History of the Tax System in Sri Lanka

It is clear that taxation had initiated simultaneously with emerging the concept of “State” of human Civilization. People who lived in the ancient time in the world had given a part of their earnings to the state. Furthermore states in the world had been implementing various tax systems from the ancient time to collect revenue for the functions of the states.

According to the historical information, there was an organized taxation system in Sri Lanka since Anuradhapura Era. Ancient inscriptions and literature reveal us    more information about old tax collecting activities in Sri Lanka since 3rd century BC. Kothgalkanda inscription (250 BC) at Kandalama, Perimiyankulama  inscription of king Vasabha,   Mihinthala inscription of king  Mihindu IV, Badulla (Hopitigama) pillar inscription of king Udaya IV, Polonnaruwa Gal-Potha ( Stone Book) inscription of king Nishshankamalla,  Godawaya inscription of king Gajaba I, Mahawanshaya, Samanthapasadikawa,  Poojawaliya and the book ( An Historical Relation of the Island of Ceylon) written by Robert Knox,  for instance,  provide  more facts on ancient taxation system.

Tax enacted on the use of water for agriculture, named as “Dakapathi” (Diya Beduma / Dakabaga) was a very old tax prevailed since 3rd century BC.  “Bojakapathi” was an another main tax in the ancient time and it was imposed on behalf of cultivation in king’s land. In addition to that there were a number of taxes,   such as Madaran, Matharamajibaka, Kathi Ada, Ketoo Kanaba, Mahawara Badda, Melatsi Badda, Nilapandura and Irawariya etc. in ancient Sri Lanka. One sixth of the yield should be given to the state as the tax. Dakapathi, Wannaku, Bojakapathi, Maha Patuladda and Thota Bojaka were the officials who had been appointed for collecting taxes in the past. According to Godawaya pillar inscription of king Gajaba I (114 – 134 AD), the customs duty was levied in the Godapawatha (Ambalanthota) harbour and the designation of the officer who had been appointed for collecting customs duty was “Mahapatuladda”. Robert Knox’s book which was published in 1681 provides information about various types of taxes, different rates of taxes and the way the taxes were collected in the time of Kandyan Kingdom. Also, taxes had been collected thrice a year in that time according to Robert Knox.

Then ancient tax system of Sri Lanka had been changed by the British colonial rule. The taxes, such as, “Marala Badda”, “Anga Badda”, “Pol Badda”, “Maha Badda”, “Thuwakku Badda”, “Para Badda”, “Balu Badda”, and “Sereppu Badda” were collected in colonial times in Sri Lanka. But some of them were very oppressive to the people.

However present tax system has been introduced in the British colonial era. Income tax ordinance No 02 of 1932 was a milestone in Sri Lankan tax law and income tax was introduced by above ordinance in 1932. The main tax authority in Sri Lanka, Department of Income tax was established in the same year and the first commissioner of the Department of Income tax was Mr. N.J.Haxham.

Stamp Duty was introduced under the provision of Stamp Duty Ordinance No. 22 of 1909 in Sri Lanka.  Since 1933, the stamp duty had been collected by the Department of Income Tax. There after Prevailed tax system has been amended time to time and various tax authorities have been established at present.

Establishment of the Department of Provincial Revenue (Sabaragamuwa)

The 13th amendment of the constitution of the Democratic Socialist Republic of Sri Lanka was a significant event in the power devolution in Sri Lanka and also the tax system. With the introduction of the 13th amendment to the constitution in 1987, It paved the way for the creation of provincial councils.  Twenty  revenue  Sources from 36:1 to 36:20 of 1st  list  (provincial council list)  in the 9th schedule  of  the above said  amendment have been devolved to the provincial councils.  Earlier some of these taxes, charges and fees were administrated by the Department of Inland Revenue.    

According to the Finance Statute of Sabaragamuwa province   No. 06 of 1990 passed by Sabaragamuwa provincial council, the Department of Provincial Revenue of Sabaragamuwa province was established in 1991 in order to perform the revenue collecting activities in the province.

The Initial Staff of the Department of Provincial Revenue in 1991 were seven and they were attached from the Department of Inland Revenue. The first Revenue commissioner of Sabaragamuwa province was Mr. A.A.Wijepala (1991) and then the successors were as follows in order.

Period Name of the commissioner
01.01.1993 – 24.02.2009Mr. M.A.Chandrapala
25.02.2009 – 29.01.2011Mr. S.A.Ariyasena
23.02.2011 – Up to nowMr. G.Hettige

Imposing and collecting taxes and charges under the provision of the Finance statute of Sabaragamuwa Province No.06 of 1990 was executed by the head office in Ratnapura until 2001. The regional office of the department was established in Kegalle in 2001 to administrate devolved taxes and charges in Kegalle district.     

The following taxes and charges are currently administrated by the Department of provincial Revenue.

  1. Stamp Duty
  2. Drugs and Chemical Tax
  3. Mineral Tax.
  4. Turnover Tax
  5. Charges under the Fauna and Flora Protection Ordinance