Tax reforms in progress
New Tax Appeals Commission:
Dharmadasa Rangalla- Deputy Commissioner Department
of Inland Revenue
The constitution of the Democratic Socialist Republic of Sri Lanka
establishes the concept of unity, sovereignty and territorial integrity:
it has recognized the separation of power of the legislature, the
executive and the judiciary, delineating the power of each legislature,
executive and judiciary and directs these three organs to function
within the specified subjects engrafted in the constitution. Division of
power between the legislature, the executive and the judiciary is one of
the basic features of the constitution of Sri Lanka. The legislature
makes laws, the executive enforces them and judiciary interprets them.
The Parliament being the Law making authority, it makes laws for the
requitement of the society and the country the executive is empowered to
enforce laws enacted by the Parliament as legislator.
The executive should exercise of the power within the parameter and
jurisdictions conferred on them.
The legislature is omnipotent in the exercise of the taxing
prerogatives. The constitution of Sri Lanka empowers the Parliament to
make laws in relation to state finance and accordingly the Parliament
has made laws to raise revenue for the requirement of the country. Since
these laws empower the executive to collect revenue by way of duties,
levies, and taxes etc. The administration of the tax law is the
responsibility of the executive power.
It is experienced and commonly accepted that when revenue laws are
implemented, by exercising discretionary power by revenue officers in
respect of issuing assessments, aggrieved parties have a legal right to
make a petition of appeal to relevant administrative authority. The
relevant appeal procedures and process of settling of such appeals have
also been specified in the relevant fiscal legislation. In past few
years, it was challenged to the independency of the hearing of appeals
and there were lot of argument relating to guarantee of the fair hearing
President Mahinda Rajapaksa on his budget speech in Parliament on
Budget for 2011 expressed that "An Independent Appeal Commission" will
be established comprising a team of legal, technical and operational l
experts in handling any appeal made against the determination of the
The present functions of the Board of review will be removed from the
Relevant Acts administrated by the Commissioner General of Inland
Revenue and will be brought under a separate Act. Apart from the Acts
administrated by the CGIR the activities of the Commission will cover
the appeals on the taxes in dispute under other statures namely, Custome
Duty, Excise Duty etc.
Now the concept has become reality. Tax Appeals Commission Bill was
passed by the parliament and Tax Appeals Commission Act No. 23 of 2011
has come into force an implementation with effective from April 1, 2011.
According to the newly introduced Tax Appeals Commission Act, there
shall be established a Commission to be called and known as Tax Appeal
Commission. The Commission is a separate independent institution and
specially established for the hearing of all appeals in respect of
matter relating to imposition of any tax levy or duty.
According to Appeal Commission Act, Commission has power to hear the
appeals relating to tax matters of Income Tax (IT), Value Added Tax
(VAT), Nation Building Tax (NBT) and Economic Service Charge (ESC).
Appeals relating to excise duty and custom duty are not covered by new
legislations as proposed in budget.
The Organization Structure
Commission is comprised with not more than three members. Member are
appointed by the Minister of Finance. One member of the Commission will
be appointed a Chairman of the Commission and members appointed from
amongst retired judges of the Supreme Court of Sri Lanka and the Court
of Appeal of Sri Lanka, who have wide knowledge of, and have gained
eminence in the field of Taxation, Finance and Law. Every member of the
Commission shall hold office be for a term and not exceeding three years
and shall be eligible for reappointment.
In addition to Commission members, Minister of Finance appointed a
penal of Legal Advisors. Panel comprises with not more that ten members,
who have gained eminence in the field of Law. Panel should assist the
Commission in the exercise, performance and discharge of powers duties
and functions specified in the Tax Appeal Commission Act.
In addition to commission members and panel, the Minister of Finance
appoints a Secretary to the Commission.
Functions of the Commission
Any tax payers (Appellant) who dissatisfied with reasons given in
relating an appeal by Commissioner General have right to make an appeal
to the Commission in respect of appeals relating to tax matters of IT,
VAT, NBT, an ESC. Such appeal shall be heard by the Commission and make
a decision within one hundred and eighty days from the date of
commencement of the hearing of the appeal. The decision of the
Commission shall be notified to the CGIR and Appellant in writing.
Within thirty days of the receipt of an appeal, the Secretary to the
Commission shall fix a date and time and place for the hearing of the
appeal and shall give forth two days notice thereof both to the
appellant and to the Commissioner General.
Three or more members of the panel shall be nominated by the Minister
to attend the hearing of the Commission and assist in the progress of
the appeal proceedings and any investigation if any before such
Such appeals are heard in Camera. Every appellant shall attend in
person or by an authorized representative, on the day fixed for the
hearing of appeals by the Commission. The Commission has the power to
call appellant attend in person, if commission think it necessary to
appellant attend in person.
The Assessor who made the assessment appealed against or a person
authorized by the Commissioner General in that behalf, shall attend the
hearing of the Commission at which such appeal is heard, in support of
the determination of the Commissioner General.
More important aspect of newly introduced appeal process is any
person who makes an appeal to the Commission, be required to pay 25
percent of tax assessed by CGIR in his determination; into a special
account which is opened and operated the Commission. In this regard
appellant can submit a bank guarantee for by the equivalent amount if
money is not deposited.
Any party both Appellant or the CGIR dissatisfied with decision of
Commission decision have right to make an application to the Commission
to state a case to Court of Appeal on the question of law arising in the
appeal. The provisions relating to appeal to the Court of Appeal and
Supreme Court in the Inland Revenue Act are applied for on that regards.
Rules and Regulations
Rules and regulations relating to be the hear the appeals and
determine such appeals to be made by the Commission in that behalf.
No More Board of Review
Before commencement of Tax Appeal Commission, there were thirty
members Board called and known as Board of Review of inland Revenue.
There were three legal advisors for the Board to assist the board
members in relating to the legal matters and Secretary to the Board to
assist for smooth administrative function of the Board. Appeals those of
not commenced hearing or not hearing were completed as at 31.03.2011
before the Board of Review are transferred to the Commission and such
cases to be heard and decisions to be given within two years from the
date of 01.04.2011. Members of the Board of Review, legal advisors and
Secretary to the Board were appointed by the Minister of Finance and Now
BOR is discontinued.
All the functions vested to the board under the Inland Revenue Act up
to 31 March 2011 now falls to the administrative preview of Tax Appeal
Commission which is established as more independent institution.