Inland Revenue investigating direct VAT payments to combat fraud
Sri Lanka’s tax authority, the Inland Revenue Department, has confirmed to the Committee on Pubic Accounts that it is considering enforcing split VAT payments. This would require consumer payments for taxable transactions to pay the VAT element direct to the Inland Revenue. Similar measures are applied around the world, and spreading to Europe.
Split payments is a measure to combat VAT fraud. It removes the opportunity of suppliers charging VAT and then disappearing without declaring and paying it to the tax authorities. This is sometimes termed missing trader fraud.
UK VAT split payments is being piloted shortly. Italian split payments has been in operation for several years on B2G transactions only.
