Welcome Remarks at the Sri Lanka’s first National Dialogue on Taxation

Sri Lanka’s first National Dialogue on fair taxation and stronger social contract for the Sustainable Development Goals (SDGs)

June 12, 2024
Tax Dialogue - Ms. Azusa Kubota, Resident Representative, UNDP Sri Lanka

•    Honorable Minister Shehan Semasinghe, State Minister of Finance  
•    Mrs. Sepalika Chandrasekara, Commissioner General, Inland Revenue Department 
•    Alex Cobham, Chief Executive, Tax Justice Network 
•    Honourable Members of the Parliament  
•    Senior government officials, representatives from the private sector, CSOs, academia, development partner organizations, and youths 

A very good morning to you all,

1.    I am honoured to welcome you all to the ‘National Dialogue on Fair Taxation and Stronger Social Contract for SDGs’ organized by UNDP’s Tax for SDGs programme, implemented together with the Inland Revenue and Fiscal Policy Departments, and the Ministry of Finance at large.  

2.    In the era of polycrisis, the global community is experiencing a critical situation where SDG gains have regressed, and financing for SDGs has significantly contracted. Progress towards and financing required to meet the Paris targets on climate change are both critically lagging. Against this reality, the UN Secretary-General called for an SDG push to advocate for a global collective effort to ensure that countries do not run empty on the fuel they need for sustainable development. The fuel here entails financing.

3.    Developing countries are faced with a $4 trillion investment gap in achieving the SDGs, and they require increased funding and effective policy solutions. The finance needed to bridge this gap is only 1% of the global wealth. Another problem is that available financing is not directed to the areas most needed for attaining SDGs. Domestic resource mobilisation and targeted investments must be at the front and centre of our development efforts.

4.    This clearly calls for enhancing the capacity of tax administrations to generate vital revenues and aligning tax policies with SDG targets. Indeed, tax revenue remains as one of the most sustainable sources of revenue for governments, and the most viable means to raise finances towards the SDGs.  

5.    For Sri Lanka’s journey to sustainably recover from its economic crisis, optimizing financing streams across the private and public sectors is key. Speaking of public financing, as evident from the revenue-based fiscal consolidation measures put forth by the IMF reform programme, the Government is strongly encouraged to bolster tax revenue.  

6.    In view of various tax policy reforms taking place, much debate has been generated amongst the public, indicating a high level of interest and significant inter-generational impact the reform measures have on the lives of people. The question is how to bring people along with the reform agenda, and boost tax morale, particularly in the efforts to increase tax revenue.  

7.    Global experiences show that heightened levels of social contract are crucial where Governments and citizens are called upon to collaborate as partners in the pursuit of shared societal goals.  

8.    The COVID pandemic experience has led to the erosion of social contract and trust in institutions across the globe. In Sri Lanka, people’s hardships have been compounded by the recent economic crisis.

9.    As per the data from the Multi-dimensional Vulnerability Report launched by UNDP last year, more than half of the Sri Lankans were reported to be multi-dimensionally vulnerable. And close to 70% of them experienced a reduction in income. Many had to change diets or reduce at least one meal a day as a coping mechanism. And many families have fallen into a cycle of indebtedness.  

10.    Aside from the most vulnerable, the Sri Lankan business community also felt the impact of slowing down in economic activities. 

11.    Moving forward with a much-needed reform agenda that directly touches on people’s lives, we must ensure people’s buy-in.  

12.    As we in Sri Lanka embark on dynamic domestic revenue generation efforts, the current global discussions and practices surrounding tax justice and renewed social contract, resonates very well with us.  

13.    In this regard, I am deeply grateful for the presence of Mr. Alex Cobhan, who will be speaking about fair and transparent taxation later in the programme. I first heard Alex in New York last year during the Tax for SDGs week, co-organized by UNDP and Colombia University. I was impressed by the wealth of knowledge and depth of research, which clearly demonstrates a close link between governance and tax. Over the course of the coming days, he will be interacting with a diverse group of stakeholders in Sri Lanka to gain insights and share global experiences.  

14.    For the past two days, in this very same room, UNDP held a national symposium on future-fit local governance with support from the EU. A key message from this symposium was that in times of poly-crisis where challenges that governments face are becoming ever more complex, governments must be agile, adaptive, anticipatory, and accountable.  

15.    It is our hope that Sri Lanka’s first-ever national dialogue on tax will provide a unique platform to foster greater understanding and engagement amongst diverse groups so that the tax administration and policy reforms will be agile, adaptative, anticipatory and accountable, as well. Similarly, drawing from your views and insights, we hope that the platform will immediately identify quick-win actions, which will reinforce the ongoing reform processes. I am sure the development partners will gain valuable insights from today’s dialogue to reflect on their ongoing and planned support to the Government and wider stakeholders.  

16.    To provide a foundation for the dialogue, today’s programme will start with a presentation on the country’s first taxpayer's perceptions, attitudes and experiences towards taxation. While we hear public debates on tax matters, in order to objectively understand citizen’s attitudes about taxation and their level of satisfaction with tax policy, administration, efficiency, accountability and level of citizen involvement in tax policy-making processes, UNDP, the Inland Revenue Department and Ceylon Chamber of Commerce collaborated in carrying out this survey.

17.    The effectiveness of tax collection is fundamentally tied to the people’s willingness to comply with tax obligations. The survey points out that people are willing to pay taxes only as long as they value what they gain from it. This underscores the importance of addressing perceptions, structural deficiencies, misinformation, and misconduct in order to boost tax morale. You will soon hear more about the findings today.  

18.    I would like to first commend the Ceylon Chamber of Commerce for carrying out this extensive research. I would also like to acknowledge the Government’s commitment to listening to people’s voices and using them as a way to continuously improve and reflect on the ongoing tax administration and policy reform.  

19.    Equally, UNDP is committed to continuing our support to the Government to effectively design behaviorally informed tax solutions. In this regard, UNDP does not view this survey as a one-off exercise, but rather one that the Government can carry out periodically in moving forward.  

20.    In addition, responding to the demand from the Government of Sri Lanka, we through UNDP’s Tax for SDGs initiative, will continue to offer unique expertise and insights on how to increase domestic resource mobilization to finance the SDGs. Some of the examples include the following:

21.    First, tax evasion and the consequences of a poorly managed tax system undermine the government’s ability to serve public interests. UNDP supports, for example, digital transformation and link our Tax for SDGs programme with our greater economic governance programme, with a particular focus on supporting CIABOC and other anti-corruption institutions.  

22.    Second, building on last year’s SDGs Tax Framework assessment on gender equality and domestic resource mobilization, UNDP is supporting the Government’s ambitions climate change agenda which requires the alignment of the tax and fiscal policies to unlock climate financing. This includes the assessment of trade-offs and synergies between tax and budgets as part of a comprehensive fiscal policy analysis, and to ensure policy consistency in the advancement of the green and blue economy.  

23.    Third, one of the key recommendations stemming from the Tax Perception Survey is the need for wider public engagement of the tax officials with the taxpayers. UNDP is already supporting the IRD with such efforts in operationalizing solutions which are instrumental towards open and proactive communication and outreach.  

24.    Before I conclude, let me once again convey my deep appreciation to the Inland Revenue Department, the Fiscal Policy Department, and the Ministry of Finance, for their continued leadership and support in making the nation’s first tax perception survey and National Tax Dialogue a reality. And our gratitude goes to all of you who are present today to be part of the Dialogue.  

25.    We must all move decisively into an economic transition which has SDG-aligned taxation at the heart of it. UNDP remains firmly committed to walking alongside the Government and people of Sri Lanka in this journey.  

26.    Thank you.