1 July, 2022

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New Tax Policies Must Be Complemented With Expenditure Rationalization To Ensure Social Protection

By Eran Wickramratne

Eran Wickramaratne MP

The Prime Minister’s office announced new revenue policies that is a positive step towards reinstating the tax regime of the previous administration. While we welcome this reversal in policy, it must be noted that the initial tax cuts in 2019 by this administration was the first policy mistake that led to Sri Lanka’s first ever sovereign default and the economic crisis that has upended our country. Tax revenue dropped to a mere 7.7% of GDP by 2021 as a result of the disastrous tax cuts. Sri Lanka was cut out of the international capital markets as a result as credit ratings downgraded the country amidst the COVID-19 pandemic.

Sri Lanka has faced an issue of declining revenue despite continued growth for decades. This decline exacerbated an already precarious budget deficit and successive governments conveniently ignored this growing problem. Under the previous administration, we took this issue head-on with technical and financial assistance from the International Monetary Fund (IMF) as part of the Extended Fund Facility (EFF). As State Minister of Finance, I oversaw the implementation of the new Inland Revenue Act (IRA) as part of our fiscal consolidation program. One of the primary objectives of the IRA was to reduce room for discretion by ensuring transparent, objective tax criteria thereby reducing space for corruption and tax evasion. The Act minimized tax exemptions and loopholes thereby broad basing tax collection. It replaced open ended untargeted tax concessions with targeted investment related concessions. The Act also attempted to simplify the complex tax structure to facilitate compliance and increase penalties for non-compliance.

We are glad that the administration has finally heeded the call of the opposition parties, economists, and business leaders and reengaged with the IMF. However, the road to recovery is a long one and any more delays will only bring more hardship to the most vulnerable sections of our society. That is why these tax policies must be complemented with expenditure rationalization so that social protection mechanisms can be expanded. The need of the hour is to protect those on the brink of abject poverty and not to protect the rich from paying their fair share of taxes.

*Eran Wickramratne M.P., Former State Minister of Finance

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Latest comments

  • 4
    0

    M.P. EW,

    Yes, as the rich holding all the country money have no chance of creating jobs and mobility for the country at this time, they should certainly also be taxed in lieu of VAT that is a tax that will create starvation for the Masses.

    The Lankan rich did not even create investment potential at the time Gota gave them tax incentives. Actually, I think they did invest, but outside the country on the Rakapaksan alternate economic offshore system. There should be a vast prosecution campaign via world bodies to get this stolen money back.

    • 2
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      RTF,
      Good morning
      “The Lankan rich did not even create investment potential at the time Gota gave them tax incentives”
      The problem is GR/MR did not state clearly nor was it offered for FDI!!
      They just gave it saying it was being done to keep their election promise!
      Very good way to “govern a country”!!
      They never mentioned or made it a condition for the FDI? Foolishness!
      See what happened to the “Good Faith”, election a War Winning President, hoping effective and Good Governance??!! Zilch!!
      Good faith seems ‘not to work even with Spouses’
      Then how doesit work with Strangers!!??

    • 7
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      Ramona, the prime reason why Gotta gave tax cuts to those super rich is ONLY because the businesses they run are ALL funded by Rajapaksha family with their 15 year loot!! You see, any business run by Dhammika Perera, Dilith Jayaweera, Ishara Nanayakkara, Asoka Pathirage and the likes (heck! the list is too long!!!) are mostly funded with Rajapaksha loot. These R idiots who only had experience of running a curd business in Hambanthota with looted cows from the neighborhood thought they can get super rich by giving tax rebates to their own businesses!! To see the country is bankrupted within 2 years of the elections!!

    • 3
      1

      Dear Eran,
      .
      You are one of the few politicians I have a greater respect.

      Alone when the slogan go up – ” we dont want all 225″ – the names instantly come to my mind are yours and that of Harsha, to be honest. Harsha s profile is going viral right at the moment – in the same time, I cant stop thinking about ” Kanda Mahatha Man (fat pig) of Ranathunga family – or the like politicians”- it is really a sorry sight.

      Without taxes being imposed – economies of the countries would not move an inch forward. That is what we have experienced it today – looking at Rajapakshes that cheated the nation again and again – by curtailing the taxes that you brought in.
      :
      I am in full agreement with you above ” The need of the hour is to protect those on the brink of abject poverty and not to protect the rich from paying their fair share of taxes.”
      all taxes shoudl be brought back, but not pushing the poor from frying pan to the fire.
      VAT should not be increased to unaffordable levels but those earn huge salaries and business men and women should be taxed…… middle east paradises are oil countries and they can allow their nations TAX free environments- however, our countries would not surivive if the avenues for state revenues would not further be available.

    • 0
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  • 5
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    Sri Lanka has faced an issue of declining revenue despite continued growth

    What use of having 225 parliamentarian for declining revenue and people are having one meal a day
    If you other country are facing the same having a literacy rate highest in world no responsibilty.

    • 0
      0

      “…people are having one meal a day”
      Don’t be hasty.
      Ranil declared two meals a day come September.

  • 4
    11

    “New Tax Policies Must Be Complemented With Expenditure Rationalization To Ensure Social Protection”
    —-
    If ‘Yahapalana’ Government practiced what Eran is preaching, probably the country might not have faced the present economic crisis.

    Eran has forgotten how the ‘Yahapalana’ Government ate $$$s by:
    • Importing luxury vehicles
    • Allowing MPs to import duty free luxury cars
    • Importing bullet proof vehicles for the Bosses
    • Allowing importers to import all sorts of junk
    • Paying millions as compensation for cancelling international agreements
    • Paying millions as compensation for stopping Port City project and later starting it
    • MPs going all over the world for study tours (Shopping trips)

    • 12
      2

      Eagle mutt Eye, are you bloody joking? Do you load up on some local Kassipu before you start writing all this garbage on CT? Idiot, the Rajapaksas were notorious for driving expensive cars and living a lavish lifestyle of the wealth of the country. Oh boy, this mutt EE is a piece of work.

      • 3
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        Tftn
        The points made about ‘Importing luxury vehicles etc.’ are valid.
        We have to severely curtail consumption of luxury items.
        No import should be encouraged unless it can generate significantly more wealth than it costs.
        This is not something that the IMF will prescribe, for it wants us to import luxury goods.

        • 8
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          SJ
          “This is not something that the IMF will prescribe, for it wants us to import luxury goods.”

          Is it so? Do you have any paperwork to your statement?

          • 8
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            Ajith

            Mao’s b***s carrier types:
            “This is not something that the IMF will prescribe, for it wants us to import luxury goods.”

            The problem is ours, our politicians, the crooks, …… created shortages for foreign currency. Therefore it is our responsibility to ban all luxury items. I never heard of IMF forcing countries to buy luxury cars spend their foreign exchange on luxury goods.

            People should know what they are talking about.

            • 1
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              Here goes one who imagines that he knows what he is b*******ing about!

            • 1
              1

              The article is pure 100% Chinese propaganda.

          • 2
            0

            Confessions of an Economic Hit Man
            by John Perkins

        • 4
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          SJ, you missed the intent of my message. It is not about the rich buying with their own money, it is about these village country ass mutts (Rajapaksas) who amounted to nothing in life until they became the leaders of this country robbed and pillaged the country’s wealth to buy these toys while the masses starve.

          • 0
            0

            tftn
            My response was to an important point that arose.
            Whether it is the rich or the corrupt, import of luxury items is wasteful and leads to further waste.
            Recovering all the loot by not just the family but others as well is not adequate to put the economy on a sound footing.
            A great degree of frugality is needed and wasteful practices cannot be forgiven because they are by the rich.
            *
            I trust that you will not disagree.

            • 0
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              SJ,
              “A great degree of frugality is needed and wasteful practices cannot be forgiven because they are by the rich.”
              Like Dhammika Perera’s Rolls Royce.
              Now the man seems to have taken Pohottuwa membership, and the mask of honestly earned wealth has slipped.

    • 15
      3

      Blind Eagle
      .
      Why don’t you write about the faults or mistakes of the present government which are a direct consequence of the present crisis?
      Are you not ashamed to mention these things you have listed as excuses when they are minuscule in comparison to those perpetrated by the real culprits: Mara and his band of bandits?
      How much money do they pay you to keep making a fool of yourself?
      If I were an admin of CT, I would ban you for having so many dislikes on CT.
      I would go ahead and ban anyone with a net -1,000 dislikes so that CT will become a community of sane and rational people.
      Anyone who is so shameless like you, does not belong in a forum like this.
      .
      How I wish you went to help the melachcha Rajapaksas on the 9th of May, you would have learned a valuable lesson just as Mahinda Kahanagama did. I think you are overdue for such a thrashing too.
      .
      This also applies to Soma, Champa, Lester, A14455, and all such rabid dogs.

      • 4
        2

        HT,
        .
        It is just EE type is sitting on his/their little brain/s. Pera is said to be EE s Alma mater, unfortunately, he behaves no different to Mahinda Kahandagama (https://www.youtube.com/watch?v=QZavI01gGl4) and anyone close to Medamulana pimps.
        .
        EE and his kind of ilk would never get it even if his/their lovely ones would have been caught by MURDER machines set up by Gota the executionist/incumbent president, on broad daylight, to the manner Jamal Khashoggi whose was dismembered immediately after the murder- there EE or the like would find even new theories to defend them arguing -” his good excuse would very likely be srilanken markets nowadays lack Wild pig meat- PORK, and we have to supply meat by hook or by crook”.

        EE would not see it” – the kind of BRAIN WASHING that had been applied would not be curable… EE is just one single example only. Please look around – we have whole lot of them there down. Yet today, they would not be without seeing the mustache of BP, Mahinda and stay being servile as LAB RATs that are injected for some invitro experiments.

        tbc

        • 3
          2

          continuing

          This is why I repeat, 9th May was soft and it will surely repeat soon – the first victim will likely be -SHIRANTHI Rajapakshe for various reasons. If any innocient parties were caught by that riot on the 9th, I am sorry for that, but SHIRANTHI and NAMAL Baby should learn lessions not to provoke the youth again. In Jamal Khashoggi murder, Jamal was named after ” sacrificial animal ” hours before he was caught and dismembered.

          I think A14455 has shown few signs of progress to the civilization, atleast to some extent. But no guaranee how long it would last. Champa is unique- and the kind of psychiatric patients are being experimental models to psychologists and psychiatrist in their research projects – these days more than in the past. Champa as a self proclaimed historian, would continue praising PUTIN next day more than s/he did it sofar. Get well Champa… that is all what I can say looking back to your nature.

          • 1
            0

            LM
            Whatever retribution the people dish out to the Mara clan, they deserve it.
            They created the problem, now let they bare the consequences.
            Especially that inhiman bastard Shiranthi Raja-bastard.
            Gaani wa allala polowe gahanna ona, kudu wenna.
            Basil, Mara, Namal, Gota, all must be dealt with mercilessly.
            This family is a curse worse than War.
            Now we can see how far deception has gotten everyone. Both the deceivers and the deceived.
            We must somehow get out of this disaster one way or another.
            By the way Mara and co. must be made to vomit the money they have stolen.

  • 4
    1

    The man who headed the Jarapalanya Government is heading the present beleaguered government. So there are no surprises. The urgent need of the hour is to recover the stolen taxpayer money from the Rajapakshe Family which can go a long way to feed those who are going hungry.

    • 3
      2

      HP,
      .
      think about it again Mr HP…… thinking is a hard work- one of my teachers always repeated pointing the finger at ARAB students….
      ….. but please it is worth doing so…
      – what is acutally the need of the hour ? to listen culprits and silly criticisms of doing the due providing the most essentials to the people.
      .
      The grave situation is like – the patient is now in ICU caught by a panel of experts/surgeons – as time is flying – priorities should be – to make the decision in the very efforts of rescuing the life of the patient.Those who being away would criticise again and again…..
      However, our peoples have no hearts to focus on the priorities. ….
      Whole lot of people in this country were kept in dark by MR-Cabral-GR-et al for the last 2 years, — they stay on singing PRAISING songs texts pleasing Rajapkshe animals…. even if the facts based on the ECONOMY was long known to even AL students.
      .
      Yet today, former SLCB governor is not arrested – for having misled the nation deliberately. He did it again and again.

      An amount of 500 mio of dollars were paid off in Jan 2022 settling an credit installment, reiterating ” we will have enough funds to gap up all the debt payments”….. Journos leave Cabral out of their new headlines today… how come ?

    • 0
      1

      “The urgent need of the hour is to recover the stolen taxpayer money from the Rajapakshe Family”

      Saudi Arabia and China should pay for the damage they did to Sri Lanka. Saudi Arabia is the origin of Wahhabism, the same ideology employed by ISIS. Saudi Arabia brainwashed vulnerable S. Lankan Muslims with Wahhabi ideology by paying for the construction of mosques with so-called “radical” preachers. The Muslims responsible for the Easter bombings were indoctrinated at these mosques, built on land in the East given as bribes by “Batalanda” Ranil to win votes. We should not blame ordinary Muslims, who warned the security agencies about extremists in their community. “Batalanda” Ranil ignored the warnings. Second, China is responsible for COVID-19, which decimated the tourist industry, already down 70% after the Easter bombings.

    • 0
      1

      Agree on recovering and those in need. Lenders now insist too so we are stiched.
      But try that and you will see roadblocks…….first blame lenders not the borrowers and never the fiddlers .
      No point asking Eran what Yalpanaya govt did ,he was blocked as well but is at least speaking up.
      Diversion is the name of the game ……passport ques getting longer than gas ques !!

  • 0
    0

    EW, All this empty talk about tax policies and social protection will not impact the gas and diesel queues which grow longer daily and stay overnight and may be the next 2 days as well. Whatever input of dollars, it will be robbed and the queues will continue for ever. MR chased. Imprison the rest too. Then only will the dollars be available for the peoples needs. Have to expect an unhealthy explosion soon, not benefitting the kaputas.

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