23 June, 2024

Blog

The Misunderstood Taxation Of EPF & Other Superannuation Funds

By W.A. Wijewardena

Dr. W.A Wijewardena

Superannuation funds: Cash cow for empty treasury governments

A contentious issue pertaining to superannuation funds that include the giant in the sector, Employees Provident Fund or EPF, is the tax treatment of their gross earnings. These funds are subject to a tax of 14% on their gross income minus the cost that they have incurred in producing that income. In fact, the superannuation funds had not been subject to tax till 1989. In that year, the Government which had been faced with a severe revenue shortage due to the JVP insurrection in the South and LTTE war in the North had chosen to tax the working population’s meagre savings by imposing a tax of 10% on their gross income.

As a result, EPF which is the largest fund became the largest single corporate income taxpayer in the country. It was therefore a cash cow for the Treasury. Hence, despite the representations made by many, including this writer as its Superintendent at the Central Bank, all the successive governments continued with the happy taxing of this lucrative source. Instead of abolishing this offensive tax, in 2017, the Yahapalana Government led by the current President Ranil Wickremesinghe chose to increase the tax rate from 10% to 14% to fill the empty coffers of the Government. As at today, it is this rate that is applicable to all these superannuation funds in the country.

Tax is on Gross Income and not on Net Income

The tax on superannuation funds at 14% has not been openly disclosed in the Inland Revenue Act of 2017. It has been done rather in a roundabout way. In the interpretation section of the Act (S 195) which is the most unusual place to announce a new tax, companies have been defined to include a host of societies catering to their members, namely, friendly societies, building societies, pension funds, provident funds, retirement funds, superannuation funds or funds or societies that have similar features. The common similar feature is that they should be owned and operated by their members. Then, in the first schedule to the Act that outlines the tax rates applicable to different individuals, it has been specified that these funds should pay a tax of 14% on their taxable income.

Taxable income has been defined in the Act (S 3) as the Assessable income minus qualifying payments. Since superannuation funds do not enjoy deductions on account of qualifying payments, their taxable income is identical with the assessable income. The only deduction which these funds can make when calculating the tax liability is the cost incurred by them in the production of earnings (S 11(1)). In a normal business, these costs include the salary bill, other administrative expenditures, depreciation of fixed assets, and loan losses that they have incurred in the production of the income involved.

In terms of the Inland Revenue Act, the capital expenditure items or dividends declared are not permitted to be deducted. The capital expenditure is not a current expenditure and hence only its depreciation part, according to the rates fixed by the Inland Revenue, is permitted to be deducted. Dividends are not an expenditure incurred in earning the income but something that arises after ascertaining the net profits and involve the distribution of such profits among the owners.

Tax treatment of superannuation funds is different from that of financial institutions

The tax treatment of a superannuation fund differs from that of a financial institution with respect to the treatment of the interest paid to their fund suppliers. In the case of a financial institution, interest paid is a cost and therefore the institution can charge it to the profit and loss account in ascertaining the net surplus or deficit for tax purposes. The depositors and bondholders of a financial institution are not owners and hence, any payment to them is not a distribution of profits among them. However, a superannuation fund is owned by its members who are also beneficial partners. Hence, any payment to them, though it is called interest paid, for tax purposes, it is simply a profit distribution like the payment of dividends.

Since dividends are not allowed to be deducted when ascertaining the net surplus or deficit for tax purposes, the superannuation funds are also not allowed to deduct the interest paid when ascertaining the taxable income. As a result, financial institutions pay a tax of 30% on their net income, whereas superannuation funds pay 14% on their gross income. There, the two different rates are not comparable since the tax base involved differs significantly from each other.

An excessive punishment meted out to superannuation funds

There have been recent attempts at treating these two rates as comparable when fixing the penalty tax rate of 30% on superannuation funds that fail to exchange at least 50% of their Treasury bond portfolio with Treasury under the ongoing domestic debt optimisation program. These are two incomparable numbers. When the taxes paid by superannuation funds, though at 14%, are expressed as a percent of the taxable income of financial institutions, the tax rate rises significantly. Table 1 presents my calculation of same for EPF for the years from 2020 to 2022. For this purpose, by using the published date, EPF’s income and expenditure accounts were represented.

According to the calculations, in 2020, the taxes paid by EPF, when expressed as a percent of its net income, the tax rate amounted to 70%, in 2021 to 88% and in 2022 to 490%. This is a severe tax burden on EPF members. Similarly, if the tax rate is increased to 30%, the tax rate based on the comparable tax base applicable to financial institutions will shoot to 149% in 2020, 188% in 2021, and 1050% in 2022. This will, therefore, be excessive punishment meted out to non-cooperating superannuation funds.

Potentially negative net worth Central Bank should consult its staff before implementing DDO plan

Any debt restructuring against the creditor is painful. When a nation does so, it involves passing the pain on to all the creditors concerned. However, in the present DDO plan, it has been suggested to pass the burden on to the Central Bank in the case of Treasury bills and to superannuation funds in the case of Treasury bonds. The Central Bank will agree to exchange its Treasury bill portfolio amounting to Rs. 2.7 trillion and provisional advances that take the form of an overdraft extended to the Government amounting to Rs. 340 billion for a longer maturity bond repayable within 5 and 15 years. When the fair value of these bonds is reassessed comparative to the existing portfolio, Central Bank’s financial position may turn out to be a negative net worth.

Though a central bank can continue with a negative net worth for some time, it will badly reflect on its creditworthiness. This will adversely affect the Central Bank’s ability to raise short term funds for financing temporary liquidity shortages from external sources and providing guarantees to the Government when it raises external loans. Hence, it is a malaise which need be addressed immediately. But it will require the Government to recapitalise the Central Bank which in turn will be borne by the taxpayers of the country. Taxpayers will have to provide capital funds to the Central Bank either by paying more taxes or sacrificing some of their current benefits or both. Whatever the course of action taken, it will be a pain imposed on taxpayers. Further, since the negative net worth of a central bank will adversely affect the career prospects and emoluments of its staff, it is advisable to consult the trade unions in the central bank before implementing this proposal.

Pain inflicted on superannuation funds

In the case of Treasury bonds, members of superannuation funds will have to bear a pain. The authorities have excluded all other bond holders from the pain on the ground that some of those bond holders are already supporting Sri Lanka’s economic recovery program by paying higher taxes than that paid by superannuation funds. For instance, commercial banks pay an income tax of 30% and another tax of 18% on their value-added financial services. As mentioned above, this rough comparison is erroneous because it is two tax bases which are being compared.

The tax base of commercial banks is net income after deducting the interest paid, while that of superannuation funds is gross income where interest paid to members is treated as a profit distribution and hence non-deductible. As a result of agreeing to the DDO plan, they must be content with a lower future income flow. If they do not agree, they will have to pay a higher tax at 30% calculated on their gross income and not on the net income.

Whatever the course they choose, it is an inequitable pain-bearing. The threat that if they do not agree to DDO plan, the Government will have to default debt servicing is not an equitable distribution of the pain. That pain should be borne by all the Treasury bond holders since all of them have benefited in the past equally from the secured investment that guaranteed a fixed return.

Multiple tax stages applicable to EPF members

An important fact that has not been reckoned when deciding to pass the full pain on members of superannuation funds, especially those of EPF, has been the multiple stages at which they pay taxes to the Government. In the first instance, they pay a tax of 14% on their gross income and forego a sizeable portion of the would-be income they should have received. Secondly, when they make the contribution to EPF, such contributions are not allowed as a qualifying payment. Hence, they pay normal taxes on the money they saved as well. Third, when they get benefits from the fund, they are subject to a terminal benefit taxation as well if the total benefit is more than Rs. 10 million.

Fourth, since the Government does not adjust the interest rates on the securities it issues to fully compensate the prevailing inflation levels, the difference between the low rate which the fund receives and the rate comparable with inflation is a tax they pay to the government. In the name of equity and fairness, these multiple stage taxes should be reduced to a single stage. It will require the government to abolish the tax on gross interest earnings and subject them only to a terminal benefit taxation at the appropriate rates.

Inflation haircut by superannuation funds

The inflation factor on the holdings of Government securities has not been properly reckoned. When a consumer price index has advanced to a higher level, it is a price level that prevails as at a particular date. Though the inflation rate may be receding compared to the level of the index on a previous date, the current levels of prices remain taxing all the consumers. The holding of Government securities is a stock figure in money or nominal terms. To convert it to a real value, one should divide it by the prevailing value of the consumer price index and multiply by 100. For instance, in January 2021 in which month the new re-based Colombo Consumers’ Price Index or CCPI was released, the value of the index was 100. The same index has now advanced to 192 as at end-June 2023. It depicts a real value of 52 on every 100-rupee bond held by investors.

In other words, the value has fallen by 48% over this period. Consequently, the Rs. 3.4 trillion portfolio of EPF in nominal terms as at the end of 2022 has a real value of only Rs. 1.8 trillion. This is despite the growth of the fund at the prevailing interest rates through investing in Government securities. This reduction in the principal value can be termed an ‘inflation haircut’. Non-reckoning this part when offering the DDO plan to superannuation funds seems to be an oversight.

DDO haircut

Similarly, when superannuation funds agree to the DDO plan, they should necessarily forego a part of the interest income which they would have earned under normal circumstances. In the case of EPF, according to the Central Bank Governor Nandalal Weerasinghe, DDO will reduce the current EPF rate of return of 11.5% to about 9.4%. Therefore, this is simply a DDO haircut.

Should the pain be passed on to all the bondholders?

If the pain is passed on to all the bondholders equally, it would have been a fair and equitable treatment. Though there is a fear that it would lead to instability of the financial system, that could be avoided it the pain is transferred to all equally. Then the people would have felt that they have been treated fairly. Such a trust is a must when a country goes through a painful adjustment to come out of a serious economic crisis.

Authorities can successfully implement the adjustment program only if they can command the cooperation of the people.

*The writer, a former Deputy Governor of the Central Bank of Sri Lanka, can be reached at waw1949@gmail.com

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Latest comments

  • 10
    0

    WAW,
    Thanks Unlimited!!?? WONDERFUL!! None else could have done it better; ever will, if they attempt!!?
    Well “Laid and Argued out” case, SPELT OUT – ‘easily understandable’ LUCID language – even suitable to be discerned by 10 year olds’!!??
    However, the problem remains, the SL lawmakers/Politicians with very brief or Nihilistic level and enchanted by Kleptocracy would remain UNDETERRED, convinced otherwise!!!??? SYNTHETICS at their best!!!

  • 26
    19

    While taxing the people at every turn our governments pump all the tax money to disasters like Sri Lankan airline !

    Recently I flew Sri-Lankan to India , the plane was so old I thought it might just disintegrate ! The ground and air staff looks so amateur like , as if they are on training. They lack confidence and avoid dealing with passengers or even looking at them .

    Meanwhile every government appoints political catches to the Board of the airline. I am told that these non-executive directors are so low that they approve for themselves and families free air tickets, VIP lounges endlessly.

    The names of all the former and present non-executive directors , all the air tickets and other benefits they have enjoyed and continue to enjoy, must be produced in parliament before another cent of tax money is given to this airline.

    • 5
      11

      ” all the air tickets and other benefits they have enjoyed and continue to enjoy, must be produced in parliament before another cent of tax money is given to this airline.”

      Don’t you know that all the government President,Parliament Ministers, deputy ministers , MPs, and Officials enjoy that benefits?

      • 6
        3

        None in the opposition?

      • 8
        9

        Thank you Ajith , now everybody can see you for who you are ! So you were on the Board of the airline ! No wonder it is such a disaster !

        • 6
          8

          deepthi silva,
          Thank you for your understanding. Do you think this corrpted parliament will take any action against Sri lankan executives? This is the parliament that brought bankgruptcy to this country. They are the one’s who gave two third majority to 20th amendment. They are the one who endorsed the ban on fertilizers. Not only Srilankans but also Hambantota projects, Bonds scam etc. are endorsed by parliament. If parliament is right, every thing will become profitable. That is why people asked for system change which was blocked by USA and Ranil.

        • 4
          4

          deepthi^ silva

          “No wonder it is such a disaster !”

          Do we know why it is on deathbed?

      • 4
        4

        Ajith,
        When did this start???
        Probably with ‘Kiribath’ partaking and lighting of Fire Crackers celebration, departing of Peter Hill as CEO and ‘Bye-Bye’ Emirates from 22nd January 2008!!?????
        Mahinda Chinthanaya is responsible!!!???
        When Messiah is up to “NO –GOOD”, NONE RAISES A QUERY!!???
        That is STANDARD PRACTICE!!?? The Messiah (DEMI-GOD) never does any WRONG/IMPROPER act!

        • 5
          2

          Dear Mahila, a good question thank you..
          .
          It started with the people being dumb for anything they did. Dumbness of people was a long process which was finely done by VISUAL media (TV derana and HIru and SIRASA TV as well).

          At the time Gota s nomination was given, while him still being a dual citizen, people did not utter a single word. In a civilized country, people would have gone amok killing masses.
          .
          All because PINGUTTHTHARAYA commuinity backed Rajapakshes, specailly GOTABAYA, like Germany’s Goebells misled society. Pinguththarayas should be hanged so as Rajapakshes if good people of this country to be comforted.

          Election Commissioner MACO was raped and tamed by Rajapakshe ballige puthas loudly but people stood as if the mice injected with lab materials for our lab experiements.

      • 3
        1

        AJITH,
        The cost of which included – budgeted allocation (beginning of the year) or SUPPLEMENTARY ALLOCATION (Subsequently) – and approved by Parliament, under the respective Ministry, Department or Statutory authority heading!!!??? Treasury payes based on that approval not FOC!!!???

    • 4
      6

      Deepthi,
      “Meanwhile every government appoints political catches to the Board of the airline. I am told that these non-executive directors ARE SO LOW THAT THEY APPROVE FOR THEMSELVES AND FAMILIES FREE AIR TICKETS, VIP LOUNGES endlessly.”
      This is standard inclusion in the remuneration package of all staff of any International Airline!!???
      NOT somebody gets approval ‘ONE-OFF’!!!??? The issue is a perennial one from the inception of the airline, exacerbated since the advent of ‘Mahinda Chinthanaya’ and ‘kicking-out’ of Peter Hill as CEO and reverting back to 100% ownership by SL government!!!???
      Nothing New but has been there since January 22nd 2008, when Emirates WALKED AWAY from the management agreement, after that incident and since then FOREIGN INVESTMENT has been a “SHAM’ when the ‘Messiah and Coterie’ decided that, HEAD OF STATE AND THOSE ACCOMPANYING SHOULD INALIENABLE RIGHT TO PRIVILEGE TO ENJOY “WALK-IN PASSENGER SEAT ACQUIRING” STATUS and BUSINESS CLASS too!!!???
      Event celebrated “partaking, KIRIBATH AND LIGHTING FIRECRACKERS”!!!??? WHY COMPLAIN NOW!!? “DEEP SLUMBER WAKE-UP SYNDROME”!!!???
      Airline Staff, need INTENSE TRAINING – achieve expected PERFORMANCE STANDARDS OF SERVICE!??
      NONE to carry-the-Baby!!?? Sri Lankan accountability – NIL
      Sri Lankan Airlines has followed the prodigal Sri ‘LANGAMA’ (CTB/SLTB) of1956 REVOLUTION, epitomising COUNTRIES PROGRESS!!!???

    • 2
      4

      Deepthi,
      “I am told that these NON-EXECUTIVE DIRECTORS ARE SO LOW that they approve for themselves and families free air tickets, VIP lounges endlessly.”
      Identify, architect of decline??? That’s CRITICAL THINKING!!!???
      The Members of Parliament MP’s itself is a Disgrace!!?? Can’t add 2+2, mentally or remember Zeroes in Million!!?? Drive around in Cars worth millions!!!??? They can’t open their mouth – SAY “JAM” and if not for armed security Street Urchins would hijack them!!? We pay MP’s Rs 500,000/month all told!!?
      That’s because the people of this country are GULLIBLE and vote for Lampoons in return for ¼ bottle of gal arrack, Chicken Biryani Packet and Rs 5000 as gift on ELECTIONDAY!!!???
      First and foremost GRAVEST SIN committed is to reach out “ultimate SIN/GOAL to ROB/IMPOWERISH COUNTRY!!!???
      None talks about that, – the Messiah may become UNEMPLOYED, unable to feed FAMILY Overseas Venture Investment!!!??? Aggrandisement – next 10 generations of CLAN, whilst people, STARVING!?
      How come parliamentarians self-approve their salaries, allowances and benefits – Houses, cars, Security, Phones and “Personal Aides” for ‘Massages’!!!???
      WONDERFUL DILIGENCE!!!??? Culprit continues ROBBING & LOOTING in USD Millions – Deflection to AIRLINE BOARD, as relative isn’t Chairman!!!
      TREACHERY BY ANTI-NATIONALISTIC TRAITORS – Targeting Airline Board should be least PRIORITY!!!??

  • 8
    5

    Thanks, Dr Wijewardena,
    .
    When I see you saying forthright things like this:
    .
    “This will, therefore, be excessive punishment meted out to non-cooperating superannuation funds.”
    .
    one sees how unjustified the criticisms of you as overly-cautious are. Given your subject and background you will never make rash criticisms, but you’re always clear in what you say, and try very hard to make dolts like us to understand your very difficult subject.
    .
    Yes, this is much more difficult than telling people whether there is a God/gods or not – where all want to make weighty pronouncements about the ineffable. Those are the most “popular” subjects.
    .
    This article clearly needs careful study.
    .
    VishramikaGambadIngirisiIskoleMahattaya (NIC 483111444V)

  • 20
    17

    So many thumbs down for my comment that all the benefits enjoyed by the non-executive directors of Srilankan airline should be made public before any more tax money is given to this bankrupt airline ! ( names and the various benefits enjoyed by them )

    None of these non-executive airline chaps are experts on airlines. They have a good time at public expense merely because they are old friends of the “Leader”. Both political parties have done this and hence no one wants this information to go public ! Remember MR’s joker of a brother in law who was chairman ?

    This is public money and this airline has contributed heavily to our nation’s down fall.

    As to the thumbs down , we can see many of these non-executive directors read this forum , and as this is in English, most of them are probably UNP !

    • 4
      9

      Deepthi,
      It is so SAD to note that you have condemned the ‘NON-UNPERS’ as NON-ENGLISH literate!!??
      So 85% literacy rate adduced to Sri Lanka is not true, according to you!?
      What a conundrum???

    • 4
      8

      “This is public money and this airline has CONTRIBUTED HEAVILY TO OUR NATION’S DOWN FALL.”
      That is a LOAD of BS!!!???
      The downfall, is because of total and utter mismanagement, subscribing to projects w/o study of EIA and RoI study to ensure sustainability of Loans repayment, especially, Southern Expressway, HPP, Mattala, Sooriyawewa stadium, Nelum Pokuna, the infamous tower to boost individuals ego!!!????? All these projects are post December 2004!!!?? EVERYONE BY NOW KNOWS WHO WAS RESPONSIBLE!???
      Add to that the 20% commission – kick-back demanded and paid, which is public knowledge in respect of LPP1, coal plant (negotiated in end 2004) and LPP 2 and 3!!?? All the 20% that was demanded and paid on all above projects, into private accounts of “you-know-who’(?) is the CONTRIBUTOR to DOWNFALL OF THIS NATION!!!???
      Definitely not freebees in Sri Lankan airways!!
      Why none talks about all these acts of charlatans’, so-called Patriots who are the anti-nationalistic sycophants!!!??? Why don’t they demand the return of these ill-gotten wealth, by skimming the Loan funds of development project funds!!!???
      Leave SL Airways aside!!!?? CEB unbearable cost to POOR, DESTITUTE population – due to inflating cost of LPP 1. 2 and 3 alone, by the pious “WALAWE CULT”!!??

      • 10
        7

        Mahila or Hila, empty space I suppose, I like your hate and passion but I dont want you to get a stroke !
        You should know, many things you are saying has another side and another interpretation ( You nor me can be always right or can only be somewhat right…)

        By the way not knowing English does not make you illiterate. Trying saying that in China or France !

        All these directors of the airline, how did they get there ? Because they were in school with Ranil or gave money to the UNP ?

        Under ranil was this country developing fast ?

        Ultimately in these things, the most vital factor is peoples view. Like in a company, the majority shareholders.

        People in this country despise Ranil. Most of the UNP also hate him that is why they are with Premadasa today . No one has come back to Ranil.

        Who is right ? Ranil, ajith, Mahila and SJ or 23 million people ?

        • 4
          8

          “You should know, many things you are saying has another side and another interpretation ( You nor me can be always right or can only be somewhat right…)
          By the way not knowing English does not make you illiterate.”
          Is that English?
          Of course some woman can use big words but not know English.

          • 6
            0

            NOTO alias OC ! Good to hear you under another name , new bottle, same common prejudices !

        • 6
          6

          deepthi^silva

          “Who is right ? Ranil, ajith, Mahila and SJ or 23 million people ?”

          In 2019 the eligible total voters were 15,992,096, Gotabaya received 6,924,255 he was elected the Sinhala/Buddhist president (first among the racists). However the all powerful war winning president who was elected by pure Sinhala/Buddhists was chased out of the office, ….. returned to the island after making deals (handing over his b***s to Ranil) with Ranil.

          Were the 6,924,255 pure Sinhala/Buddhist who voted for Gota right in the first place?

          Please don’t rebut yet.
          I can wait.

        • 3
          8

          Deepthi or Deep T. Hi,
          “6,924,255 doesn’t make it a mandate of 15,992,096, or worse than that of 23 million people”!!!???
          That is where the scallywags misrepresented, misconstrued and misunderstood the concept of Democratic Governance!!!???
          Whilst it’s the elected government of ALL Citizens of the country, IT DOESN’T IMPLY MANDATE OF ALL CITIZENS – 23+ Million in SL which since independence have been observed in Breach time and time again!!!???
          English Literacy, in China, France and Japan, not that important, but in a commonwealth country devoid of good grounding in English is significantly unacceptable for any profession to be accomplished!!!
          French, Chinese and Japanese background countries have their own Medical Education and extensive Books on Medical Practice in those languages, makes English redundant!!! That’s the relevance!!!
          However, same could not be said of Sri Lanka, and Sinhala Language conversant Medics, outdated Sinhala Translated Books!!!
          English Relevance – SL medical and health history is replete with SL medical MISADVENTURES ON PATIENTS – WITH WRONG AMPUTATIONS AND/OR SURGERIES DONE ON WRONG PART OF ANATOMY!!!???
          Hope and pray that the NHS too doesn’t get infected with the Malady!!!??
          Good luck and sojourn in Old Blighty and ‘Hail the Monarch’ – Rex Charles III for time being!!??

        • 1
          6

          Who is right ? Ranil, ajith, Mahila and SJ or 23 million people ?
          What about deepthi?

          • 1
            5

            Ajith,
            Good question.
            As to my being right or wrong I leave it to others to judge!!!???
            Others, my point is, have arrived at this point, due to MaRa, then President expending unlimited Borrowed funds (Chinese) high ratio of Borrowings to GDP, just to enhance his electability by voters!!! Evidence all these projects being located in Ruhunu except one – Lakvijaya PP 1, 2 and 3 RECKON HE THOUGHT BEST AWAY FROM RUHUNA DUE EXCESSIVE COAL DUST, from his Electoral Bastian, so to say and help Medamulana Family!!! Because of high borrowing, which the country cannot afford to service – leading to Bankruptcy, starvation and deprivation!!!
            The others, Sri Lankan to is his baby – mismanagement are all chicken feed compared to rorting 20% of development Loans, importantly didn’t have Positive RoI!!!
            As to the last individual, if She or He can’t see the reasoning therein, I wouldn’t even venture, “hazard-a-guess”, as to the PROGNOSIS would proceed on NHS patients in London/England!!!???
            GOD SAVE THE KING!!!??? What for the telling!!!???

      • 4
        7

        Dear Mahila, you may not know…. This Deepti De Silva is a jokester. As an expert who is constantlyl gossiply interested in searching for the personal details of the commenters, you might have much time to hang on with Deepthi’s pedigree…. that can clear our doubts about Deepthi s gender status atleast.
        He or she is based in the UK, claims to be a doctor, and whatever the PISSU man or woman presents is based on his empirical stuff. Many have questioned whether he recently underwent genital surgery, which has caused some changes in his or her psychology. I know you don’t know this as a serious commenter, but beware of these nitwits anyway.

        • 3
          4

          Dear Mahila,
          I posted the above comment while traveling. I’m sorry for the TYPO errors. Unfortunately, one part of the sentence was missing.
          .
          It should be as below
          .
          As an expert who is constantly gossiply interested in searching for the personal details of the ANNONYMOUS commenters, SINHALA MAN AKA PANINI ED might have much time to hang on with Deepthi’s pedigree and let us know who he/she is.

        • 3
          4

          LM,
          Thanks and noted.
          “He or she is based in the UK, claims to be a doctor, and whatever the PISSU man or woman presents is based on his empirical stuff.’
          HE OR SHE, OR EVEN A TRANSEXUAL, cannot be let loose to “GETAWAY with loose STATEMENTS” without SUPPORTING FACTS to arrive at CONCLUSION!!??
          She can’t be medical doctor, probably D Lit., just like the “other SILVA” – COMEDIAN, Charlatan ‘Mervyn the Perve’!

    • 2
      6

      Self-styled Professor’s don’t know, as the adage goes are ABSENT-MINDED professionally!! This information you’re seeking should be in public domain, if not please resort to FoI act to seek relief!!!
      If the 225 parliamentarians are honest, erudite (suspect not so!) they would have approved the payments and fringe benefits!!! Seek from Sri Lankan Airways!!!??
      The 134 Pohottuwa MP’s are responsible for this mess and none else!!??? The SLPP team is well administered by The Messiah at every point and the emerging personality, who is making noises appropriately, and when it is convenient for him and suits his Goal!!!??
      SURE THEY WOULD BE OF HELP!!! Chairman SLA is MR’s appointee!!!??? Nothing has changed!!!???
      He is maintaining silence as would “wolf in sheep’s clothing”!!?? Nothing strange there; as expected!?

      • 2
        5

        Dear Logical Thinkers,

        The English Proficiency Index for 2022 gives us some insight into the world’s English proficiency-based rankings. Although we are a long term commonwealth member, Sri Lanka belongs to the low proficiency category. Even Vietnam’s rank (100 million) is above ours (23 million).

        https://en.wikipedia.org/wiki/EF_English_Proficiency_Index

        Despite their own pronunciation of the language, those top ten countries maintain their rankings or improve it to their advantage.

        Our self-proclaimed English pundits of senior age groups don’t seem to be doing anything to improve Sri Lanka’s declining standards. They are quite busy with gossip and personal details of CT commentors and their friends.

        tbc

        • 3
          3

          cont.
          .
          Prof. Kovoor (psycho-social analyst) made a very clear statement about the Sri Lankan society decades ago, that even though they hold high academic titles, at the end of the day, they all sit together and “sadhu sadu” effect” like the norm of the society.

          https://en.wikipedia.org/wiki/Abraham_Kovoor%27s_challenge

          At that time selected for malaria control, they prefered the Ratana Sutra chants more than any medicine taken.Other analysts point out very clearly that Sri Lankan psyche cannot be cured, most of them suffer from mental illness rather than other health problems.

          tbc

          • 3
            0

            cont.
            .
            And the fact that Thieves or like Pingona- like personalities were appointed to Sri Lankan foreign missions in Europe, North America and other destinations by recent governments led by Pattapal horu. ONLY prerequisite was the blood relatedness to MEDAMULANA dogs or their back licking attributes to Rajapakshse.

            The best example is former US ambassador Jaliya Wickramasuriya (nephew of Mahinda Rajapaksa) becoming akin toJuliyampitiya Amaraya (Rajapaksha’s bodyguard) in their financial crimes. The Sri Lankan judiciary remains permanently silent on all of MaRa crimes, if committed by RAJAPAKSHE men.
            Not so long ago, Bangladesh was known as a beggar and geographically sinking nation, whose level of English is higher than that of Sri Lankans.

            • 3
              2

              cont.
              .
              This may be the reason why the international community has found it difficult to read the minset of our people in recent years.. Some parts of India have introduced several other languages in their school curriculum. According to their scholars, English knowledge and knowledge of other EU languages should be increased, however, GOSSIPS, hatreds dominated of our nation and their self-aggrandizement may have left our people in a stagnant lake like Colombo Baira.
              For you logical thinkers, let’s discuss the logic behind all this in the next comments.
              Dayan Jayathilaka or similar sinhala racist diplomats who clearly abused Sri Lankan diplomatic missions should come forward to find the reason why Sri Lankan diplomatic levels have fallen to such an alarming level. Instead of Mrs. Bandaranaike’s external policies, murderous, uneducated, Rajaksha damaged Sri Lanka’s image forever.

              No matter what anyone says or does, if Mr. Kadiragamer, who was in former president CBK’s cabinet, was not appointed as FM then, the terrible terror in this country will not stop. Its credit was also stolen by DA Rajapaksa’s scoundrels. All this is becoming clearer now than ever before.

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    The second paragraph after the table is about this risk to be taken by the Central Bank due to taking burden in the DDO program. You say that the CB can become having negative net worth and hence might need to recapitalize. This is a tricky point involve with accounting convention. of CB.
    Negative net worth simply means that assets become less than liabilities. But my understanding is, even though liabilities become more, much of it consists of “currency in circulation” which is just accounted due to accounting convention but not a real liability to be met with. This may be the reason that a central bank can continue with negative net worth. Since the important question is how much capital depletion can be tolerated by the central bank without any bad impact on its operations while not requiring to be recapitalized in this kind of situation. Kinly answer.
    Hema

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      “When the fair value of these bonds is reassessed comparative to the existing portfolio, Central Bank’s financial position may turn out to be a negative net worth.”
      Dr WAW said net worth, but he probably meant Net Present Value. There are a lot of terminologies with which I am not able to put a sure-footed argument. He is talking about a situation of investment, not any business’s balance sheet. He is only talking about reassessed bonds, which CB might end up holding after Evil’s jugglery. The resale value or the bonds will be negative, even though there is coupon value after the renegotiation. This is like the Hangbangtota port sales deal by Evil, where he gave 5 Villages land to China to take back the port China built. A simple sighting can be: if the inflation is 10% and the not adjusted bonds’ return is 5%, then at the maturity on bonds what the holder (CB) earned is a negative number -no haircut assumed. On another scenario, if the inflation is 10% and bonds’ earning 15%, then the net present value of the investment can be assessed by a 5% compound calculation at the maturity date.

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      I don’t like to comment on this type of situation with calculated examples which will look unrealistic, because the future risk factor on Langkang bonds is tremendously enhanced by the renegotiation & bankruptcy declaration. The EPF and CBSL are forced to renegotiate the investment. As WAW mentioned somewhere else, earlier, the foreign investors go for these bonds because they have the freedom (ability) to insert the risk factor (Possible haircut or total loss) into the Net Present Value calculation & check exactly what they get or what their loss is going to be at maturity. Say you bought the bonds for $99,000 cash payment, discount rate “r”, coupon value $100,000 and dollar inflation is xx%, but you took a settlement at .50cts for dollar, you are devastated by holding those bonds, without disposing of them in a timely manner. The discount rate and the hair cut percentage simultaneously influence the net worth of the so-called coupon payment. WAW mentioned the reassessed negative net worth only by having the new negotiated discount rate. Remember there is no way to rule out any future hair cut or even a total loss, even the MD of IMF, Ms. Georgieva, not involving or enforcing. Remember these are not real business or voluntary investments; these are forced on Modaya people to crown somebody as Dutugemunu, by spending $400b on a genocide war.

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      It ails to hear the truth but what to do; Every Sinhala Intellectual encouraged the 2200 years old mythical untrue, history misrepresented Dutugemunu creation and Modayas voted for. Will ever the Rapist Navy Modayas, Rear Admirables accepts these truth? Not even in their Karma loaded rebirths.

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    For someone unscooled in economics, Dr. W.A Wijewardena’s articles are an education. I read and re-read them. Appreciate if Dr. W.A Wijewardena will write how currencies obtain their intrinsic value. I am told, for instance, that the US$, the global currency of exchange, which was once pegged to gold, now free-floats and has no underlying value. What’s even more astonishing is also that the US is trillions of dollars in debt and continuing to get more into debt daily. Any other country in such a situation would be called bankrupt. Is it true that to overcome its critical position the US prints worthless dollars and exchanges them worldwide for goods and services? Those pieces of paper are then put into circulation between other countries that exchange them for exports and imports. How can all this take place? Please Dr. W.A Wijewardena explain this one day.

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      Sarath
      The pieces of paper themselves are not real. They are virtual and are only promises of exchangeability.
      With more and more international trade shifting out of the shadow of the USD, the future of the USD and thereby that of the US economy seem gloomy. But it is going to be a rather drawn out process.

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