By Ceylon Signal 
Sri Lanka’s Inland Revenue Department (IRD) has failed to recover a staggering Rs. 961.4 billion in outstanding taxes, penalties and interest as of 30 June 2024, according to a latest report issued by the Auditor General. The disclosure underscores deepening concerns over tax administration efficiency at a time when state revenue remains critically important for economic recovery.
Income Tax Tops List of Outstanding Arrears
The report notes that Income Tax accounts for the largest proportion of unrecovered dues as of mid‑2024. This category represents the highest percentage of outstanding balances among all tax types.
Following Income Tax, the Value Added Tax (VAT) holds the second‑largest share of arrears, indicating persistent challenges in collecting indirect taxes from businesses and registered taxpayers.
Sharp Increase Within One Year
A particularly concerning trend highlighted in the report is the rapid growth of arrears within a single year. Between 30 June 2023 and 30 June 2024, outstanding taxes, penalties and interest have increased by more than Rs. 18 billion.
This surge suggests either worsening compliance, delays in enforcement, or systemic weaknesses in the IRD’s recovery mechanisms.
Implications for State Revenue
The Auditor General’s findings come at a time when Sri Lanka is under pressure to strengthen fiscal discipline and improve tax collection as part of broader economic reforms. The ballooning arrears could further strain government revenue targets and complicate ongoing efforts to stabilize public finances.