as Minister of Finance, signifies a significant shift in Sri Lanka\u2019s approach to taxation. Centered on the theme of <b>Equity, Efficiency, and Enforcement (EEE<\/b>), the initiative aims to rebuild public trust, promote fairness, and strengthen fiscal responsibility. Equity is advanced through increased tax-free income thresholds and progressive taxation. Efficiency is improved through digital reforms, such as VAT digitalization and POS integration. Enforcement efforts aim to enhance compliance and crack down on evasion through collaboration among key departments.<\/p>\n<p class=\"p1\">The backdrop to this initiative is Sri Lanka\u2019s historically low tax-to-GDP ratio, which fell to 7.4% in 2022 before recovering to 9.8% in 2023\u2014still significantly below that of regional peers, such as India (19%) and Vietnam (21%). A narrow tax base, widespread exemptions, and weak administrative capacity are identified as core challenges. The article proposes seven practical reforms to broaden the tax net, including formalizing the informal sector, reducing exemptions, utilizing digital tools, and enhancing public trust and transparency.<\/p>\n<p class=\"p1\">To ensure success, the initiative must promote public education, simplify tax processes, demonstrate visible enforcement, and secure legislative and political backing. If executed effectively, Tax Week could catalyze a cultural transformation in Sri Lanka\u2019s tax system.<\/p>\n<p class=\"p2\"><span style=\"color: #ff6600;\"><b>Conclusion<\/b><\/span><\/p>\n<p class=\"p1\">\u201cTax Week\u201d is more than a policy drive\u2014it is a nation-building mission rooted in fairness, civic responsibility, and economic resilience. For Sri Lanka to break free from its reliance on debt and achieve sustainable development, increasing domestic revenue is essential. Through effective leadership, transparency, and inclusive reforms, the AKD\/NPP government is establishing the groundwork for a fair and modern fiscal state. Ultimately, a well-informed and engaged taxpayer is not just a source of revenue, but a partner in national progress. If implemented well, the Tax Week initiative could raise awareness, improve voluntary compliance, and support the broader IMF-backed revenue goals for 2025.<\/p>\n<p class=\"p1\"><span style=\"color: #ff6600;\"><b><i>*The writer, among many, served as the Special Advisor to the President of Namibia from 2006 to 2012 and was a Senior Consultant with the UNDP for 20 years. He was a Senior Economist with the Central Bank of Sri Lanka (1972-1993), asoka.seneviratne@gmail.com<\/i><\/b><\/span><b><i><\/i><\/b><\/p>\n","protected":false},"excerpt":{"rendered":"<p> [&hellip;]<\/p>\n","protected":false},"author":2725,"featured_media":242129,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[3,2186,46,8,2375],"tags":[],"class_list":["post-242128","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-colombotelegraph","category-featured-news","category-constitutional-reforms","category-editorial","category-stories"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v26.3 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Significance Of President&#039;s Tax Week Initiative - Colombo Telegraph<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.colombotelegraph.com\/index.php\/significance-of-presidents-tax-week-initiative\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Significance Of President&#039;s Tax Week Initiative - Colombo Telegraph\" \/>\n<meta property=\"og:description\" content=\"[&hellip;]\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.colombotelegraph.com\/index.php\/significance-of-presidents-tax-week-initiative\/\" \/>\n<meta property=\"og:site_name\" content=\"Colombo Telegraph\" \/>\n<meta property=\"article:published_time\" content=\"2025-06-06T10:44:53+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2025-06-22T06:54:29+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.colombotelegraph.com\/wp-content\/uploads\/2025\/06\/Anura-Kumara-Dissanayake.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"600\" \/>\n\t<meta property=\"og:image:height\" content=\"438\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Asoka. 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