Rule of law in taxation: Rights before revenue - Part 1

TWO important pillars are essential for a fair and transparent tax system. They are: a well-informed public and an accountable tax authority. A weakness or strength of either pillar determines the level of the integrity of the entire system. The strength creates a conducive environment where mutual respect among tax payers and officials, increased tax compliance and friendly culture prevail. The weakness leads to mutual mistrust, increased tax evasion and avoidance and ultimately a deterioration in the quality of national life—not only economically, but socially and culturally as well.

- By N.M. Mifly

In this article, the term “tax” and “taxation” refers broadly to the three key components of state revenue collected through the country’s main revenue authorities: the Inland Revenue Department (IRD), the Customs Department (CD), and the Excise Department (ED). These include: (1) domestic taxes collected by the IRD, (2) cross-border taxes such as customs duties and levies collected by CD, and (3) excise duties collected by ED such as on cigarettes, liquors, etc.

Since IRD-collected taxes cover a wide portion of the population and account for the largest share of government revenue, both taxpayers and tax officials of the IRD have been taken as the primary focus for illustration. I respectfully request readers to interpret the term “tax” and “taxation” in this article in a broader sense, encompassing all three departments—Inland Revenue, Customs, and Excise—depending on the context.

The taxation is the lifeblood of any nation. No country can survive without taxes to fund public services, infrastructure, and social welfare. Yet, collecting taxes is not a walk in a park but a tightrope walk. Despite the payment of tax is called as a “civic duty” or “social responsibility,” many - if not all — are reluctant to give away their hard-earned income unless they see a return—tangible or intangible — on the payment of tax. That return could come in the form of efficient public services, a respectful process, or simply the absence of harassment.

The core challenge: What do taxpayers receive in return?

At the launch of “National Tax Week” on 2 June 2025, President Anura Kumara Disanayake— known for speaking to the hearts of the people rather than merely appealing to their heads—highlighted four key reasons behind widespread tax evasion and avoidance:

1.Misuse of public funds by political authorities;

2.Corruption among public officials;

3.Complex and nonuser-friendly compliance processes;