DEFAULT TAXES (SPECIAL PROVISIONS) ACT

Arrangement of Sections

1. Short title.

2. Application of the provisions of the Act.

3. Appointment of an Advisory Committee.

4. Functions of the Committee.

5. Establishment of the Default Tax Recovery Unit.

6. Report on taxes in default to be prepared.

7. Certain taxes in default to be written off.

8. Write-off of any tax in default to be published in the Gazette.

9. Issue of notice to those whose tax in default is to be recovered.

10. Consequences of not responding to a notice sent under section 9.

11. Commissioner General to request for information.

12. Tax in arrears not to exceed certain percentage.

13. Commissioner General to submit a report where there is an excess.

14. Secrecy.

15. The Commissioner General may delegate his function and powers under this Act.

16. Sinhala text to prevail in the event of any inconsistency.

17. Interpretation.

18. Amendment of the First Schedule to Act, No. 10 of 1996.

SCHEDULE

16 of 2010,

14 of 2014.

AN ACT to provide for a streamlined and speedier process for the recovery of taxes in default in a time bound manner; to provide for the writing-off of taxes in default in certain circumstances and for matters connected therewith and incidental thereto.

[Date of Commencement: 7th December, 2010]

1. Short title.

This Act may be cited as the Default Taxes (Special Provisions) Act and the provisions of this Act other than this section, shall come into operation on such date as may be determined by the Minister by Order published in the Gazette (hereinafter referred to as the "appointed date”). The provisions of this section shall come into effect, in terms of paragraph (1) of Article 80 of the Constitution, on the date on which the Certificate of the Speaker is endorsed.

2. Application of the provisions of the Act.

Notwithstanding anything in any other written law to the contrary, the provisions of this Act shall apply to the recovery, discharge or write-off of taxes charged and levied on or before December 31, 2009 under any of the laws specified in the Schedule to this Act and which continue to be in default under any such laws, for a period of over two years or more, or where applicable, after the appellate procedures specified in any such laws for the recovery of any such tax (in this Act referred to as "tax in default”) have been exhausted:

Provided however where pursuant to any action taken for the recovery of any tax in default prior to the appointed date, a defaulter has agreed to or an effective arrangement has been made for the settlement of such tax in default, by the payment of the same in installments or otherwise and the defaulter concerned has thereafter failed to comply with such agreement or arrangement, as the case may be, the provisions of this Act shall apply in regard to the recovery of the balance sum remaining unpaid in terms of such agreement or arrangement, other than in instances where such agreement or arrangement was entered into or made, in pursuance of an order made by a court.

3. Appointment of an Advisory Committee.

(1) The Minister shall appoint an Advisory Committee (hereinafter referred to as the "Committee”) consisting of five members of whom one member shall be a retired Judge of the Supreme Court or of the Court of Appeal or of the High Court, as the case may be, who shall be the Chairman of the Committee. The other four members shall be selected from among persons who have knowledge, experience and shown capacity in taxation law, accountancy and auditing, business management or finance.

(2) The quorum for any meeting of the Committee shall be three members and the Chairman shall preside at all meetings of the Committee. In the absence of the Chairman from any meeting of the Committee, the members present shall elect one of the members present to preside at such meeting.

(3) The Committee may regulate the procedure in regard to the meetings of the Committee and the transaction of all business at such meetings.

(4) The Minister may for reasons assigned therefor, remove a member of the Committee from his office by a letter sent to him in that behalf. A member of the Committee may resign from his office by letter to that effect addressed to the Minister and such resignation shall take effect upon it being accepted by the Minister writing.

(5) The members of the Committee may be paid an honorarium in such amount as may be determined by the Minister.

4. Functions of the Committee.

(1) The functions of the Committee shall be to—

(a) respond to communications received from the Commissioner-General under section 7, regarding the write-off of any tax in default; and

(b) advise on any matter referred to it for its advice by the Commissioner-General or the Minister, as the case may be.

(2) In the discharge of its functions, the Committee shall have the power to summon any person whom it considers is able to give any information or produce any document, with regard to a matter, which is before such Committee for its deliberation.

5. Establishment of the Default Tax Recovery Unit.

There shall be established a unit called the Default Tax Recovery Unit under the purview of the Commissioner- General, with a Deputy Commissioner-General assigned to be in charge of such unit.

6. Report on taxes in default to be prepared.

The Commissioner-General shall within six months of the date of the appointment of the Committee, cause the Default Tax Recovery Unit to prepare and finalize a report, identifying taxes in default of—

(a) Public Corporations;

(b) Government Owned Business Undertakings;

(c) Government Owned Business Undertakings established as corporations under section 2 of the Conversion of Government Owned Business Undertakings into Public Corporations Act, No. 22 of 1987;

(d) Government Ministries;

(e) Government Departments; and

(f) Co-operative Societies registered under the Co-operative Societies Law, No. 5 of 1972, including any Corporative Rural Bank.

7. Certain taxes in default to be written off.

(1) Subject to the provisions of subsection (2), with regard to taxes in default of any institution identified under section 6 of this Act, the Commissioner-General shall—

(a) having verified from the persons concerned of the accuracy of the amount recorded as being due as tax in default; and

(b) having obtained the confirmation of the Secretary to the Treasury that such institutions is dependent on Government funding to meet its tax liabilities, take all necessary steps to write-off the tax in default of such identified institution.

(2) The Commissioner-General shall three months prior to taking necessary steps to write-off any tax in default under subsection (1), inform the Committee of such fact and the Committee shall be entitled to make any comments on the same within three months of the receipt of such information. In the event the Committee makes any comments, it shall be the responsibility of the Commissioner-General to respond to such comments immediately.

8. Write-off of any tax in default to be published in the Gazette.

Where any tax in default is written-off under section 7 of this Act—

(a) the Commissioner-General shall, notwithstanding any provision relating to secrecy contained in the law under which the tax in default was levied and charged, publish that information in the Gazette, within thirty days of the date of such write-off; and

(b) the tax in default which had been written-off is subsequently recovered under the provisions of the relevant law under which such tax was charged and levied, the amount so recovered shall not be refunded to the defaulter.

9. Issue of notice to those whose tax in default is to be recovered.

(1) Where any tax in default is not written-off under section 7, then, notwithstanding—

(a) any agreement that may have been entered into by the defaulter with the Commissioner-General for the payment in installment of the sum in default; or

(b) the commencement of any proceedings for the recovery of such tax under the law under which such tax was levied and charged, other than where any proceedings for recovery has been filed in a court, the Commissioner-General shall issue a notice to the defaulter concerned, setting out the details of the amount due as tax in default and requesting that such amount be settled within sixty days of the receipt of such notice.

(2) A defaulter who is issued with a notice under subsection (1) may, prior to the expiry of the sixty days referred to therein, shall write to the Commissioner-General—

(a) requesting that such defaulter be permitted to settle the amount of tax in default in installments as shall be agreed to with the Commissioner-General; or

(b) raising any objections in regard to the payment of the tax in default referred to in the notice.

(3) Where a defaulter makes a request for the payment of the tax in default in installments, the Commissioner-General may agree to such payment, subject to the condition that the payment of the amount due is paid in full within a period not exceeding three years from the date of entering into such agreement. The Commissioner-General shall also inform the Committee of the details of the agreement entered into with the defaulter.

(4) Where the defaulter raises any objections in regard to the payment of the tax in default referred to in a notice sent, the Commissioner-General shall make his decision in regard to the same within sixty days of the receipt of such objections and where the objection involves a re-determination of the tax liability concerned, he shall discharge the excess if any, of the tax in default over the amount so determined.

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