By Captain CoCo
Taxation is necessary. Tax compliance is necessary. But complicated tax compliance is not necessary.
Captain CoCo has been watching the introduction of the new Statement of Estimated Tax (SET) arrangements in Sri Lanka. And Captain CoCo has a simple question for the Hon. Minister of Finance:
Why should taxpayers carry the burden of administrative problems?
SET itself may have a valid economic purpose. Paying tax progressively during the year can help the Government maintain a steady flow of revenue and may prevent taxpayers from facing one large payment at the end of the year. But even a good idea can create a bad experience if it is introduced without proper preparation, communication and transition arrangements. That appears to be the concern with the present SET implementation.
The revised Circular SEC/2026/E/06 was issued on 6 August 2026, while taxpayers have only a very short period to understand and comply with the new requirements. Taxpayers may have to calculate liabilities using information that is not yet finalized, understand different methods, prepare declarations and deal with additional schedules and procedures.
Captain CoCo asks:
- If SET is really beneficial to the economy, why were taxpayers not properly prepared for it in advance?
- Why cannot the tax administration explain the system clearly before taxpayers are required to comply?
- Why are taxpayers expected to follow revised instructions issued only days before a deadline?
And most importantly:
- Why should taxpayers suffer because of administrative delays, communication gaps or implementation weaknesses?
This is where the responsibility of the Commissioner General of Inland Revenue becomes critical. The Commissioner General is not responsible only for collecting revenue. The head of the tax administration also has a responsibility to ensure that taxpayers can understand and comply with the system being administered. Issuing a circular is not the end of the job. A properly managed tax reform requires preparation, consultation, clear communication, taxpayer education, adequate transition time and practical systems for implementation.
If taxpayers are confused, the administration must respond. If procedures are unclear, they must be clarified. If the deadline is unrealistic, it must be reconsidered. If taxpayers have already acted reasonably under the information previously available, they should not be penalized simply because the rules were subsequently changed.
An ordinary taxpayer does not have a tax adviser sitting next to them every day. A small business owner has customers to serve and employees to pay. A professional has a business to run. An entrepreneur has cash-flow pressures. Many taxpayers cannot afford to pay professional advisers simply to understand what the tax authority is asking them to do. Every additional form, calculation, declaration and technical requirement therefore creates another cost.
And that cost eventually reaches the economy.
More complexity creates more compliance costs. More compliance costs create more frustration. More frustration can reduce trust. And reduced trust can weaken voluntary compliance. That is the opposite of what a modern tax administration should be trying to achieve.
Sri Lanka needs more people entering the formal economy, not fewer. It needs businesses to grow, entrepreneurs to invest, professionals to expand their activities and taxpayers to voluntarily comply with their obligations.
Tax administration should therefore make compliance easier, not harder. If SET is genuinely necessary, then make it simple. Explain it well in advance. Publish one clear and finalized set of instructions. Use plain language. Provide practical examples. Give taxpayers adequate time. Make submission digital. Remove unnecessary paperwork.
But if the economic benefits of SET do not justify the additional compliance burden, then there should be the courage to pause, review and reconsider the system. Perhaps the simpler annual tax payment system should be retained, at least until a genuinely taxpayer-friendly quarterly system can be designed.
A strong tax system does not have to be complicated.
Simple does not mean weak. Strict does not mean confusing. Digital does not mean difficult.
Captain CoCo therefore has a message for both the Finance Minister and the Commissioner General:
Please open your eyes and look beyond the revenue number. Look at the taxpayer standing behind it. Sri Lanka needs tax revenue. But Sri Lanka also needs healthy businesses, confident entrepreneurs, productive professionals and ordinary citizens who are willing to participate in the formal economy. Do not make taxpayers fight the tax system before they can pay their tax. Make compliance clear, simple, predictable and hassle-free. Because the real success of a tax system is not measured only by how much tax it collects. It is measured by how willingly people comply.
And Captain CoCo has one final warning: