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by E. M. G. Edirisinghe

Income Tax, Turnover Tax and the Value Added Tax which together form the foundation of raising internal revenue in Sri Lanka, are well entrenched in the regional and national economy in the country. Of these forms of taxation, the levy of tax on income dates back to 1932 while the Turnover Tax is 40 years old.

However, Value Added Tax the youngest of the three, is still an infant just beginning to breathe. These three taxes put together constitute over 50% of the total government revenue today. Hence it is of prime importance to any government in power.

Raising funds internally to meet the increasing demands of administration, subsidies, security, welfare and development is a major hurdle the government has to leap every year. Several wings of the government, yielding the required harvest of revenue is kept busy through out the year to realise the revenue goals targeted in the policy statement of the government pronounced every year.

Efficient effective implementation of the law leads and binds every liable tax-payer to furnish and annual return of income and to pay a quarterly tax arising there on faithfully regularly and accurately.

Compliance however, so astutely sought from the prevail eged segment of the society is somewhat poor reaching only abut 60-65 per cent. Particularly for a country with a very high rate of literacy and high level of patriotism, this response is unsatisfactory.

Compliance to be complete in all aspects, it has to operate satisfactorily at two levels. One, an accurate return of income along with a statement of accounts, wherever necessary should be furnished on time, and the other is the payment of tax in four quarterly returns instalment.

Non-conformity to these revenue requirements entails an additional load of work to the Department in the form of reminders, red notices, calling for information, estimated assessments, appeals and investigations. Added on to these is the tedious recovery procedure causing embarrassment to both the Assessor and the Assessee.

These irritants could be avoided if the tax-payers commit themselves to the fulfilment of these two legal obligations accentuated by their moral obligation to the society and the country. Anyway, call for payment of tax is not a punishment for generous and hard-earning.

In contrast, it implies an inescapable answer to the social and moral obligations falling on man who prospers drawing from the social and economic infrastructure provided and maintained by the state.

The community contributes to the material uplift of the individual who acts in a mutually beneficial role in the economic life of the country. The privileged few of the population owe a greater share of gratitude to the under-nourished for their successful exploitation of natural and human resources within a secure economic environment.

Depending on the depth of one's earnings, one is called upon to give over a specified percentage of his income to the State. That share is recycled into development and consumption thereby improving the general well-being of the people the fundamental source of one's material success. Thus they are morally obliged to part with a part of their taxable income for the defence of the country and the people.

To "reverse" compliance to its very source in its proper perspective, one should not forget that it is the consumer the bulk of whom are workers and peasants who finally bear the real burden of all taxes whatever is its form, style and name.

That part of the net takings offered to national coffers is the sweat and sacrifice of the people. Whoever pays taxes to Revenue is either passed on to the consumer after payment or it is paid to Revenue after collecting it from the consumer.

That is how the burden of tax shifts and rotates. Even the PAYE tax which the employees pay is indirectly passed on to or indirectly collected from the consumer. The taxpayers who promptly pass the tax they pay to Revenue to the consumer, are most reluctant or least responsible to pay to Revenue the tax they collect from the consumer.

Morally and legally he is obliged to pay to Revenue what they have collected from the consumer. If he uses it for himself he is dishonest and is committing an offence.

On an inspection of a business premises by some Revenue officials, one a shop-keeper was found totally unco-operative and maintained that he had paid all the taxes. Attempts to politely persuade him to co-operate did not succeed. By then a sizable crowd too, had gathered round.

Finally the officials told him, "Sir, people around here when paying for the meals they had, they also have been paying turnover tax which you should faithfully remit to the State. We are here to see whether that minute fraction of your gross taking had been regularly paid to the State by you." The approach succeeded.

Thus when the trader collects the cost and expenses plus his profit from the unsuspecting customer, he is entrusted with the custody of people's money against which he has no right but to remit it to Revenue on time. If he decides to keep it for himself, he is guilty of breach of trust and misappropriation and will amount to unjust enrichment.

On the other hand, taxation inescapable within our economic system. It not only taxes but provides incentives by way of tax holdings, depreciation and exemptions. Furthermore, the State ensures provision and maintenance of infrastructure that is essential to economic growth and exploitation of the available resources.

Once the economy thrives through fiscal measures and economic strategies of the government, a part of such revenue goes to operate, maintain and secure the machinery of the State and the very sustenance of the political system that provides the suitable environment for economic and social advancement.

Therefore anybody who benefits directly or indirectly from the fiscal and economic policies of the government is obliged to safeguard and fortify the very system that did strengthen him economically, financially and socially.

In this regard, ignorance of the law as well as the necessity of taxation for a country, tends one to seek comfort in maximum possible on-compliance. Taxation neither cripples the economy nor drains one's earnings.

Payment of the correct tax at the right time makes the overall economy and the whole community healthy. A "good tax-payer" always feels content, confident and open in all his business and professional matters.

The wrong impression that why should one part with one's hard-earned money for nothing, is ignorance of the operation of a market economy and the nature of a modern well-fare State where social well-being of every person is a prerequisite for the well-being of the whole nation. The State knows best as to what should be the rate of tax, who should be taxed and on what the long arm of the law would be reluctantly extended to net in the tax that remains unpaid.

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