Sri Lanka’s IRD, Excise Dept sign MoU to prevent tax evasion, money laundering

ECONOMYNEXT – Sri Lanka’s Inland Revenue Department (IRD) and the Excise Department (ED) entered into an agreement to share intelligence information aimed at preventing tax evasion and money laundering, the Finance Ministry said on Wednesday.

The Memorandum of Understanding (MoU)  will see a joint mechanism and conducting parallel investigations over the information they share.

“In parallel with Sri Lanka’s third mutual evaluation against money laundering, terrorist financing, and proliferation financing, offenses relating to tax evasion.. and offenses falling under the Excise Ordinance have been designated as ‘Unlawful Activities’ related to money laundering with effect from August 4, 2026, via the Prevention of Money Laundering (Amendment) Act,” the Finance Ministry said in a statement.

It said the new MoU will establish a mechanism to act collectively against such offenses by optimizing state resources.

Through this initiative, the government expects to achieve its revenue targets by expanding audits against tax evasion, minimizing illicit financial flows, and streamlining revenue collection, the Ministry said.

Historically, institutional silos and a severe lack of inter-agency data integration between the IRD and the ED created systemic loopholes that enabled widespread revenue leakage.

Operating as isolated entities with incompatible record-keeping systems, the two revenue-collecting bodies could not cross-verify transactional, production, and tax filings in real time.

This operational disconnect allowed non-compliant businesses and manufacturers to report low turnover figures to the IRD for direct tax assessments while simultaneously under reporting production volumes or duty liabilities to the Excise Department.

The absence of automated intelligence sharing restricted the state’s capacity to conduct parallel financial audits and limited visibility over illicit financial flows, tax evasion schemes, and black-market trade in excisable goods, analysts say.

Consequently, they say, uncoordinated oversight severely weakened tax compliance enforcement, eroding the government’s tax-to-GDP ratio and hindering the optimal realization of national revenue targets. (Colombo/October 21/2026)