Abstract:
Tax system of a country affects the economy of that country in many ways. The primary objective of
a tax system is to raise revenue for government activities. Minimizing distortions, encouraging savings
and promoting investment, maintenance of equity and efficiency are the secondary objectives of a tax
system. In Sri Lanka, there are several departments and council’s deal with the collection of taxes on
behalf of the government. The Department of Inland Revenue mainly administrates the central
government taxes. Other departments such as Department of Customs and Department of Excise also
collect some levies on behalf of the central government. After the 13th constitutional change, in
Provincial level the Provincial Councils, the Municipal Councils and Paradeshiya Sabha also collect
some tax in their management area. Currently, the Department of Inland Revenue mainly administrates
following direct and indirect taxes; Income Tax, Value Added Tax, Economic Service Charge, Debit
Tax, Stamp Duty, Betting and Gambling Tax, Withholding Tax and Social Responsible Levy
