The Impact of Tax Avoidance in the context of Economic Development in Sri Lanka: A Critique of Income Tax and Tax Avoidance

Abstract

Income tax is a tax on income. The very important financial obligations of the country are bound by the revenue of the country. Tax avoidance and Tax evasion are very similar words which could be more affected to the Tax on Income. Tax avoidance is a crucial situation in the tax system, because Levy of income tax has social effects too, besides its effect on economic life and the development of the community. Mainly it engages public purpose as it is for public and referred to public welfare activities, salaries of public servants and debts. In this context, this paper argues that the existing legal framework applicable to define the concept of income and Tax avoidance. This argument is supported mainly referring to the relevant Sri Lankan legal authorities. Thus the objective of this paper is threefold; first is to explore the scope and objectives of these legal frameworks; the second is to identify their deficiencies and the third is to make appropriate recommendations to improve the existing legal frameworks. The methodology adopted in this research paper entails two research methods: literature review and comparative legal analysis.