21 June, 2024

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Taxes, Swiss Bank Accounts & The Chinese Cafe

By Ravi Perera

Ravi Perera

They were at the next table, a typical urban middle-class family; fortyish parents, two boys and a girl, perhaps in their early teens. The children were excited, their occasional treat, a night out at the Chinese cafe! The musty smell, dusty carpets, over used plates, worn-out cutlery or the surly waiters did not matter, nothing could detract from their joy at the café experience

About three decades ago, before Chinese restaurants mushroomed all around Colombo, this was a glamorous eating place; those were simple times. Unlike many such places now, it was then owned by an ethnic Chinese, domiciled here. To be taken there was a treat for us kids; chicken and egg soup, firework prawns, sweet and sour pork, seafood fried rice concluded with caramel pudding was a meal to be savoured. Times have moved on, apparently ownership of the place had now gone to a local. Operating without the original culture, the restaurant has deteriorated steadily, nondescript food, indifferent service, remaining competitive only by keeping the pricing relatively low. I myself was there to pick up a takeaway order, doing it more for nostalgia than any other reason. Predictably, the order was not ready, while waiting I ordered myself some green tea.

From the manner the father ‘studied’ the menu, discussing every item with his wife, it was obvious the family were cost sensitive. Not wanting to mar their enjoyment of the outing, the children were ordered Coca-Cola for a drink, while the parents asked for a glass of water. When the bill was presented after the meal, I could observe the dismay in the father’s face, questioning the waiter closely on the taxes, nearly 20% of the total! 

As prices go today, it is not an expensive restaurant. Seeing the joyous anticipation in the faces of the children and the regretful dissuasion on the part of the parents I felt a twinge deep within me. In most countries the cost of having a meal at such a restaurant will not break the bank, petty cash would do. 

While the entire nation groans under an unbearable tax burden, this particular segment, the salaried middle class, has been delivered a mortal blow by the new taxes. It is a class particularly vulnerable; nearly all their financial transactions are on record, hence subject to tax at every stage. By definition, middle class needs extend beyond basic human requirements; they probably pay a substantial rent or carry a mortgage on their house, maintain a vehicle, have to dress appropriate to their social standing, education and other expenses of the children take much of their earnings. 

Having studied up to tertiary level or beyond, they belong to the nation’s intelligentsia, alive to the realities of the larger world, conscious of the depth of our plight today. For that very reason, the middle class is the most anxious; their children’s education, future careers and the state of the country they will eventually inherit fills them with deep misgivings. 

On a not too distant day, they, the parents, will have to retire from their employment, falling back on their pensions or retirement benefits. In a failed Third World country, retirement is the beginning of a perilous journey. The purchasing power of the Sri Lankan rupee is declining steadily, bringing down with it their living standards day by day. As utilities and other essentials rise in cost, pensions do not even pretend to keep up with the cost of living. Meanwhile, falling standards of education and the overall poor management in the country, has brought about a gradual deterioration of all facilities, today Sri Lanka far behind the expected quality in nearly every service sector. A grim reality; a currency whose purchasing power is depreciating steadily, while even for those with the money, the quality of the goods and services that could be acquired with that money is dropping before their eyes. Once thought of as a period of ease and comfort, their retirement years could well turn into an ordeal, an anxiety driven life of hardships and scarcities. 

We are told that the heavy taxes now imposed, were demanded by the International Monetary Fund (IMF) as a condition for their stabilizing program. It is sound policy to have a reasonable tax regime, the State needs money to fund the services it attempts to provide, and in the case of Sri Lanka, also to pay its debts. However, there should be balance and fairness in taxation too. A turn-over tax applied across the board impacts every citizen regardless of his financial status. While everyone is thus taxed to pay for the endless blunders of our rulers, it is a damning fact that there are a few fat cats living in this country paying little or no tax ,enjoying luxurious lives.  

A fundamental requirement for the financial integrity of a country is that every citizen ought to be able to explain his source of income. When a man is unable to explain his wealth, we can reasonably assume its source is illegal, what is sometimes referred to as black money. The enforcement agencies of the Sri Lankan government have been singularly inept in nabbing these dwellers in the shadowy world of black money; wheeler dealers, black marketeers and commission agents. While looting the country bare, they have corrupted our public sector, distorted policy and hoodwinked the people.

Flushed with dirty money, they purchase our politicians and policy makers with ease. Thus corrupted, the policy makers then change the rules to suit the bribe giver, leading to another round of profiteering for the scoundrels, and more black money flows in. Take Sri Lanka’s energy sector for an example, it is commonly known that we are in the choking grip of a cabal of local agents of foreign suppliers of generators, fuel and coal suppliers. These middle-men lobby the Sri Lankan decision makers on behalf of their foreign principals; working old boy networks, club connections or resorting to blatant bribery, ending up dictating policy on energy.  

While the available technologies do not allow for complete freedom from fossil fuels, many countries are actively promoting substitution of renewable energy wherever possible. In our country it is the opposite, solar panels even for a house is beyond the reach of an average person, something close to two million rupees. It seems the energy middlemen are well set here. For them to make money, the idea of renewable energy must be undermined. They use multiple methods – debunk all sources of renewable energy, highlight their initial costs, ensure a high rate of taxes to make them unaffordable, thus pushing the country towards total dependency on imported energy sources. Making Sri Lanka hostage to imported fuel/coal for energy sources has effectively killed our future, a country which will never be free of environmentally harmful and financially prohibitive energy sources.

The Sri Lankan government agencies, including the Tax Department, may feign ignorance, but these foxy opportunists are hiding in plain sight, flashing their new found money, pretending high society status through hollow social work or high profile sporting bodies, rearing fancy pets and perfecting their golf swings! 

Our public servants are distinguished by their embarrassing provincialism. Feverishly active if the quarry is a tax dodging boutique keeper or a bribe taking policeman; when the suspect however is a city slicker, a name dropping old boy of an old school, drives a Benz car or even a frequent flyer, the public servants are culturally stymied. 

Fortunately for this country, out there in the world are far more intelligent and thorough-going investigators, working tirelessly to shed light on the movement of black money in the global financial system. The networks through which this ill-gotten money moves around are labyrinthine, requiring a high level of financial sophistication to unravel. Black money is a global threat, but when it is extracted from a poor Third World country, a fatal impairment.

Not so long ago the international media were able to expose the names of secret bank account holders at Swiss Banks and other tax havens. Bankrupt Sri Lanka also made the list. The names that the Pandora Papers revealed, for instance, sent shock waves through an incredulous public. Many high-profile individuals (and sometimes even their spouses) have been stashing black money in these secret bank accounts. We can be certain that these monies did not go out through legal channels from this country. As far as we are aware most of the Sri Lankan holders of Swiss bank (secret) accounts do not have any businesses overseas and in fact have lived in Sri Lanka all their lives. Some of them are not even in any known business in this country. By merely being the middlemen working in the shadows, they go from financial meagreness to fabulous wealth overnight.

These monies stashed away in foreign tax heavens holds the mystery of our energy policies, the opaque processes behind the sale of State assets and the political elasticity of our leaders; a system which has become a big swindle through and through.

That there will not be an all- out investigation of the source of these funds, non–declaration of the funds or its subsequent hiding in a tax haven, is not a surprise. By funding political campaigns, contributing to individual politicians and bribing public officials, the agencies of the State can be silenced or moved to inaction. During the public hearings into the affairs of the infamous Perpetual Treasuries we learnt of the generosity of such operatives towards politicians of both sides.

Obviously, these scoundrels pay no taxes, their ill-gotten money is hidden away in tax havens.

No such facility is available to that father treating his three little children to some Chinese food.

To burden that middleclass family with an unbearable tax while letting economic assassins cock a snook at the country is surely unacceptable.

In simple words, this country has a system which cannot be allowed to stand any longer.

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Latest comments

  • 17
    0

    There is no middle class in SL now. It’s those who ‘have’ & the ‘have nots’. Many of my old colleagues are now in, or coming to, retiring age, although, a few have been granted a few more years by the management. It is a crucial period for most with children still in education & nest eggs meant for higher education are no longer adequate to see them through or have already been spent on essentials to survive these difficult days.
In UK, income above a certain threshold is taxed at 20%, 40% for moderate income & 45% for higher earnings, including Inheritance & Capital gains tax but, maybe, not everybody pay their fair share due to loop holes exploited by tax consultants employed by the rich. Trump has paid no tax, or in some years less than that of a low income earner, & has the audacity (or stupidity) to boast that it was because he is ‘smart’ but, by & large, everybody pays something.
    Until GR’s stupid tax policy, only the wage earner paid tax which was deducted at the source but hardly any businessmen paid any. Some years ago, a small businessman I knew came on the cross hairs of the IRS with his success & was investigated but an IRS official moonlighting as a ‘tax consultant’ sorted the tax problem for a percentage of the tax saving.
    Cont.

    • 16
      0

      Cont.
      In the end, my friend did not pay a cent in tax but paid his consultant a fee of Rs 300k. We are all now paying for years of tax dodging by a few (quite a lot if all private practice doctors & backhanders are taken to consideration)

      UK has increased the retirement age to 66 (from 65) but it is not forced & unless the employer can prove that an employee can no longer contribute due to age, there is no mandatory age to retire. Brits are now working longer due to economic hardships but many are waiting for the day they can stop working & in France, riots have broken out because the retiring age has been increased from 60 to 64. What a contrast, people in developed countries are waiting for the day to retire, whereas, in SL, we are happy to work till we drop dead, yet, unable to work even a few more productive years.

  • 15
    0

    This article is timely. It is multi-facted, so deserves several comments. I’ll start with one.

    The author says, “It seems the energy middlemen are well set here. For them to make money, the idea of renewable energy must be undermined. They use multiple methods – debunk all sources of renewable energy, highlight their initial costs, ensure a high rate of taxes to make them unaffordable, thus pushing the country towards total dependency on imported energy sources. Making Sri Lanka hostage to imported fuel/coal for energy sources has effectively killed our future, a country which will never be free of environmentally harmful and financially prohibitive energy sources”.

    Lanka is blessed with oodles of sunshine, something that denizens of latitudes closer to the poles can only dream of. If I may be permitted to use the vernacular, why the fu#ck should there be ANY tax on the importation of solar panels? Who is responsible for this?

  • 8
    0

    Should a country emphasise and target Direct tax (based on payroll or income), or Indirect Tax such as BTT, Cess and such like?? This is a common dilemma, and where there is tax dodging as there clearly is in Lanka, the focus by successive governments is to target the latter.

    Taking the example of the middle class family struggling to come to terms with settling a modest bill, our hearts should go out to them and their ilk. But is there a way out of the crippling BTT that adds up to 25% or more?

    Methinks there is. I have seen evidence of the wealthy (whether organically acquired or by stealth), paying upto rupees six hundred thousand (LKR600,000) for a meal for four at the Ministry of Crab, a high end seafood joint in Colombo. Now how much did that middle income family pay for their modest Chinese style meal? The answer should be clear……. what Lanka needs is a progressive turnover tax, based on the total bill for food, so that those who flourish their well or ill-gotten money are made to pay more tax for bills exceeding what is considered a reasonable amount, and a mich lower or zero tax on bills below a defined threshold.

    Over to the tax accountants and internal revenue policy makers in the government, if any of you miserable buggers are listening.

  • 5
    0

    Most of our Members of Parliament run multiple businesses and does anyone know howmuch tax they pay to the country. Rajapaksa family is one of the worlds richest family and does any one know how much tax they pay? This is Sri Lanka’s tax policy. IMF not worried about the rich but focused on only making ordinary people to take the burden and become poorer and poorer.

  • 16
    0

    Thanks for the great write-up Ravi Perera. The more they collect taxes from the working-class, the more the service sector of the country will stall (masses of working class won’t have the money to pay for services…restaurants, schools, medical care, taxi fare etc.). Profitable Businesses will close down. And it will happen very quickly……all in a matter of a year or two. But Ranil does not have the brains to install a progressive upward tax as he feels the ultra-rich will spend their money to create more business venture. Trouble is, Sri Lanka is not USA where the ultra-rich actually create more innovation for new job-creation (weapons for war included). Our Lankan ultra-rich will only kill more crabs.

    • 12
      0

      And some of these ultra-rich don’t look like the fat-cat politicians at all (although there is direct association – Ranil’s great and innovative idea of free- enterprise). No, they are the elite smart-talking, evangelical bespeaking (of all denominations…..money secured in holy alternate accounts to be rolled tax-free on the backs of the global workers), fashion-parade attending, high-society sandals-after-$100-pedicure wearing (still looks funny), with children and grandchildren in Western universities. That’s how innocent they look. And all the while, our poor Sinhala people will be hopping about the island extolling their Sinhala Buddhist genes. Clever educated Sinhala youth who understand the true situation will be water-cannoned, tear-gassed, imprisoned, tortured, killed, and permanenly barred from employment

  • 10
    1

    Thanks, Ravi Perera.
    !/2
    .
    As you say,
    “this country has a system which cannot be allowed to stand any longer.” Brilliantly written as is usual with you, getting us into the very human situation with which most readers will empathise.
    .
    “A typical family” of our sort. There undoubtedly are people who are worse off, but we seem to be like those people in the Chinese cafe. We have felt that we could live decent lives, raise children to be intelligent and sensitive, who would take pleasure in the thrills of dining out as a family, whilst wishing others well.
    .
    Within the family you have captured the contrasts between the generations well. Joy for the Coke-drinking children; anxiety for the water-sipping parents. The taxes added to the bills don’t by themselves drive us to fury, but when they are contrasted with the scoundrels who flaunt the dirty money that they hold on to with no taxes paid, we realise how unfeeling are the manipulators.

    • 11
      1

      2/2
      .
      This is creative writing of the highest quality
      , even if it unlikely to be remembered beyond the five days for comments. The challenge is now for us readers. Will we now comment on this with greater passion than sleepy Sinhala_Man can muster? And these name-dropping city-slickers, sporting their old boy ties, bring in unsuitable technologies, because with such fraud come the commissions which must not be allowed to succeed.
      .
      Ravi, you clearly know about the Pandora Papers and Perpetual Treasuries. You have written courageously and creatively. These accolades that have brought praise for you must attract ever greater attention to the corrupt systems that must be dismantled.
      ,
      .Panini Edirisinhe (NIC 483111444V) currently in Maharagama

  • 5
    1

    There are, reportedly, politicians who single handedly ‘own’ in excess of fifty liquor outlets. Some have multiple arrack distilleries. They are allegedly into nefarious activities including human smuggling, narcotics and prostitution. Will the great messiah lift his little finger to bring them to book ? Not a hope in hell – he’s working on numbers for the next Presidential Election.

  • 5
    0

    I’m glad that a few comments have come in. This is an article/story that all ought to read by all, but it looks as though comments are drying up.
    .
    However, Ravi, I hope that you are drawing satisfaction from the fact that there currently are many other articles which are also asserting that the present sordid system of governing the country is not allowed to stand.
    .
    What sometimes happens is that we develop debates with other commenters that then become quite intense. That has happened to me here:
    .
    https://www.colombotelegraph.com/index.php/imf-forecasts-systemic-crisis/
    .
    Panini Edirisinhe of Bandarawela

  • 8
    1

    What has the CID or the tax department , or even the Central bank done about these criminal wheeler dealers who have Swiss bank accounts ? How did they earn the money ? How did they take it to Switzerland ? Have they declared it any where ?

    How do they explain their assets even in Sri Lanka ? Why not do a forensic audit of their businesses ?

    Not a single question from our stupid authorities !

    Why is this open crime not raised in Parliament ? The answer is obvious.

    The Aragalaya must succeed !

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