18 April, 2024

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Taxation Without Accountability Is Not Sustainable

By Jehan Perera

ජෙහාන් පෙරේරා

Jehan Perera

The increase in the price of petrol and diesel has been accompanied by the removal of the QR Code quota system for the purchase of fuel. The elimination of long lines of vehicles, and people, outside of the fuel stations that existed a year ago is one of the signs of normalization that is credited to President Ranil Wickremesinghe and his government. The tripling of fuel prices over the past year, which has now increased further, would be a key factor in reducing demand and eliminating the need for the quota system. The price hikes would also make it more attractive for foreign companies to sell fuel in Sri Lanka and make their profits. On the other hand, the impoverishment of the general population by the tripling, if not more, of most prices since the economic crisis commenced is a central feature of the present reality. The increase of petrol and diesel prices will impact on other costs which will impoverish the people still more.

The devastating impact that the price increases in the country have had on the living standards of the people is brought out by survey after survey. A national citizens’ survey led by the United Nations Development Programme (UNDP) found more than 55 percent of the population to be vulnerable across three dimensions — education, health and disaster, living standards — and 12 indicators, including school attendance, physical condition [of health], unemployment and indebtedness. In effect, the survey showed that more than 12 million people out of Sri Lanka’s 22 million population have been badly affected by the crisis and remain vulnerable amid claims of a recovering economy. People are being forced to sell their assets in order to maintain a minimal standard of living.

In another survey, the United Nations Food and Agriculture Organization (FAO) has reported that the projected cereal production for 2023 is expected to fall below the five-year average due to the ongoing obstacles in farmers’ access to necessary inputs. The surging prices of key food items are also playing a role in constraining the economic accessibility of food for a significant number of households. Although the majority of households in the country maintain food security, including through taking loans and sale of assets, certain areas continue to grapple with pockets of food insecurity. In yet another report, the World Food Programme (WFP) has provided statistics from the Crop and Food Security Assessment Mission 2023, revealing that approximately 3.9 million Sri Lankans are moderately afflicted by food insecurity.

First Problem 

Accompanying the permanent increase in the price level are high levels of indirect and direct taxation that have been imposed on the people. This is a double blow. A statement by A Collective of Trade Unions and Civil Society Organisations in Sri Lanka said that “In addition to lowering the direct income tax threshold to rob lower middle-class households of more of their monthly pay packet, regressive indirect taxes (VAT)almost doubled to 15% between June and September 2022. As a result, the poorer sections of the population shoulder the burden of taxation today. Food inflation shot up to almost 95% in September 2022. With headline inflation at 57% at the end of last year, real wages have fallen by nearly 50%. The World Bank estimates that 500,000 jobs have been lost as of 2022.”

The latest announcement by the government is that it will be imposing wealth, inheritance and property taxes. This might seem justifiable as will only affect those who have such assets to be taxed. However, this will also affect a significant proportion of the middle class people as well who can barely make ends meet and who may well have put all their assets into constructing a home and are repaying loans as a result. As indicated earlier, the UNDP survey showed that about 55 percent of the population have been badly affected by the crisis and remain vulnerable. Those who have professional qualifications or are willing to take up the challenge of going abroad to work are doing so in large numbers for the reason that they cannot meet the increased level of expenditures with the income they are left with after taxation.

The first problem with the government’s efforts to find adequate resources to finance its budget deficit is that it is going after those who are already in the formal economic system. It is deepening the tax net to catch those even with relatively low incomes. It is those who are in the formal economic system, and law abiding, who are being taxed and made to pay up. However, there is a large number of people who remain outside of this formal economic system and make vast amounts of money and are able to evade the taxation of their income and wealth, which may even be parked abroad. An example would be the case of the space satellite brought up by Opposition Leader Sajith Premadasa in parliament. Even though the cost of this venture is more than that of the Indian rocket that went to the moon, when the query was raised it was said to be privately funded. There is a need to investigate if taxes were paid by those who funded the project and on the sources of their income

Second Problem 

The protest movement of a year ago whose suppression is now complete with the government having broken it through the security forces had three objectives in mind. The first objective was to send the then president home. The second objective was to send the 225 parliamentarians home. The third was to effect system change. There was a spirit of idealism captured by those of all ages and regions who came to public places to show their solidarity with the common cause. This idealism continues to live. A survey conducted by Verite Research has shown that approximately 60 percent of the public do not believe that the protest movement led to the wishes and aspirations of the people being fulfilled. In addition, 51 percent of the respondents said that corrupt and bad governance needs to be fixed in order to rebuild Sri Lanka, one year since Aragalaya protestors vacated Galle Face Green on 10 August 2022.

The second problem with the government’s efforts to find adequate resources to overcome the economic challenge has been the absence of any system change. The US Revolution of 1776 was on the slogan of “No taxation without representation.” In Sri Lanka it is taxation without accountability. The majority of people are paying the price for the economic collapse caused by a smaller group who are being spared the burden of being held accountable or asked to bear at least a part of the burden and instead continue to remain in their positions. Everything in the past remains intact including abuse of power, corruption and mismanagement. These all remain, and if hearsay is true especially with regard to corruption, the situation is even worse than before. The president and prime minister may be notable exceptions, but their financial cleanliness is no relief to the people who see ongoing depredations by others in power, whether it is in respect of emergency purchases of medicine, energy or fertilisers.

The buildup of frustration and anger in society is growing by the day and every price and tax increase that casts an additional burden upon the people, which is not met by an equivalent sacrifice or demonstration of accountability by those in government is bound to escalate those negative sentiments. The direction the country is traveling does not appear to be positive but negative. It needs to be kept in mind that command responsibility lies on them all for mismanagement and corruption. There is evidence that frustration and anger is being turned inwards and violence within families is increasing. So are robberies and killings. This frustration and anger can also take more collective forms against those of other communities. When elections can no longer be postponed, the frustration and anger will manifest itself in the manner of voting and if elections continue to be postponed it can even lead to a renewed protest movement less idealistic than the one that came a year ago.

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Latest comments

  • 3
    0

    good analysis. Ranil had the same problem during the so called Yahapalanaya days. I remember Patali boasiting in the parliment saying they borrowed money to settle loans, no one asked why then the loan burden increased during yahapalanaya tiem. It increased because the ministers borrowed high interest commercial loans and payed covered the low interest loans. (you can verify this with the commercial borrowing figures for the last 10 years). Now also Ranil is squeezing the balls of the law abiding citizens and gathering crooks around him who are tax defaulters and fleecing the coffers and the state banks. The country is running on the remmitance of expatriates and the tourism. The fundation of open economy is on export earnings which has been the dream since JRJ times. It never picked up thanks to our corrupt political culutre which we are still trying to resuscitate and carryon.

  • 3
    1

    You have an excellent title. Will All what you say, is not going to solve multitude of issues of the country.System change should happen PRIOR to holding elections.
    We need ONLY the genuine clean honourable people to contest the elections;
    National lists MPs should be highly qualified and not be from the losers list.
    I call those who waste Public funds as Parasites. There are too many of them. MPs posts should be non pensionable and ex Presidents and PMs should not be a burden for mother Lanka.

  • 3
    0

    “In addition, 51 percent of the respondents said that corrupt and bad governance needs to be fixed in order to rebuild Sri Lanka……”
    ~
    What, only 51%? It is an astonishingly low figure. No wonder Sri Lanka is a highly corrupt country. A cynic might even wonder whether 49% of the respondents are corrupt!  

  • 2
    3

    “The buildup of frustration and anger in society is growing by the day and every price and tax increase that casts an additional burden upon the people, “
    This is the prize for the people of this land by IMF and Ranil.

  • 2
    2

    Many of us readers have been critical of Jehan Perera’s listless article. I have carefully read only the first paragraph here.
    .
    However within that paragraph, may I quote this sentence:
    .
    “The price hikes would also make it more attractive for foreign companies to sell fuel in Sri Lanka and make their profits.”
    .
    I hope that all readers realise that it is a Chinese firm that is now franchised to sell fuel. China is not a producer of petroleum, so this one of the many examples of how we have given up trying to manage our affairs.
    .
    Panini Edirisinhe of Bandarawela (NIC 483111444V)

    • 4
      0

      SM,
      I need clarification.
      1.Are you against Chinese firms doing business here?
      2. Are you aware that their petrol is 3 rupees cheaper?
      3.Are you against cheaper petrol?
      4. Did you know that China is the 5th biggest oil producer, but a net importer?
      5. Don’t you think you should check before you rant?

      • 1
        0

        Would the answer be like
        (1) y
        (2) n.a.
        (3) n.a.
        (4) n
        (5) N

      • 0
        0

        Dear OC,
        .
        I am now tired of reading his ridiculous comments. You may have noticed that my posts have gradually reduced to CT. so does my friend, Human Touch.
        Most likely wearing a sarong but standing on his head.- is clearly the case with SM.
        If a man is mad, does not care much about anything. That is the reality of SINHALA MAN who does not know sinhala langauge.
        This man has been behaving like no others today…. … If posted recently there is no consistency in his comments.
        In retrospect, SM is the biggest prankster we’ve ever experienced in CT. Sorry for the person’s downfall.

      • 1
        0

        old codger

        In this island racism has been and is the destructive force in the past. In addition now we have invented and invited ourselves the regional rivalry between (among) powerful nations as if our diplomacy is superior to the rest of the world. However we are paying the price for being great practitioners of Racism and great game.

        I beg you to put some sense into practitioners of Racism and players of Great Game as we have seen both bringing destruction to the country, people, region, … The people deserve better, including the 6.9 million.

        There was a protest in front of British High Commission. There were two new members of Saffronistas, and some usual rent a mob. What did the mob want from the Brit, cancel channel 4’s licence perhaps. A protest against British Imperialism(Why SJ was missing?), perhaps a lesson in democracy and free speech, …. perhaps well paid for their time spent in front of the High Commission.

      • 1
        0

        OC,
        1. China is not doing business but business + Corruption+ invasion.
        2. 3 Ruppes cheaper but the loss for the country 3 times.
        3. Cheaper is not always good. A good example is Organic Fertilizer with bad bacterias.
        4. Not only China but also many other countries in this list.
        5. Check with what?

        • 0
          0

          Ajith,
          “2. 3 Ruppes cheaper but the loss for the country 3 times.
          3. Cheaper is not always good. A good example is Organic Fertilizer with bad bacterias.

          What exactly is this “lossto the country?
          Can you prove that Sinopec petrol is bad? Actually, it doesn’t come from China, but Singapore, from where IOC petrol also comes. Now, don’t ask me if Singapore produces oil.
          “5. Check with what?
          There is Google. All you have to do is type in “Chinese oil production “
          We must not judge things simply because of their country of origin. A lot of people talk about crappy Indian buses, for example, but ask any bus owner, and he will tell you why they prefer those buses. Not everything made in China is low quality. Have a look at the computer you are typing on.

          • 0
            0

            oc
            You cannot convince the paranoid
            Such fixation with China possesses many Tamil nationalist minds– some to the point of an obsession.
            *
            “Not everything made in China is low quality.”
            China has passed that point over two decades ago the way Japan did by late 1950s.
            *
            Do not be surprised to hear that the Chinese dilute petrol with seawater.

    • 0
      0

      Not “Jehan Perera’s listless article.”
      .
      This article is actually quite good.
      .
      So, instead of what I have typed, please read,
      .
      “Many of us readers have been critical of Jehan Perera’s listless articles.”
      .
      I have seen old codger’s request for clarifications. It will be done, but not now.

  • 3
    1

    In a democracy ……… occupying the highest office of the land without a vote, without a people’s mandate/approval is not sustainable.

    Great lovers of Democracy who were fighting for democracy during the Rajapakses ………. are now fighting for autocracy during Ranil’s …….

    Is it any wonder …….. the country is in a mess?

    It’s not just the leaders that are responsible for the mess since Independence ……… the mirror holds the answer ……….



    “I’m starting with the man in the mirror
    I’m asking him to change his ways
    And no message could’ve been any clearer
    If they wanna make the world a better place
    Take a look at yourself and then make a change”

    Then he made the change ……. went and buggered little boys

    Who can you trust?

    All the mirrors are cracked in Bandarawela …… at 2.33am ……..

    The Greeks invented it, the Thomians perfected it, and the Royalists put the icing on the cake.

    Ranil thinks, the whole country is a school load of little boys ……. he is buggering left right and centre: he is in his element.

    To understand the adult, study the schoolboy …….. and his teachers.

    Kill Panini! ……… Not Bill.

  • 1
    1

    we need more taxes.The minister has announced today that mattala airport has lost a billion rupees in 2023.The expenses are 1.2 bln while the income is 200 mln.he say every effort is being made to make it viable.At this rate how long minister?What about that proposal to sell it to india?Also we are bleeding in the airlines industry with air lanka.What about that proposal to bring back emirates group?

    a billion rupees isleaking in one of our reservoirs.with another 100 wastages we need more taxes.

    • 1
      0

      “the income is 200 mln”
      How does an empty airport generate even that much?

  • 2
    0

    Taxation without Accountability Is Not Sustainable

    Taxation is easy to impose and accountability the president cannot control he will lose supporters as he need his inner circle. A man without peoples vote is a man without protection

  • 3
    0

    “The tripling of fuel prices over the past year, which has now increased further, would be a key factor in reducing demand”
    Dr.JP has got it backwards. Price increases are only a symptom. The disease is the 60% reduction of the real value of the rupee.

  • 4
    2

    …The first objective was to send the then president home. The second objective was to send the 225 parliamentarians home. The third was to effect system change…..

    If the second and third did not happen, that is because of the faulty constitution. As long as the present constitution is in force, system will never change. So we need first system change. How can that be done?

    We need a regional governance as a strong filtering mechanism to prevent plundering of wealth. A central govt. which will consist of some of the members of the regional govt. appointee Ministers and a President. However the pillars of power will be vested with Statutory bodies sans control by politicians. This mechanism can be fine tuned to become a very effective infrastructure to keep corruption totally out. Just three regional govts. would be sufficient. No need of Pradeshya Sabawa or Palaath Sabawa. Power devolvement could be discussed.

    This kind of system change will not tolerate inefficiency, crimes and frauds. Under this system politicians role will be confined to policy making only. Why not consider such a change? Nagananda spoke how such changes can be effected.

    • 1
      0

      “The first objective was to send the then president home. The second objective was to send the 225 parliamentarians home. The third was to effect system change…..”
      *
      The first was a catchy phrase.
      The second and third were after thoughts.

  • 3
    2

    It is the good time to split in to two states in one country. Why do we have to be burden on each other. We have to force in to contribute some thing which we don’t benefit it at all.
    .
    Instead of Hambatota air port should have expanded the Pallali air port.cost must be far less than for a brand new air port.
    These all approved by experts. That’s why we called them S modoyos .
    .
    Also they should shift the Damulla vegetable market. to Anuradapura or vavunia.asking for changes what changes just follow the old system thats all..
    .
    Look at the plight of the people. No accountability even if they do they wanted Mahendran back.no Panama papers,etc Nirupama gone to CID given statement thats it.chapter closed.no follow ups how do they managed to got so much wealth etc..
    Sathosa ginger/garlic exposed what happned now he is the senior spokesman for the govnt.
    .
    Kandy Mullas adamant not to give 13A putting a fear, but not police powers, but you have Sinhala army ,sinhala navy sinhala air force then how could be..
    To progress put the house in order..
    Bangladesh is building nuclear power plant.
    We build vihares.
    Sadu sadu sadu

  • 3
    0

    Privately funded space satellite satellites? !!! Unbelievable! Immoral! But they have no conscience nor shame.

    • 2
      0

      the rajapakshes need a place to go one day.

  • 3
    0

    Jehan often sounds like the violinist on the steeply upended deck of the Titanic, and his attempts to give credibility to the regime is like re-arranging the deck chairs on that ill-fated liner for a selfie opportunity. You need far greater substance for gathering your wits and calling the utterly contemptible mess by its real name. Surely, nothing short of a popular revolution will displace these major criminals from the bastions of power, don’t you think?

    • 1
      0

      Jehan often sounds like the violinist on the steeply upended deck of the Titanic,
      He may sound, but he has purpose: a purpose that changes with the side of the slice that is buttered.

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