By Rasika Jayakody –

Rasika Jayakody

The interim budget statement, presented to Parliament by Finance Minister Ravi Karunanayake on Thursday, was election, oriented in more ways than one. At the same time, it is different from the election, oriented budget presented by former President Mahinda Rajapaksa in October, last year, just days before he announced the presidential election.

Finance Minister Karunanayake’s budget strongly challenges the neo-liberal outlook of the United National Party, making it look like a “populist” and “people-friendly” party rather than a “business-friendly” party. All in all, a noticeable cut-down is visible on overall state expenditure, but recurrent expenditure has increased significantly due to salary hikes and other benefits that have been given to strengthen the ‘poor’ and the ‘vulnerable’. The budget, a brainchild of Prime Minister Ranil Wickremesinghe, has focused a lot on bringing in more revenue through innovative measures on the tax front while curtailing expenses.

The most significant aspect of the interim budget is the way it taxes the large corporates and big businesses. It is clear that the UNP-led government, just a few months away from the general election, is trying to create a new avenue of income through Robin Hood policies. For instance, under Supergain tax, any company of which the profit exceeded Rs. 2000 million will be taxed and this will include all the large corporates who are considered as ‘long-standing friends’ of the UNP.

If we look at names of the corporate giants who have been hit with the “supergain tax”, we can understand the picture better.

Largest corporates in the country such as John Keells Holdings, Distilleries, Ceylon Tobacco, Carsons, Bukit Darah, Aitken Spence, Nestle, Oversea Realty, Access Engineering, Lanka IOC, Lanka Lubricants, AHPL, HHL and Tokyo may have to pay the supergain tax. On the other hand, banks and financial firms such as Commercial Bank, HNB, Sampath, Ceylinco Insurance, DFCC, Seylan, NTB, NDB, Central Finance, People’s Leasing would be among companies that may have to pay the tax.

Economynext, a Sri Lankan business website, also reported that guaranteed prices on milk would hurt Nestle, Coco, Lanka Milk Foods and Lamb, while Nestle and LMF would be hit by a reduction of margins on milk powder.

Vehicle assembly plants, a group that neglected their income tax payments during the previous regime – has also come under heavy taxes and Rs. 12 billion revenue is expected through prompt payments. At the same time, Casino business-owners should also play a “one-time tax” of Rs. 1 billion to the government and they were asked to make the first payment before April.

In fact, the one-time taxes came as a total surprise to the business sector of the country. They were of the strong belief that a UNP-led administration would create a friendly environment where the businesses are concerned. On the contrary, the UNP-led government, in its interim budget, has strongly deviated from its core neo-liberal policies by directly squeezing money out of the fat cats to give benefits to the poor.

Many believe this is not a UNP budget, but a JHU-Maithripala budget – two parties in the government who have strong links to grassroots level. But it is important to realize that this budget comes from the UNP which is trying to walk a tightrope between populist expectations, political exigencies and remedial measures in terms of resuscitating the country’s economy.

What will happen at general election?

The UNP’s biggest worry is that it still doesn’t have a strong support-base at the grassroots level of the Sri Lankan electorate. Had UNP National Leader Ranil Wickremesinghe contested the recently held presidential election, the party would have suffered a landslide defeat with grassroots level strongly gravitating towards his opponent, former President Mahinda Rajapaksa. That was why the UNP made a unanimous decision to back Maithripala Sirisena who was the Common Candidate of the opposition. It was Maithriapala Sirisena’s unexpected emergence that played a key role in bringing President Rajapaksa’s decade long rule to an end.

The country’s is just a few months away from a general election and at this juncture, it is clear that the UNP holds a slight edge over other political parties contesting the general election. The SLFP, in all likelihood, will contest under its traditional symbol with Nimal Siripala de Silva as its Prime Ministerial candidate. At this point, there is no reason to believe that former President Mahinda Rajapaksa will be allowed by the party to contest the general election as President Maithripala Sirisena and Chandrika Bandaranaike Kumaratunga wield a lot of influence over the decision-making bodies of the Sri Lanka Freedom Party. In addition to that, Leader of the Opposition Nimal Siripala de Silva too will believe that Rajapaksa’s presence will pose a threat to his Prime Ministerial candidature – a long-standing dream of the politician who has represented Badulla for nearly two and a half decades in Parliament.

Some are of the belief that Mahinda Rajapaksa will contest the forthcoming presidential election from a separate party with the support of his close allies such as Wimal Weerawansa, Udaya Gammanpila, Vasudeva Nanayakkara and Tissa Attanayake. Although Attanayake has expressed willingness to re-join the United National Party, the party is not in a mood to accommodate Attanayake. The former UNPer has now reduced himself to a “political orphan”. A website, run by Wimal Weerawansa, a few days ago reported that former Defence Secretary Gotabaya Rajapaksa too will play a prominent role in this new political camp. However, former President Rajapaksa has publicly stated that he will not resort to any measure that will divide the Sri Lanka Freedom Party.

The Jantha Vimukthi Peramuna is going to emerge as a major alternate force at the Parliamentary election with the Leftist party building up a strong support base among sections of the urban middle class. JVP Leader Anura Kumara Dissanayake played a key role in this new trend which transformed the traditional ‘public perception’ of the party. Realistically speaking, the JVP is likely to be the real king makers of the new Parliament and no party will be able to make crucial decision without the support of the JVP. Meanwhile, certain media reports, quoting former Army Commander General Sarath Fonseka said, the Democratic Party too would contest independently at the parliamentary election.

It is against this backdrop that the United National Party is preparing for the Parliamentary election. The UNP, needless to say, is hoping for a fresh mandate that would allow it to operate independently in Parliament with Ranil Wickremesinghe as the Prime Minister. The party will be more than happy, if Mahinda Rakjapaksa contests under a separate party, dividing the SLFP votes. However, the UNP needed a ‘big boost’ to its image before the parliamentary election and that was why Wickremesinghe and Karunanayake decided to present an uncharacteristically populist and a people-friendly budget that can be really appealing to the grassroots level. In fact, the UNP decided to compromise its business-friendly garb to form a more stable government after the next Parliamentary election.

The newly formed government is likely to suffer its first setback with Civil Aviation State Minister Faizer Mustapha deciding to resign from his ministerial portfolio. Mustapha, who is displeased with the appointment of Ajith Dias as SriLankan Airlines Chairman, is to officially resign from his ministerial portfolio on Monday. Mustapha’s possible resignation is completely based on a personal matter and has nothing to do with the 100 day program or the core principles of the Maithripala Sirisena government.

Mustapha is going to resign from his position on the grounds that he was kept in the dark about the appointment although he was the duly appointed state minister to oversee the subject. Apparently, Mustapha wanted to appoint someone else as the Chairman of the national airline and his attempt was blocked when Wickremesinghe appointed Dias as the Chairman of SriLankan Airlines, replacing former President’s brother-in-law Nishantha Wickremesinghe. Ajith Dias is a prominent business leader in the apparel sector and a highly respected figure among the business community of Sri Lanka.

Musptapha’s resignation from his position is not a sudden move. Last Saturday, he sent a letter to President Maithripala Sirisena, threatening to resign from his post over the manner in which the Chairman of the SriLankan Airlines was appointed. He also said that Cabinet Minister Arjuna Ranatunga’s authority over the ministry has “belittled” his role as the State Minister. It was learnt that President Sirisena had tried to pacify him, but no action was taken to address the concerns raised by Mustapha.

Mustapha has told his close associates that he will stick to his legal career, after resigning from the ministry. Although he was elected to Parliament from Kandy district in 2010, he was appointed as a Co-organizer of Colombo Central electorate by former President Mahinda Rajapaksa. He extended his support to the Common Opposition before the presidential election in January, this year, after his negotiations with the Rajapaksa camp failed.