The government has announced a measure to waive interest and penalties on overdue income tax, provided the outstanding amounts are cleared within six months.
As per Section 19 of the technical provisions in this year’s budget, unpaid taxes for the 2022-2023 period will be exempt from fines under the Inland Revenue Act No. 24 of 2017 and the Tax Act No. 14 of 2022, as long as they are paid within the stipulated time frame.
Pubudu Jayagoda, Education Secretary of the Frontline Socialist Party (FSP), strongly criticized this move, warning that it could result in a loss of Rs. 500 billion in interest from overdue income taxes.
According to Section 159 of the current tax law, unpaid taxes are subject to a monthly interest rate of 1.5% (18% annually) along with a 25% fine.
Addressing a press briefing recently, Jayagoda pointed out that W.M. Mendis and Company had evaded Rs. 1.5 billion in income tax, excluding excise duties.
With the interest on this amount over five years, the company would typically owe around Rs. 100 million.
However, under the new relief program, the government is waiving this interest, requiring only the original Rs. 150 million in unpaid taxes to be paid, he said.
Jayagoda condemned the decision as a significant financial loss and a betrayal of the people, emphasizing that billions of rupees in public funds would be forfeited due to the tax exemption.
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