Study on income tax evasion in Sri Lanka

Abstract

This study explores the impact of tax evasion on government revenue. One of the major income sources of the any government arises from-taxes. Taxation is used as instrument to achieve and control the economic, social and political objective of the government. In order to collect tax revenue a government can use direct taxes and indirect taxes. There are number of methods in collecting indirect taxes. However the direct tax collection is very difficult. Tax payers try to escape from paying taxes. Tax evasion means tax payers try to escape from paying tax, over estimating or underestimating income than actual amount. Tax evasion is illegal. Government should identify the percentage of the tax evasion in the particular year of assessment. This is because unpaid tax revenue creates more problems in the black economy of the country. Therefore the tax evasion should be controlled. Number of tax payers and tax administrative officers were interviewed and noted their grievances. On the taxpayers side they feel that they contribute for better economic of the country. However they are ill-treated by relevant tax authority and the government, as result of it tax payers try to away from paying actual amount of taxes. The tax administrative officers should be given proper counseling so as to deal with the tax payers. Therefore both parties should work together for the betterment of the country.