Corrupt elements use Parliament, Finance Ministry to evade taxes

Economic Oversight Committee Chief makes shocking allegation

Complicity of official owning Las Vegas house exposed

by Shamindra Ferdinando

Chairman of the Sectoral Oversight Committee on National Economic and Physical Plans Mahindananda Aluthgamage, MP, yesterday (01), said influential corrupt elements within the state revenue collection apparatus had with the help of the Finance Ministry brought in amendments to relevant laws to stifle the revenue collection process. Their actions had taken a heavy toll on the state coffers.

The government had created a system that allowed four appeals against Inland Revenue Department tax estimates, MP Aluthgamage explained, alleging that interested parties abused the parliamentary process.

The former Minister said so in response to the queries raised by The Island about his recent declaration at the Presidential Media Centre (PMC) that a special unit was required to monitor Inland Revenue, Customs and Excise Departments.

Asked whether he had sought to highlight the failure on the part of parliamentary watchdog committees, the COPE (Committee on Public Enterprises), the COPF (Committee on Public Finance) and the COPA (Committee on Public Accounts), relevant ministerial consultative committees as well as the Auditor General to carry out their duties and functions properly, Aluthgamage said the fact that as much as Rs. 904 bn had not been collected as taxes over the past 15 years proved that the existing systems were flawed.

MP Aluthgamage said: “In fact, the government, at the expense of the national economy created a system for the benefit of tax dodgers. Parliament is responsible for this situation. Four appeals are not allowed in any part of the world. But the Finance Ministry and Parliament created systems that can be manipulated because the corrupt elements receive the backing of the powers that be.”

Responding to another question, MP Aluthgamage said those who had been tasked with revenue collection seemed to have been hand in glove with tax dodgers.

Aluthgamage said his committee had recently requested President Ranil Wickremesinghe, who also holds the Finance portfolio, to reduce the number of tax appeals from four to two.

MP Aluthgamage said that he had realised the urgent need for a fresh and thorough inquiry into state finance following the declaration of bankruptcy in May 2022 and the ouster of President Gotabaya Rajapaksa two months later.

The former Minister said that he wouldn’t hesitate to admit that corrupt systems remained in place regardless of the change of government in July last year. “A few months ago, a person known to me was asked to pay Rs 100 mn as tax. He got in touch with a senior revenue official, paid him Rs 10 mn and got the matter settled. When I brought this to the notice of the relevant department head, the official concerned simply said that particular officer often did so.

“Obviously regardless of the change of government and the fact that the country is begging for IMF assistance, corruption is rampant,” MP Aluthgamage said, noting that though the country was bankrupt and experienced continuing turmoil the vast majority of those who were tasked with revenue collection lived cushy lives. The Oversight Committee Chairman disclosed that one of the key Inland Revenue officials owned properties in Las Vegas, whereas another top official had walked free after being caught with heroin.

Alleging that some of those holding key positions in the revenue collection set-up collaborated with tax dodgers, the MP said that similarly the Excise Department and liquor manufacturers perpetrated massive tax frauds. Responding to another query, MP Aluthgamage emphasised that actually the increase in the price of liquor had helped certain liquor manufacturers.

Appreciating the interventions made by MP Patali Champika Ranawaka to pressure the Excise Department to do its job, MP Aluthgamage said that routine checks had revealed the widespread use of fake security tax stamps affixed to bottles of liquor countrywide. The Excise Department bosses should be held accountable for this situation as liquor manufacturers could not engage in such massive frauds without the blessings of the department.

Referring to a delay in agreement with the IMF over the releasing of the second tranche of USD 2.9 bn Extended Fund Facility (EFF), MP Aluthgamage said that the flaws in the revenue collection process, too, had contributed to the situation. The MP alleged the Inland Revenue, Customs and Excise Departments continued to undermine the revenue collection. “They always come up with lame excuses to thwart efforts to streamline tax collection,” he said.

Alleging that frauds involving the Excise Department and liquor manufacturers caused 40 percent loss in revenue, MP Aluthgamage alleged that a significant amount of that money ended up with Excise Department personnel at all levels. “This is the sad truth,” the ex-Minister said.

According to him, the Inland Revenue, Customs and Excise were required to collect Rs. 1,667 bn, Rs 1,217 bn and Rs 217 bn, respectively, this year.  But so far this year, they had collected only Rs 956 bn, Rs 578 bn and Rs 109 bn, respectively, MP Aluthgamage said.

MP Aluthgamage said that he had been targeted by Inland Revenue after he raised the issues at hand publicly. “I was investigated,” the MP said, adding his efforts couldn’t be derailed by such efforts.

MP Aluthgamage said that he had urged President Wickremesinghe to take remedial measures as soon as possible. “Our continuous failure to act even after the declaration of bankruptcy is unacceptable.”