Category: Daily Financial Times

A 10-man India have staved off Pakistan 5-3 and advanced to the second round of the Hockey World Cup after a crucial encounter for the South Asian neighbours at Wagener Stadium.

The victory on Wednesday for eighth-ranked India keeps them in contention for the semifinals while Pakistan were eliminated from the tournament, which is being held in Amstelveen, the Netherlands.

India captain Harmanpreet Singh led the way when he opened scoring in the fourth minute from a penalty corner before Abhishek doubled their lead in the 10th minute off a pass from Mandeep Singh.

Harmanpreet added one more for India in the 20th minute off a penalty corner before Pakistan’s Hannan Shahid scored off a rebound from the goalkeeper.

Abhishek extended the India lead to 4-1 from a lucky deflection off Pakistan’s stick, but Sufyan Khan’s superb dragflick off a penalty corner narrowed the gap to 4-2 at halftime.

Hardik Singh made it 5-2 with a penalty stroke early in the third quarter, which ended with a three-point lead for India and a green card each for Pakistan’s Zikriya Hayat and India’s Rajinder Singh.

Pakistan rallied to make it 5-3 just as the fourth quarter began when Shahid scored in the 45th minute after Hardik lost possession of the ball in the midfield.

India were unsuccessful with their video review taken by Dilpreet Singh in the 53rd minute. It was tough luck for the men in orange when Aditya Lalage received a yellow card in the 55th minute, ruling him out from the rest of the match.

A 10-man India held off Pakistan for the last few minutes to seal the win and progress to the second round. They sit in second place in Pool D with six points from an earlier 3-1 win against Wales.

Sri Lanka will be without Dinesh Chandimal for the second Test against India starting at the SSC grounds on 23 August.

Chandimal was concussed and replaced by Pasindu Sooriyabandara as concussion sub on the fourth day of the first Test at Galle after he hit his shoulder and head hard on the ground while fielding.

Prior to that wicket-keeper/batsman Kusal Mendis was ruled out of the series with a hamstring injury and Pathum Nissanka who missed the first Test after undergoing surgery to his wrist has also been ruled out of the second Test.

‘We are missing a few guys, but it creates an opportunity for young players to come in and put their hands up. Players who have got good first class records in this country,’ said head coach Gary Kirsten.

‘It’s unfortunate we lost Dinesh (Chandimal). He is a quality Test match veteran. In this circumstance he would have been a really important player for us. That was unfortunate but that’s the nature of the game. It’s nice that a few guys who have played a handful of Test matches are getting a chance to bat in the top order and understand what it is like to play Test cricket against some of the best Test cricket nations in the world.’ (ST)

GALLE: Sri Lanka’s Head Coach Gary Kirsten said that the failure of the top order batting in both innings cost Sri Lanka the first Test against India which they lost by 165 runs at Galle yesterday.

‘Where we lost the game was in both innings we lost wickets upfront. You just can’t afford that in Test match cricket, especially when you are chasing a total of 462,’ said Kirsten at the post media conference.

Sri Lanka were 90-5 in the first innings and 47-4 in the second innings.

‘Winning the toss on these wickets – the options are to bat well in the first innings. We ended up playing our first innings on the third day when the wicket took the most amount of turn. On day four and five it played a little bit easier and the ball got softer much quicker,’ said Kirsten.

‘It was a very good Test match wicket. To give away 178 runs in the first innings that’s where it cost us the game, we didn’t bat all that well apart from a great partnership of 146 between (Sonal) Dinusha and (Niroshan) Dickwella. The pitch played really well and didn’t turn hugely throughout the game. It was a good cricket wicket.’

Kirsten said that there were some positives Sri Lanka could take out of the match.

‘From being 99-5 at the beginning of the third day and taking the Test match into the afternoon of the fifth day was particularly pleasing and the fight. We were keen to try and stay in the Test match. We still believed even this morning we could work something up to win the Test or certainly draw it. Very pleased with the energy and attitude of the team around that.’

Kirsten was full of praise for Sonal Dinusha and debutant Keshara Nuwantha.

‘This is his (Dinusha’s) fourth Test match, to see the way he’s played is very exciting for Sri Lankan cricket. His love for Test cricket and playing the way and that style is particularly pleasing to me to watch. We certainly would encourage our players to have that Test match mindset and attitude,’ said Kirsten.

‘The challenge for the modern players especially in Sri Lanka is that we don’t play many Test matches. We have at least six lined up in the next six months or so. It’s great to get into the Test match game a little bit and then try to score runs and bat for a long period of time and have an influence on the game. Sonal has done that a few times in the West Indies as well, where under pressure he was able to make performances. He’s got good mental strength, courage and resilience and he is a good example for all other players. That step up you’ve got to be on your game mentally to manage it.’

‘I was very impressed with Keshara Nuwantha. On his debut he bowled exceptionally well. He got four wickets in the Test match and he batted for 70 balls in the second innings. Our conversation with all the lower order batters is to bat as many balls as they can in these conditions. He showed real grit and determination.’ (ST)

The Expolanka Leisure Cluster recorded an outstanding performance at the National Business Excellence Awards (NBEA) 2026, with three of its brands being recognised across multiple categories, reaffirming the group’s commitment to excellence, innovation, and customer-centric service delivery across Sri Lanka’s travel and tourism industry.

Among the night’s top honours, Classic Travel was named Winner in the Travel, Visa and Immigration Services sector. Expo Visa Services (EVS) secured Runner-Up in the Travel, Visa and Immigration Services sector while also being recognised as First Runner-Up in the Small Category. Meanwhile, Classic Destinations received a Merit Award in the Hospitality and Tourism Services sector.

Commenting on the achievement, Expolanka Leisure Cluster Director/Chief Commercial Officer Sabry Bahaudeen said: ‘These recognitions reflect the standards we continue to uphold across every business within the Expolanka Leisure Cluster. While each of our brands serves a distinct market, they are united by a shared commitment to excellence, customer-centricity, and continuous improvement. These awards inspire us to keep raising the bar and delivering meaningful value through every experience we create.’

The National Business Excellence Awards, organised by the National Chamber of Commerce of Sri Lanka (NCCSL), is one of the country’s most prestigious business awards programs, recognising organisations that demonstrate outstanding business performance, leadership, governance, and sustainable growth. Now in its 21st year, the awards celebrate excellence across a wide range of industries through a rigorous multi-stage evaluation process led by independent technical experts and an esteemed panel of judges.

Commenting further, Classic Travel Strategic Planning and Business Development Head Shazna Hassen said: ‘To see multiple brands within our cluster recognised on one of Sri Lanka’s most respected business platforms is a proud achievement for all of us. It reflects the dedication of our teams, the trust placed in us by our customers and partners, and our collective pursuit of excellence. As we continue to grow, we remain focused on strengthening our brands, embracing innovation, and delivering exceptional experiences that create lasting value across the travel, tourism, and hospitality sectors.’

The multiple accolades further reinforce the Expolanka Leisure Cluster’s position as one of Sri Lanka’s leading travel and tourism groups, with a diversified portfolio of brands committed to setting new benchmarks in service excellence, innovation, and customer experience.

George Steuart and Co. Ltd., group companies Citrus Leisure PLC, Hikkaduwa Beach Resort PLC, Waskaduwa Beach Resort PLC have appointed Nirekshe Perera as their new Chief Executive Officer.

A multifaceted hospitality executive with over 25 years of leadership experience spanning luxury hotels, integrated leisure complexes, MICE operations and banking, Perera brings a strong track record in building and positioning premium brands, driving revenue growth, optimizing costs, and delivering operational excellence in challenging business environments.

His exposure in the leisure industry includes Group Chief Executive Officer of Monarch Imperial, senior leadership roles at Shangri-La Hotel Colombo, Waters Edge Ltd., and Hilton Colombo Residences. He holds a Bachelor of Commerce from the University of Western Sydney, Australia, and is a Member of the Chartered Institute of Marketing (CIM). Perera does not hold any other directorships and has no relationship, business or otherwise, with any Director or substantial shareholder of the companies.

Bangladesh continued to impress in the ICC World Test Championship with a superb nine-wicket victory against the current WTC table-toppers Australia in Darwin.

With this landmark win, Bangladesh are now placed fourth in the WTC standings with 66.67 PCT.

Opting to bat first, Australia could not get going against the pace attack of Bangladesh as Hasan Mahmud got rid of both the openers.

The visitors continued to attack with wickets at regular intervals with just Steve Smith showing some resilience for the former World Test Champions.

Australia eventually folded out for 198 with player of the match Mahmud delivering a memorable spell (6/55) that set up things nicely for Bangladesh.

Bangladesh’s reply in the first innings with the bat was led by opener Tanzid Hasan’s magnificent century (101 off 197 balls) combined with Captain Najmul Hossain Shanto’s 84 off 126 balls.

A crucial contribution of 65 off 154 balls by Mehidy Hasan Miraz overshadowed Josh Hazlewood’s six-wicket haul as Bangladesh were bowled out for 426.

Mahmud continued to impress in the second innings as well as he removed the Australia openers cheaply again giving Bangladesh the dream start.

With a hefty lead lead of 228, spin played a significant role for the visitors as Mehidy took charge with a wonderful five-wicket haul.

Cameron Green (104 off 201 balls) waged a lone battle but the Shanto-led side gave little away as Australia were bowled out for 284 runs.

Requiring just 57 runs to win, the visitors got there with nine wickets to spare marking a significant moment in Bangladesh cricket.

The historic win came up after Bangladesh were skittled out for 54 runs in the warm-up match against Cricket

Australia XI.

Shanto, who was determined to put up a fight against a challenging Australia side, credited the team after the momentous victory.

‘Very happy, proud of myself and the way the boys played. We did lot of hard work,’ he said during the post-match presentation, calling it the biggest Bangladesh win across formats.

‘Earlier, five years ago, pacers didn’t want to play Tests. But we’ve been playing lots of Test cricket and they are giving importance to Test format.

‘They want to play, want to perform, want to be world-class. That is the mindset they now have.

‘This is the biggest win so far for Bangladesh in any format. Going forward, we want to do something special in the future.’

Parliament’s Committee on Public Finance (CoPF) has called for a review of the cost structure of Sri Lanka’s liquor security sticker system, questioning why digital codes are charged at the same rate as physical stickers despite their lower production cost.

The CoPF, chaired by MP Dr. Harsha de Silva, examined the cost, technical standards, and fiscal benefits of the system, which was introduced following the 2016 Budget to curb untaxed and counterfeit liquor and safeguard excise revenue.

The contract was awarded in 2017 to Indian company Madras Security Printers (MSP). The system was subsequently expanded in 2021 to permit digital inkjet codes to address difficulties in applying physical stickers on high-speed liquor production lines.

However, the Committee was told that the fee of $ 5.99 per 1,000 paper stickers is also charged for 1,000 digitally printed codes.

The CoPF noted that while initial infrastructure costs for digital printing machinery at bottling plants had to be considered, digital codes would generally cost less than paper stickers. It therefore called for a review of the existing pricing structure and the economic benefits accruing to the Government.

The Committee also called for the adoption of relevant international ISO standards and a Track and Trace system covering liquor products from production to the consumer, alongside a mobile application allowing consumers to verify product authenticity.

With a new tender process under consideration, the CoPF stressed that evaluation should cover price, quality, data security, and technical standards, with officers possessing the required technical expertise included in the evaluation process to guard against counterfeit stickers and imitation.

The Excise Department was instructed to study international practices and submit a report to the Committee.

In the latest July 2026 round of the Gallup-style ‘Mood of the Nation’ poll conducted by Verité Research, the Government’s approval rating moderated to 50%, following a post-election high of 65% in the previous February 2026 round. The polling partner was Vanguard Survey Ltd.

Perceptions of the economic outlook reduced sharply. Those who think the economy is ‘getting better’ declined to 42% from 64% in the previous round. Those who said it was ‘getting worse’ increased to 40%, and those who said they disapproved of Government increased to 31%, both from around 15% in the previous round.

Over half, 56%, said that the current economic conditions in Sri Lanka are ‘poor.’ Only 38% said conditions are ‘good’ or ‘excellent,’ in contrast to the previous round where a majority said so.

The net rating on the economic outlook and the state of the economy are averaged to create an Economic Confidence Index ranging from -100 to +100. This was -39 in mid-2024 but came into positive territory after February 2025, and declined to -8 in this round of polling.

The precise phrasing of questions and response percentages to two decimal points on this ‘Mood of the Nation’ survey are detailed below. They add up to less than 100 because some percentage said they did not know or refused to answer.

*Government Rating | ‘Approve’ 49.83% | ‘Disapprove’ 31.40% | In response to the question, ‘Do you approve or disapprove of the way the current Government is working?’

*Economic Outlook | ‘Getting Better’ 41.63% | ‘Getting Worse’ 40.29% | In response to the question, ‘Do you think that the economic conditions in the country as a whole are getting better or getting worse?’

*State of the Economy | ‘Good’ or ‘Excellent’ 38.00% | ‘Poor’ 55.59% | In response to the question, ‘Rate the economic conditions in the country today as either excellent, good, or poor.’

These questions were different from those in other recent national surveys published. For instance, the ‘Social Indicators Survey’ said it asked about satisfaction with specific political figures or groups, and reported satisfaction with the President and Prime Minister as 76% and 68%, and satisfaction with ‘MPs of the ruling party’ as 45%. The ‘Mood of the Nation’ survey, in contrast, asked about approval of Government as a whole, and got a result of 50%, which is close to the response on ruling party MPs in the ‘Social Indicators Survey.’

The regularly conducted ‘Mood of the Nation’ poll is part of the Sentiment Survey instrument of Verité Research, and enriches its regular macro-political briefings. The instrument allows other organisations to add survey questions to check the sentiments of Sri Lankans. More details on the polling results are available to clients.

The latest poll was administered between 11 and 30 July based on a nationally representative, multi-stage, randomised sample of 2,013 Sri Lankan adults from separate households. This survey was designed to have a maximum sampling error margin of ±2.21% for the full sample at a 95% confidence level. Error margins can be further affected by lapses that could arise in the implementation process.

Unlike most economic forums where the spotlight falls on Government policy and reform, a discussion on Sri Lanka’s economic future turned the focus on the private sector.

Verité Research Executive Director Dr. Nishan de Mel described the economy as a ‘racket’ marked by tax non-compliance and high real returns to those with financial assets, while Advocata Institute Chairman Murtaza Jafferjee said economic policy was effectively shaped for about 1,000 people and called for greater competition to change the status quo.

Speaking at a panel discussion organised by the Sri Lanka – Korea Business Council on ‘Sri Lanka’s Future: Forecast, Scenarios and Challenges,’ the two economists highlighted structural constraints facing the post-crisis economy.

Jafferjee argued that substantial macroeconomic reforms had already been undertaken but competition, productivity, and trade remained critical to growth, while Dr. de Mel cautioned that growth which failed to improve the lives of the majority would ultimately prove unsustainable.

Dr. de Mel said Sri Lanka spent less than most countries on welfare, with the International Monetary Fund (IMF) having to push the country to spend 0.6% of GDP, which he said remained below levels in many poorer countries.

‘We have a country-and this is why I said it’s a racket-the people who earn don’t pay taxes,’ he said.

He pointed to the substantial revenue generated from withholding taxes (WHT) as an indication of weaknesses in wider tax compliance. If taxpayers were already fully declaring and paying their liabilities, increased WHTs should largely be deductible against final tax payments rather than producing a substantial increase in overall revenue, he argued.

Dr. de Mel had earlier used the ‘racket’ description when discussing the impact of high real interest rates and taxation. He said low inflation alongside high interest rates disproportionately benefitted those with substantial savings, while people dependent on wages faced higher taxation, including 18% Value Added Tax (VAT), with Government revenue in turn used to service interest payments.

‘This is a racket in which people like us, you know, benefit enormously on the backs of those who see very little benefit of the economy,’ he said.

Jafferjee said Sri Lanka’s productivity problem was closely linked to inadequate competition and the influence of a narrow group of interests over economic policy.

He said, figuratively, that economic policy was effectively shaped for about 1,000 people, rather than referring to a literal list of individuals, arguing that policies had frequently been framed and implemented to accommodate incumbent interests.

‘The main determinant of productivity is competition,’ Jafferjee said.

At the same time, he rejected the perception that little reform had taken place following the economic crisis.

‘If not for this crisis, there are so many things that were fixed in this country on the macro side that would have never been possible,’ Jafferjee said.

He cited the new Central Bank law, Fiscal Management Act, and Public Debt Management Act as three crucial pieces of legislation, alongside changes in governance and tax administration. Significant technical assistance had also been undertaken as part of the IMF-supported reform program.

Jafferjee pointed to increased scrutiny by tax authorities of assets, including overseas accommodation, art, and gems as evidence of changes in revenue administration.

He identified productivity, competition, and the structure of the economy as key challenges beyond macroeconomic stabilisation and legislative reforms.

The State-owned enterprise (SOE) footprint was part of the problem, with State enterprises capable of distorting competitive neutrality where they operated alongside private businesses, he said.

Jafferjee called for more competition, liberalisation of imports and exports, a reduced SOE footprint, and greater foreign direct investment (FDI).

‘We don’t need FDI because we need capital, we need knowledge,’ he said.

Sri Lanka also needed to reconsider its approach towards domestic production and international trade.

‘What people misunderstand in Sri Lanka is there being a need to produce what Sri Lanka needs. What Sri Lanka needs to do is to produce what the world needs,’ Jafferjee said.

Contrasting Sri Lanka with East and Southeast Asian economies, he said successful export economies were also substantial importers and more integrated into international production networks. Sri Lanka’s economic complexity ranking had improved only from around 89 to 83, while Vietnam had advanced from around 65 to 45.

Trade agreements and economic diplomacy were important to expanding Sri Lanka’s integration with international markets, he said.

Jafferjee also identified the diaspora as a source of knowledge needed to diversify production. Sri Lankans who had spent long periods working in overseas companies could bring expertise, corporate networks, and knowledge of international markets, he said.

Several institutional changes to facilitate greater private sector participation were also progressing. Jafferjee said an insolvency framework was due to come into force in December, while public-private partnership (PPP) legislation was at an advanced stage and would enable greater private sector participation. Reforms were also envisaged for the commercial management of SOEs.

He acknowledged that the previous SOE restructuring process had failed to complete proposed transactions, but rejected the conclusion that reform efforts had been absent.

Jafferjee attributed the failure partly to efforts to ensure due process following previous Supreme Court decisions reversing privatisations where procedures had been questioned. The process had to balance transparency with practicality, he said.

The political timetable subsequently ran out ahead of the Presidential Election, while bureaucratic willingness to complete transactions diminished as the election approached.

Jafferjee also flagged structural labour constraints, noting that annual births had fallen from around 370,000 to about 240,000, around 20% of certain young working-age cohorts appeared to be missing largely due to migration, and female labour force participation remained around 30% despite women comprising a larger share of university students.

Large numbers of workers also remained in low-productivity employment, requiring improvements in skills and technology, economic restructuring, and greater competition, he said.

Dr. de Mel, meanwhile, said growth had to be assessed against its impact on living standards.

Poverty had more than doubled from around 14.3% to close to 29-30%, adding that even if it had since fallen into the lower 20s, the increase remained substantial. Available Employees’ Provident Fund (EPF) data showed 92% of formal private sector employees earned less than Rs. 100,000, he said.

He called for greater attention to healthcare, education, and other support structures for lower-income households.

‘Growth that doesn’t make the lives of people, the majority, better off, ends up, like in lots of places, biting back, even on those who benefit from that kind of growth,’ Dr. de Mel said.

He also questioned development priorities centred on expensive road infrastructure and increased private vehicle use while public transport remained underdeveloped.

‘Putting more roads at very high costs and more cars on the roads are not the solution,’ he said.

This article comprehensively examines the legal and financial consequences of failing to pay a quarterly income tax instalment on its due date, utilising the first quarterly payment deadline of 15 August as the primary example. It breaks down the immediate liabilities for interest and penalties, the procedural crystallisation of a “tax in default” status, the legacy civil recovery methods, the draconian new criminal prosecutions, and the crucial legal reconciliation between the conflicting administrative timelines within the Act

Transformation from civil debt recovery to criminal magistrate proceedings

The tax administration landscape in Sri Lanka has undergone a profound and highly aggressive transformation following the enactment of the Inland Revenue (Amendment) Act, No. 11 of 2026. By amending the core framework of the Inland Revenue Act (IRA), No. 24 of 2017, the State has effectively shifted the consequences of tax defaults from slow-moving civil debt recovery to rapid, uncompromising criminal Magisterial proceedings.

For taxpayers, ranging from corporate entities to individual professionals, understanding the precise statutory deadlines and the escalating consequences of missing them is no longer merely an administrative task, it is a critical necessity to protect personal liberty.

The Quarterly Instalment Mandate and the 15 August deadline

The foundation of Sri Lanka’s direct tax collection relies on a system of self-assessment and advance payments. Under Section 90 of the Inland Revenue Act, No. 24 of 2017, an instalment payer is legally mandated to pay their estimated tax liabilities in four quarterly instalments. To supplement this process, the Commissioner-General of Inland Revenue issued Circular No: SEC/2026/E/06 (Re – Revised).

As per the IRA 2017, the very first quarterly instalment for a given Year of Assessment must be paid on or before 15 August, if a taxpayer misses this midnight deadline, it triggers an automated, cascading series of financial and penal consequences.

Immediate financial consequences: The accrual of interest

The most immediate consequence of failing to remit the 15 August instalment is the automated levy of late payment interest. The law treats this interest not as a punishment, but as a mandatory financial charge to compensate the government for the time value of money.

Under Section 157(1) of the IRA 2017, if an amount of tax is not paid by the due date, the taxpayer becomes legally liable for interest on the unpaid amount for the period from the due date to the exact date the tax is finally paid. It is critical to note that there is absolutely no statutory grace period for the application of this interest. If the deadline is 15 August, interest begins calculating automatically on 16 August. This interest accrues at a specified rate of 1.5% per month or part of a month.

The 14-day grace period and the 10% penalty

While the law is rigid regarding the immediate accrual of interest, it provides a very brief administrative window for taxpayers to rectify an underpayment before applying punitive financial sanctions.

Under Section 179(2) of the IRA 2017, a person who fails to pay all or part of an instalment required under the Act within 14 days of the due date shall be liable to a penalty equal to 10% of the amount of tax due but not paid. Therefore, for the 15 August deadline, a taxpayer has until 29 August to settle the principal instalment amount. If the payment is not realised by this date, a flat 10% penalty is permanently attached to the outstanding liability, in addition the interest of 1.5% computed monthly, which starts running from 16 August.

The only exception to this penalty trigger is if the taxpayer proactively secured a formal extension. Under Section 179(3), where an extension of time has been granted under Section 151, the taxpayer shall not be liable to this 10% penalty unless the newly extended period expires without payment having been made. (however time extension does not waive off the interest calculation)

The crystallisation of “Tax in Default” status (Section 152) vs. ‘Due and Payable’

A common misconception among taxpayers is that missing the 15 August deadline instantly renders them a legal “defaulter” subject to State seizure or court action on 16 August. However, the IRA 2017 structurally separates a tax being “due and payable” from a tax being officially “in default.”

The payment demand notice

The creation of the formal “tax in default” status is governed exclusively by Section 152 of the Act. Section 152(1) dictates that when a tax is not paid by the date on which it became ‘due and payable’, the Commissioner-General may send a formal notice to the taxpayer demanding payment.

This demand notice is a strict legal instrument that must contain specific statutory elements, including the name of the taxpayer, the amount of tax, interest, and penalties payable, and an explicit demand for the payment of these amounts. Crucially, this notice grants the taxpayer a final 21-day procedural buffer. It is only when 21 days have elapsed after the service of this notice that the taxes owed by the taxpayer officially attain the legal status of “tax in default” in respect of any amounts still remaining unpaid.

Civil recovery methods and procedures (Chapter XVI)

Once the 21-day timeline under Section 152 expires and the taxpayer is officially in default, the Inland Revenue Department (IRD) is empowered to unleash the severe debt recovery mechanisms outlined in Chapter XVI of the IRA and the newly introduced criminal prosecution in the Magistrate’s Court.

1. The Automatic Statutory Lien

(Section 164)

The moment the default status is crystallised, the State automatically secures its interests. Under Section 164(1), where a taxpayer fails to pay a tax by the due date, a ‘lien’ in favour of the Commissioner-General is created on all property belonging to the taxpayer. This invisible legal hold covers the principal amount owing, together with all accrued interest, penalties, and costs of collection.

A ‘lien’ under Section 164 of IRA 2017 is a legal claim on a taxpayer’s property that automatically attaches once taxes fall into default (Section 152), securing the Government’s priority over the asset. It effectively blocks unencumbered transfer of the property and empowers the Inland Revenue Department to enforce recovery via court-ordered sale of that property to settle the unpaid tax debt.

2. Execution Against Property (Section 165)

If the default persists, the IRD can move from a passive lien to active seizure. Under Section 165, the Commissioner-General is authorised to levy execution against the taxpayer’s property, which ultimately leads to the physical seizure and sale of the defaulter’s movable and immovable assets to recover the debt.

3. Third-Party Debtors (Section 170)

One of the most effective civil tools available to the IRD is the ‘garnishee order’. Under Section 170, the Commissioner-General can issue notices to third parties, such as commercial banks, employers, or trade debtors, who owe money to, or hold money for, the defaulting taxpayer. This notice legally compels the third party to hold those funds in trust for the government of Sri Lanka and redirect the payments directly to the IRD to settle the tax debt.

Prior to the 2026 amendments, Section 163(2) empowered the Commissioner-General to institute proceedings in a competent civil court to recover unpaid taxes. In practice, however, this mechanism was often ineffective, as recovery actions could be prolonged by injunction applications and delays inherent in the civil litigation process, resulting in significant delays in tax collection.

The criminalisation of tax defaults: The 2026 Amendment and Magisterial proceedings

In response to concerns regarding the effectiveness of traditional civil recovery mechanisms, Parliament enacted the Inland Revenue (Amendment) Act, No. 11 of 2026, introducing a new enforcement framework that allows certain tax defaults to be pursued through proceedings before the Magistrate’s Court.

The amendment to Section 163 represents a significant shift in tax recovery. Prior to 1 April 2026, unpaid taxes were recoverable through civil proceedings in a court of competent jurisdiction, with the Commissioner-General’s certificate constituting conclusive evidence of the tax liability. Tax arrears were therefore treated strictly as civil debts.

With effect from 1 April 2026, however, the legislation introduces a new enforcement mechanism that operates through the Magistrate’s Court. Under Section 163(4A)(a), where a taxpayer fails to pay tax in default, the Commissioner-General may submit a certificate containing particulars of the default directly to the Magistrate, without first commencing civil recovery proceedings. Upon receipt of the certificate, the Magistrate is required to issue summons on the taxpayer to show cause why recovery proceedings should not proceed.

If the taxpayer fails to establish sufficient cause, the outstanding tax is deemed to be a fine imposed by the Magistrate for an offence punishable by fine only. As a result, the unpaid tax becomes recoverable under the procedures set out in the Code of Criminal Procedure Act, No. 15 of 1979, significantly strengthening the enforcement powers available to the tax authority.

Several features of the new regime reinforce its expedited nature:

Mandatory issuance of summons

Upon receiving the Commissioner-General’s certificate, the Magistrate must summon the taxpayer to appear before court and show cause why further recovery action should not be taken.

Restricted judicial review

Section 163(4C) limits the role of the Magistrate to enforcement. The court is not empowered to examine the correctness of the assessment or the statements contained in the certificate. The Magistrate is also prohibited from postponing proceedings for more than thirty days.

Evidentiary status of the certificate

Under Section 163(4H), the Commissioner-General’s certificate constitutes sufficient evidence that the tax has been duly assessed and remains unpaid. Accordingly, challenges relating to the accuracy or quantum of the assessment cannot be entertained in the Magistrate’s Court. However, where an administrative review or appeal is pending, the Commissioner-General is precluded from issuing the certificate.

Where recovery proceedings are successful, the outstanding tax, together with any applicable penalties and interest, is recoverable in the same manner as a court-imposed fine. Failure to pay the amount as directed by the court may ultimately result in imprisonment in accordance with the procedures applicable to the recovery of fines.

Key features of the 2026 Amendment

Jurisdictional shift: Recovery proceedings move from the civil courts to the Magistrates’ Courts, enabling faster enforcement.

Quasi-criminal enforcement: Unpaid tax may be treated as a fine imposed by the Court, with consequential enforcement measures, including instalment arrangements and imprisonment in default of payment.

Limitation override: Proceedings under Section 163 may be instituted notwithstanding the expiry of the limitation period specified in Section 161.

Additional recovery powers preserved: Proceedings under Section 163 do not prevent the Commissioner-General from pursuing other recovery mechanisms available under the Inland Revenue Act.

This amendment reflects a deliberate policy decision to strengthen tax collection by reducing procedural delays at the enforcement stage. While tax liability continues to arise under the revenue laws, the revised framework introduces a more coercive recovery mechanism that significantly enhances the State’s ability to collect unpaid taxes.

Conclusion

The enactment of the Inland Revenue (Amendment) Act, No. 11 of 2026 has fundamentally rewritten the rules of tax enforcement in Sri Lanka. Missing a quarterly income tax instalment on dates such as August 15th is no longer an issue that can be casually delayed and negotiated over years of civil litigation.

The moment the deadline passes, taxpayers are immediately hit with non-negotiable interest of 1.5% per month followed swiftly by a 10% penalty after just fourteen days. Once the Inland Revenue Department exhausts the 21-day procedural warning under Section 152 [6], the protections of the civil realm evaporate.

By harmonising the gatekeeper clause of Section 160 with the aggressive new powers of Section 163(4A)(a), the State is now legally empowered to drag defaulting taxpayers into Magistrate’s Courts, where unquestionable certificates of debt can rapidly culminate in criminal fines and imprisonment. Absolute, timely compliance is now the only shield against the formidable penal machinery of the modern Sri Lankan tax regime.