The Inland Revenue Department (IRD) and the Excise Department have signed a Memorandum of Understanding (MoU) to work together against tax evasion, money laundering and related financial crimes.

The agreement sets up a joint mechanism for sharing intelligence and for conducting parallel investigations based on information exchanged between the two departments.

It aims to expand audit operations that target tax evasion, reduce illicit financial flows and streamline revenue collection procedures. It also seeks to make better use of state resources in meeting government revenue targets.

The MoU was signed at the Ministry of Finance at 9.00 a.m. on Wednesday, 21 October, under the patronage of Deputy Secretary to the Treasury A. N. Hapugala.

Commissioner General of Inland Revenue Rukdevi Fernando and Commissioner General of Excise M. B. N. A. Pemaratne signed on behalf of their departments.

Background

The agreement follows amendments made under the Prevention of Money Laundering (Amendment) Act No. 16 of 2026. With effect from 4 August 2026, the amendments classify tax evasion offences under Section 189 of the Inland Revenue Act, and offences under the Excise Ordinance, as unlawful activities in the context of money laundering.

In practical terms, money obtained through such offences can now be treated as proceeds of crime under the money laundering law, which widens the powers available to investigators.

The IRD collects income tax and other taxes administered under the Inland Revenue Act, while the Excise Department regulates and collects duties on items such as liquor and tobacco. Until now each department has worked within its own legal mandate, and the new MoU provides a formal channel for the two to exchange information.

Government revenue collection has been a central concern in Sri Lanka since the economic crisis of 2022, and revenue targets are part of the country’s programme with the International Monetary Fund (IMF).

What it means

For businesses and individuals, the arrangement means that information held by one department can be used by the other. A discrepancy found in tax records may now prompt questions from excise officials, and the reverse is also possible. Taxpayers and licence holders may therefore see closer scrutiny of their declared income and activity.

For honest taxpayers, the stated aim of stronger enforcement is to raise revenue that would otherwise be lost, which the government relies on to pay for public services. Keeping accurate records and filing returns on time remains the simplest way to avoid problems.

The departments did not say in the announcement when the first joint audits would begin.