Many Sri Lankans are obsessed with not paying tax at all or paying far less than they should. Sometimes, they even boast about how they got out of paying their tax dues through various ruses and by using loopholes.

At times, non-payment is legitimately done by lobbying the government to legislate tax free allowances, exemptions, amnesties and concessions, on the basis that these are necessary for development and promotion of investment; but often, there is blatant tax evasion.

According to the World Bank, Sri Lanka’s tax-GDP ratio has dropped over the years – to an abysmal eight percent by 2020 – while the comparative ratio at the time was 27 percent in Sweden, 24 percent in the UK, 14.5 percent in Thailand, 13 percent in Singapore and 10 percent in India.

The outcome in Sri Lanka is due to a combination of intended or unintended state supported avoidance, and large scale evasion by taxpayers.

Meanwhile, the ill-advised tax cuts in 2020, which legitimised a huge tax leakage and having less than 300,000 individual tax files (other than PAYE) among a population of 22 million, shows the sorry state of tax collection and compliance.

Taxpayers try to justify evasion on the basis that there’s no accountability for the allocation and use of tax reve­nues, and much of it is wasted or stolen. They rightly feel that institutions that are meant to safeguard against abuse – viz. parliament, the auditor general and anti-corruption agencies – are unwilling or unable to provide that protection.

While this has indeed been the sad truth, the remedy isn’t to evade tax for that reason.

The sense of entitlement and Scandinavian standards of social welfare that citizens have come to expect from the state cannot be even partly met unless the country broadens its tax base significantly, and there is much greater compliance by taxpayers.

In this era of technology and digitisation, it’s not difficult to enrol more people as taxpayers and ensure greater compliance. Transactions and high visibility assets can be easily monitored if there’s a will to do so.

Tax holidays and exemptions should be critically analysed, and significantly curtailed to broaden the tax base. The consequences of wilful evasion should be severe. An annual increase in the number of taxpayers and incremental tax collected from that group should be a key performance indicator for the Inland Revenue Department (IRD).

In parallel, an independent budget office or some such mechanism should undertake the task of allocating resources, and discretionary spending power and diversion at ministry level should be eliminated.

Only when Sri Lankans start paying their income and asset based taxes on time – and in full – while at the same time strengthening controls over the use of tax revenues will the country be able to progress to a higher level.

In this era of technology and digitisation, it’s not difficult to enrol more people as taxpayers and ensure greater compliance