Over Rs.108 billion in disputed tax revenue remains locked up in an unresolved backlog at Sri Lanka’s Tax Appeals Commission, a scathing new audit report has revealed, exposing severe administrative paralysis and crippling delays within the state’s tax dispute resolution mechanism.
According to the National Audit Office’s performance report for the Finance, Planning and Economic Development Ministry, for the year ended December 31, 2025, there were 626 unresolved appeals registered with the commission.
The audit highlighted that a staggering 48 percent of this total disputed value is concentrated in just 20 appeals, each exceeding Rs.1 billion, which cumulatively amount to Rs.52.05 billion.
Furthermore, 133 appeals, each with a disputed value between Rs.100 million and Rs.1 billion, remain unresolved. These cases account for another Rs.46.59 billion, representing 43 percent of the total disputed tax value of unresolved appeals.
The Auditor General issued a sharp critique regarding the commission’s failure to conclude the cases in a timely manner. The report observed that between 2011 and April 24, 2026, the hearings had commenced for 611 registered appeals, yet determinations had not been issued, tying up Rs.107.2 billion.
“Even though the hearing of appeals has been completed, there are 146 ‘Reserved Cases’ up to December 31, 2025, where the final determination has not been given,” the Auditor General noted, pointing out that these cases involve a disputed tax value of Rs.34.1 billion.
The audit explicitly stated that spending prolonged periods at the final stage of the appeal resolution process, without completing the task, was a “failure to achieve the expected performance level”.
The statutory framework governing the commission also drew scrutiny. Section 10 of Tax Appeals Commission Act No. 23 of 2011 stipulates that a determination must be given within 270 days from the commencement of an appeal hearing. However, the Auditor General stated that the commission has failed to submit the necessary amendments to make this provision mandatory.
The audit also exposed severe administrative dysfunction, stemming from the delays in key appointments. The report revealed that while the chairman and members are appointed for three-year terms, some members appointed by the ministry secretary refused to accept their positions, while others resigned in less than two months after receiving their appointments.
This leadership vacuum triggered a complete breakdown in operations. Following the vacancy of the chairman position, the tax appeal hearing committees that concluded on November 03, 2025, were only reinstated on January 26, 2026.
The Auditor General noted that taking nearly three months to appoint a chairman resulted in the tax appeal resolution process being “completely paralysed” during that period.
The consequences of this administrative gridlock were immediate and costly. Because the term of the previous appeal resolution body concluded on August 31, 2025 and new members were not appointed in a timely manner, the scheduled hearings for 120 companies between September 01 and September 23, 2025—involving Rs.31.62 billion—were delayed.
In addition, 26 new appeals, concerning 13 companies, with a disputed value of Rs.1.86 billion, were referred to the commission during this inactive period.
The digitalisation efforts to streamline the commission’s operations have also stalled. Despite allocating Rs.2.5 million in 2025 and Rs.2 million in 2026 for the development of a much-needed database system, the audit observed that the software had not been completed even by May 20, 2026.
