The Sunday Leader

Reforming A Shylockian Economy

By Wimalanath Weerarathne

Prime Minister Ranil Wickremesinghe addressing the launch of the World Bank Systematic Country Diagnostic Report on Sri Lanka titled – Ending Poverty and Promoting Shared Prosperity

Sri Lanka’s economy is more or less a Shylockian economy. Shylock, probably the third most famous character (after Romeo and Juliet) in Shakespearean literature, is a much disliked Jewish moneylender of Venice and the principal antagonist of Shakespeare’s celebrated comedy – Merchant of Venice. With Antonio being unable to repay a loan obtained from Shylock, the latter demands nothing but a pound of Antonio’s flesh.

In Sinhalese literature too, the story of ethical and righteous merchant Kachchaputa  and Serivanija, who tried to unlawfully enrich himself by deceiving a poor family, is told to instill the importance of ethical business in the hearts and minds of people.


Kachchaputa  and Serivanija 

According to the Serivanija Jathaka, the Bodhisattva (Buddha-aspirant) was born in a family of trading caste and became a famous dealer in pots and pans known as Kachchaputa. Once he visited ‘Andhapura’ city accompanied by a greedy trader by the name of Serivanija. The latter, whilst traversing on the streets, came across a rich family of nobility that had become very poor. All members of the family had passed away sans one granddaughter and her grandmother. They had lost all their wealth and lived doing menial work.

The young girl, seeing Serivanija, pleaded with her grandmother to buy a trinket for her. As the duo did not even have any food to eat, they wanted to trade a platter covered with soot for a trinket. They were unaware that it was a golden platter which their predecessor had used to have his meals. The greedy Serivanija, suspecting it to be a precious metal due to its weight, scratched it with a needle, verifying for certain that it was gold.

However, with greed to own it by giving nothing to the poor family he said: “What value is there in this platter? Not even half a farthing”. He then threw it on the floor and went away, with the intention of returning.

Meanwhile, the Bodhisaththva (i.e. Kachchaputa) came to that house with trinkets for sale.  The poor girl, not giving up, showed him the platter thrown away by Serivanija. Kachchaputa, being an honest trader, immediately knew it to be a golden platter and told the poor grandmother, “Mother, this bowl is invaluable and I don’t have any goods to match its value!” Kacchaputa gave a hundred pieces of gold coins (Kahavanu) and goods worth five hundred more. He then proceeded to the river and got into a boat to cross the river.

Meanwhile, the greedy Serivanija went to the house again and asked for the platter offering to pay ‘something’. Hearing that his rival Kachchaputa had bought the platter, he chased after him. Arriving at the river bank, he saw the Bodhisattva crossing the river and suffered a heart attack causing blood gushing out from his mouth and had a tragic death.


Invasion of Shylocks

If a country is to be corruption free and become a nation of beautiful minds, I strongly feel that there are three key societal members who can make a difference. They are the father, the mother and the teacher, said the late Indian President A. P. J. Abdul Kalam, who was a beloved leader to all peoples of India, regardless of caste, creed or race.   However in Sri Lankan context, this axiom of this great personality cannot be applied as the very ‘Appachchi of the nation’ has been plundering and pillaging the very economy he was entrusted to safeguard.

During the Rajapaksa regime, many of the Rajapaksa relatives, confidantes and cohorts were allowed to plunder and pillage the economy in millions and the inner circle of the Rajapaksa dynasty embezzled billions whilst the poor laboured in the paddy fields, chenas and salterns.    According to Finance Minister Ravi Karunanayake a staggering 1.1 trillion rupees or 1,100 billion has been spent during the tenure of former President Mahinda Rajapaksa without the scrutiny of the Parliament or even the Cabinet of Ministers. According to some experts, this magnitude was close to six percent of the country’s Gross Domestic Product (GDP).

Minister Karunanayake at a forum this week said, “These staggering monies would ultimately turn into a burden upon the general public. These are nothing but financial crimes perpetrated by the previous government. The debt and budget deficit, experienced by the current United National Front for Good Governance (UNFGG) administration, was inherited from the Rajapaksa regime.”


Breach of Constitution

Article 27 of the 1978 Constitution which spells out the ‘Directive Principles of State Policy’, although not justifiable, ‘shall guide Parliament, the President and the Cabinet of Ministers in the enactment of laws and the governance of Sri Lanka for the establishment of a just and free society.’

According to Article 27 (7) ‘The State shall eliminate economic and social privilege and disparity, and the exploitation of man by man or by the State.’

Article 27 (8) mandates that, ‘The State shall ensure that the operation of the economic system does not result in the concentration of wealth and the means of production to the common detriment.’

However, the very Head of State blatantly violated the morals of the Constitution visibly resulting in the concentration of wealth, creating economic and social privilege and disparity and promoting the exploitation of man by both man and by the State, to the common detriment.

Although Article 27 does not confer or impose legal rights or obligations, and are not enforceable in any court or tribunal and no question of inconsistency with such provisions can be raised in any court or tribunal; the State, the Cabinet of Ministers and the Head of State is morally and ethically obliged to follow these principles.


President, Cabinet answerable to Parliament

According to Article 42 of the Constitution, “The President shall be responsible to Parliament for the due exercise, performance and discharge of his powers, duties and functions under the Constitution and any written law, including the law for the time being relating to public security”, whilst the Cabinet of Ministers are “charged with the direction and control of the Government of the Republic, which shall be collectively responsible and answerable to Parliament,” as per Article 43(1).

However, as per Article 148, control of Parliament reigns supreme over public finance. President is responsible to Parliament in general whilst the Cabinet of Ministers is collectively responsible and answerable to Parliament which has unfettered power of scrutiny over public finance.148 – “Parliament shall have full control over public finance. No tax, rate or any other levy shall be imposed by any local authority or any other public authority, except by or under the authority of a law passed by Parliament or of any existing law.”


Capital instead of aid

Prime Minister Ranil Wickremesinghe raised a valid argument recently at the launch of the World Bank Systematic Country Diagnostic Report on Sri Lanka titled – Ending Poverty and Promoting Shared Prosperity.

“Let us embark on a journey together or face the consequences. The people gave a green light to the two main parties to form a national government expecting to achieve a certain result. We as a government is determined to go this journey together and will not let anybody hinder our journey. The private sector must learn to compete shoulder to shoulder with international companies. They must get ready to compete with India or China or any other country for that matter. Instead of opening up, they are holding protests against liberalization, espousing protectionism.”

The Premier said that in this new journey, what was more important in the alleviation of poverty was to provide capital to the poor than entice them to stay in poverty through subsidies.

“The only thing that has happened is that the wealthy have become wealthier while the poor had become poorer by paying taxes. The rich and super rich own the 80 percent of the wealth in the country but pay only 20 percent towards national tax income. The poor on the other hand, owning 20 percent of the capital, contribute the majority of indirect taxes or 80 percent towards treasury coffers. We have to change this system,” he pointed out.

Last November, Wickremesinghe announced that through a policy of minimizing regressive taxes, the ratio of direct and indirect income tax generation in the medium term would be increased from 80%:20% to 60%:40%, strengthening the tax management processes while removing tax holidays and benefits. The removal and reduction of all tax concessions against a backdrop of now non-existent threat of war, low interest rates, a policy of ensuring realistic foreign exchange rates and against a setting of reduced petrol, diesel and energy charges, minimize tax concessions and tax free benefits was desirable.

Lowest tax revenue-to-GDP ratios in the world

According to the World Bank, Sri Lanka has one of the lowest tax revenue-to-GDP ratios in the world, reflecting a decline from 24.2 percent in 1978 to 10.7 percent in 2014. The major causes of this decline are the low increase in the number of taxpayers, reductions in statutory rates without commensurate efforts to expand the tax base, inefficiencies in administration and numerous exemptions. In particular, since the introduction of a Value Added Tax (VAT) in 2002, successive changes in the tax regime have led to over 500 types of exemptions for a wide variety of goods. There are also over 40 broad types of exemptions on corporate and personal income tax depending on the source of income and the type of taxpayer. Administration is complicated by the lack of coordination among entities collecting revenue as well as the Board of Investment, which provides incentives. No tax expenditure analysis is conducted before or after the introduction of incentives.


Way forward

The Prime Minister, as the Minister of Planning and Plan Implementation, stated that there are groups holding protests against liberalization, espousing protectionism.

Singling out the Government Medical Officers’ Association (GMOA), he levelled a veiled threat against Judases of the union for opposing.

“We reduced the duty free tax for vehicle permits for doctors upon a request by the GMOA. If they continue to protest, we will consider increasing this duty again and lessen the tax burden on the general public.”

It is high time the Premier ironed out his problems with the GMOA and act professionally together just as he propounded in his speech to advance the lot of the people of this country. On the other hand the hands of the GMOA are also not clean. Many sided with Rajapaksas shedding their impartiality and professional independence.

Ranil Wickremesinghe is adamant that his government would ink the controversial Indo – Lanka Economic and Technology Co-operation Agreement (ECTA) with or without the support of the professional bodies.

However, the Premier must not forget that with or without ECTA, with or without CEPA, the government would not return to the nefarious and despicable Shylockian economic policies promoted under the Rajapaksa regime.


2 Comments for “Reforming A Shylockian Economy”

  1. Nanda Simpleman

    “Ranil Wickremesinghe is adamant that his government would ink the controversial Indo – Lanka Economic and Technology Co-operation Agreement (ECTA) with or without the support of the professional bodies.”

    My way or highway, that is the principle of this Prime Minister. He knows very well as a person born with the “silver spoon” in the mouth., there is nothing for him to loose. He will roll the dice and poor Sri Lankans will have to pay the price. No wonder, why people say that he is no different from the former corrupt strongman.

  2. H.L. Vanstraten

    Well, the plate of gold that was stolen from the people by the Rajapaksas and their cronies during their sway from 2006 to end 2014 has long since been cut up in pieces and distributed among the embezzlers. Of course all in secret and illegally.

    Are you going to let them run away with the booty now that they have fallen from grace?

    What about setting up a state financial detective agency whose sole purpose will be to scrutinize all books and accounts of the Rajapaksa government period to hopefully scrape back as many pieces of this plate as is still possible for the state coffer while imposing heavy fines or even imprisonment on the thieves?

    But make sure that no-one of the stooges of the old regime will have anything to do or access to the proceedings of this detective agency! After all many of them are still involved in the present government.

    No doubt it will be a tough and time-consuming job, since so many of these dealings will never have been recorded. Yet considerable sums of state money have mysteriously disappeared. This could not be hidden from public scrutiny then or now. Let these cronies explain their personal and family riches before independent judges and let everything in excess of what reasonably could be expected be confiscated and… o yes, scrutinize their income tax declarations they have provided during these years. I’m sure that quite some gold could be retrieved that way.

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