It is clear that taxation had initiated simultaneously with emerging the concept of “State” of human Civilization. People who lived in the ancient time in the world had given a part of their earnings to the state. Furthermore states in the world had been implementing various tax systems from the ancient time to collect revenue for the functions of the states.

According to the historical information, there was an organized taxation system in Sri Lanka since Anuradhapura Era. Ancient inscriptions and literature reveal us    more information about old tax collecting activities in Sri Lanka since 3rd century BC. Kothgalkanda inscription (250 BC) at Kandalama, Perimiyankulama  inscription of king Vasabha,   Mihinthala inscription of king  Mihindu IV, Badulla (Hopitigama) pillar inscription of king Udaya IV, Polonnaruwa Gal-Potha ( Stone Book) inscription of king Nishshankamalla,  Godawaya inscription of king Gajaba I, Mahawanshaya, Samanthapasadikawa,  Poojawaliya and the book ( An Historical Relation of the Island of Ceylon) written by Robert Knox,  for instance,  provide  more facts on ancient taxation system.

Tax enacted on the use of water for agriculture, named as “Dakapathi” (Diya Beduma / Dakabaga) was a very old tax prevailed since 3rd century BC.  “Bojakapathi” was an another main tax in the ancient time and it was imposed on behalf of cultivation in king’s land. In addition to that there were a number of taxes,   such as Madaran, Matharamajibaka, Kathi Ada, Ketoo Kanaba, Mahawara Badda, Melatsi Badda, Nilapandura and Irawariya etc. in ancient Sri Lanka. One sixth of the yield should be given to the state as the tax. Dakapathi, Wannaku, Bojakapathi, Maha Patuladda and Thota Bojaka were the officials who had been appointed for collecting taxes in the past. According to Godawaya pillar inscription of king Gajaba I (114 – 134 AD), the customs duty was levied in the Godapawatha (Ambalanthota) harbour and the designation of the officer who had been appointed for collecting customs duty was “Mahapatuladda”. Robert Knox’s book which was published in 1681 provides information about various types of taxes, different rates of taxes and the way the taxes were collected in the time of Kandyan Kingdom. Also, taxes had been collected thrice a year in that time according to Robert Knox.

Then ancient tax system of Sri Lanka had been changed by the British colonial rule. The taxes, such as, “Marala Badda”, “Anga Badda”, “Pol Badda”, “Maha Badda”, “Thuwakku Badda”, “Para Badda”, “Balu Badda”, and “Sereppu Badda” were collected in colonial times in Sri Lanka. But some of them were very oppressive to the people.

However present tax system has been introduced in the British colonial era. Income tax ordinance No 02 of 1932 was a milestone in Sri Lankan tax law and income tax was introduced by above ordinance in 1932. The main tax authority in Sri Lanka, Department of Income tax was established in the same year and the first commissioner of the Department of Income tax was Mr. N.J.Haxham.

Stamp Duty was introduced under the provision of Stamp Duty Ordinance No. 22 of 1909 in Sri Lanka.  Since 1933, the stamp duty had been collected by the Department of Income Tax. There after Prevailed tax system has been amended time to time and various tax authorities have been established at present.