Tax filing failures could become criminal offences

Sri Lanka prepares to introduce strict criminal penalties for taxpayers who fail to meet procedural requirements under proposed amendments to the Inland Revenue Act. Suresh Perera, the Head of Tax and Regulatory at KPMG Sri Lanka, warned that the Supreme Court cleared the bill for a simple majority vote in Parliament, meaning the tax authority cannot be taken lightly. The new Section 185A transforms administrative failures, such as missing filing deadlines or neglecting to register with the Commissioner General, into prosecutable offences. Individuals and businesses found guilty of ignoring written notices or failing to appear before authorities face fines of up to 400,000 rupees and six-month prison sentences.

The legislation also seeks to redefine company reserves to include accumulated losses and negative earnings, though asset revaluations remains excluded. Perera cautioned that calculations must follow recent Court of Appeal rulings where negative figures are treated as zero rather than being deducted. These changes represent a significant escalation in the state's effort to enforce accountability and improve national revenue collection. Parliament takes up the bill for its second reading on the 20th of May, marking a shift toward a far more aggressive enforcement climate for the island's taxpayers.