Opening a bank account. Getting a credit card. Registering a car, land or even a business. From November 1, Sri Lankans attempting any of these will need something else first: a valid Taxpayer Identification Number certificate.
Sri Lanka is about to make the tax system considerably harder to avoid – but it is also about to make the Taxpayer Identification Number, or TIN, part of the machinery of ordinary life.
From November 1, anyone carrying out a range of specified transactions will be required to produce a valid TIN certificate before the transaction can be completed. The requirement arises from amendments to the Inland Revenue Act and is now being put into operation by the Inland Revenue Department.
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The list is extensive. A TIN certificate will be required to open an account at a bank or financial institution, obtain approval for a building plan, register a motor vehicle, renew a vehicle revenue licence, register land or title to land, register a business, transfer shares in a Sri Lankan company or obtain a credit card. In a share transfer, both the seller and buyer will be caught by the requirement.
This is therefore considerably more significant than another piece of tax administration.
The TIN is effectively becoming a gateway through which Sri Lankans will have to pass before undertaking some of the most common financial, commercial and property transactions in the country.
The Government’s objective is not difficult to understand. Sri Lanka has long struggled with a narrow tax base, weak compliance and an economy in which substantial amounts of income and economic activity have remained outside the effective reach of the tax authorities.
Making a TIN necessary for transactions involving banks, vehicles, land, businesses and company shares gives the State something it has historically lacked: a much clearer trail connecting people to economic activity.
But there is an important distinction which must not become lost in the rush to expand the tax net.
Having a TIN does not, by itself, mean that a person owes income tax.
The TIN identifies the taxpayer within the revenue system. Whether tax is actually payable depends upon the applicable tax rules, income and circumstances. That distinction will need to be communicated clearly if the November change is not to cause unnecessary anxiety.
There is also a practical question.
The requirement applies against a backdrop in which TIN registration itself has already been made mandatory for resident individuals aged 18 and above under the relevant rules. The IRD provides electronic facilities for registration and verification, and says a printout of a successful online verification displaying both the NIC number and TIN can be accepted instead of the certificate for the specified transactions.
That should make compliance easier. But November 1 will test whether the administrative infrastructure is capable of handling the policy in the real world.
A person who needs urgently to open a bank account, transfer property, renew a vehicle licence or obtain a credit card should not discover at the counter that an error, delay or discrepancy in a government database has effectively prevented the transaction.
The responsibility therefore does not fall only upon citizens.
Banks, local authorities, the Department of Motor Traffic, provincial authorities, the Registrar General’s Department, the Registrar of Companies and credit-card issuers will all become part of the enforcement mechanism. The legislation places responsibility on the relevant officials to ensure compliance.
That represents a significant change in the relationship between taxation and everyday administration.
Sri Lanka undoubtedly needs a broader tax base. Those who are legally liable to pay tax should not be able to remain invisible while compliant taxpayers carry a disproportionate burden.
But widening the tax net also places an obligation on the State to make compliance simple, accurate and accessible.
From November 1, the TIN will no longer be something many Sri Lankans can regard simply as a number belonging to the taxman.
It is becoming one of the keys to participating in the formal economy.
