More Tightening Of The Belt For Citizen Perera

by Ashanthi Warunasuriya

The current economic climate is receiving a great deal of attention these days with one of the main topics of conversation being the tax system recently introduced by the government. The public has been quick to voice its displeasure at the manner in which the government has placed more burdens on the shoulders of the people.

The government for its part says they have been compelled to enforce new taxes due to the enormous debts the Rajapaksa regime had left after undertaking white elephant development projects and extravagant spending. The government has stressed that they must repay interest on loans taken and eventually the entire loan. They say the Gross Domestic Product (GDP) is inadequate to pay even the salaries of public servants and they have no option but to increase taxes thereby reluctantly putting the burden on the general public.

Meanwhile, former President Mahinda Rajapaksa has his own answers to the allegations levelled at him. He has said that between 2001 and 2004 when Ranil Wickremesinghe was Prime Minister, the debt percentage of the country had been 102 per cent of GDP and that his government had been reducing this huge debt year by year and by 2014, it was brought down to 75.5 percent. He has also said that this percentage of debt rate was the lowest recorded after 1973. Even during the time of the war between 2006 and 2009, governmental expenditure as a percentage against the country’s GDP was 25 percent, he has said and his government had reduced government expenditure from that percentage to 18.5 percent. Since his government had shown shrewd economic management, even the International Monetary Fund (IMF) had approved a huge loan for the country to the value of USA $ 2600 million unconditionally.

While stakeholders of the former and present governments blame each other for the economic crisis, The Sunday Leader sought the views of intellectuals, economic experts and professors of universities on this issue.


Govt, caught in debt trap

Keerthi Tennekoon, Executive Director, CaFFE

The Sri Lankan economy is going to be bailed out. We expect to receive foreign investments to the value of USA $ 3 million very soon. Otherwise, we need such an amount of money from another party to face the present financial crisis. Until such time, the cost of living will go up and taxes will be enforced and the Rupee will depreciate. The government will have to resort to other unpopular alternatives as well. Therefore, the main challenge that the government now faces is to keep the economy stabilised.

Primarily we see the inability of the government to provide immediate solutions to burning issues as the main reason for this chaos. But we must know that whatever the government does, it will take some time for the process to take effect.

On the other hand, the government has fallen into a trap of huge debts. It is clear now. Loans were taken, to pay them, more loans were taken. This pattern continues. Now we are entirely in debt. This is a major issue because the public must suffer the consequences.

Whenever an ECTA is going to be signed, a series of protests crops up in the country. We have to find ways to prevent such situations from arising. On the other hand, we have been depending on Chinese investment for many years. We do not have systems to make way for foreign investment to flow into the country so fast.  Therefore, Sri Lanka has to go to the IMF pleading for money.

Now workers are in doubt as to what would happen to their Pension Fund. The government has been unsuccessful in curtailing corruption, fraud and bribes. One of the main problems foreign investors have been facing is corruption in our country so they are reluctant to come to Sri Lanka.”

However, without rallying round the public, a government cannot enforce taxes. Because increasing taxes directly affects the public.




No vision to improve industries

Mayura Samarakoon, Senior Lecturer, University of Peradeniya

Sri Lanka’s post independence economy has not been directed in the right way. We are still not able to decide whether we must select agricultural or industrial economic development. On the other hand, whenever farmers produce excess crops, they have to suffer because they have no way of selling their produce.

We do not have the proper vision required for creating a market for our national agro produce even though we were successful in increasing our agro production. Therefore farmers have to sell their crops at a price much lower than the cost they spent on growing them. However, we still think this government will change this situation. We still think this government possesses some managerial ability.

The UNP has been following a capitalist liberal economy but today we do not witness such a skilful economic management. We reap what we have sown in the past, what we sow today we will reap tomorrow. Therefore, while controlling welfare grants, we have to manage our economy smartly starting right now.

If the government tries to pick-pocket the public by enforcing more and more taxes, we will go against it by resorting to massive protests. Incorporating all, we will take trade union action against the government.”




Please increase prices after festive season

Ranjith Vithanage, Chairman, National Movement of Consumer Rights Protection

As consumers, we do not take into account those financial charts and drafts that they show us. We are living amidst great difficulties. Now the festival season is upon us. Increasing taxes impacts us from all fronts. Average people buy a dress only once a year. That is for the Sinhala Tamil New Year. We do not know even when and how the taxes have been increased. A certain institution increased the National Building Tax from February 1. It was removed later. But consumers still pay it. We filed a complaint against it. The tax system in a country should be simple. It must be understandable for the average people. Now consumers become hapless. We feel the country’s economy is unstable. We fear that prices of goods will go up in the near future once more. We have nothing now. No food, no employment and we  hear that the economy is on the decline. Just hearing that the Prime Minister is going to make a special statement is enough to instill great fear in us because he only does that about matters such as increasing prices of goods or tax. We propose to the Prime Minister that if he has to do it, do it later, after the festive season.”




Taxes must be increased temporarily

Gamani Viyangoda, Executive Committee Member, People’s Front

A hidden debt cannot be swept under the carpet for a whole year. If the Rajapaksas have taken any debt representing the government, it has to be noted somewhere in the hierarchy. The former President did not visit any country personally and obtain loans. If there is a debt, it has to be marked somewhere.

If the Rajapaksas have deposited money in foreign accounts, inability to find such funds can be understood. But when a government gets loans or it receives money from somewhere, it must be noted somewhere. It is idiotic to say for a whole year  that the former government has swept debts under the carpet. If the Rajapaksas had brought in money against the law, action must be taken against them. But I do not think that is the case now.

In whatever way, we are now undergoing a financial crisis. It is a reality.  The former government may have been held responsible for this situation. They took loans irresponsibly. They did not consider how to pay them back. The development schemes they initiated turned to white elephants. We have just started repaying them. We are still repaying only the interest. By 2020, we have to pay the amount as well. Then we will be in huge financial chaos.

When Mahinda Rajapaksa came into power in 2005, our export revenue was at the level of 35 per cent of the GDP. It was 34 percent as we arrived in 2015. Losing GSP+ and many other such reasons caused this situation. So, they affected the country’s economy.

At present, without taking more loans the government cannot maintain further the huge development schemes that the Rajapaksas initiated. Now the government has been caught in a trap.




Consequence of this govt’s mistakes

Prof. Milton Jayaratne, Head, Faculty of Management, Peradeniya University

The Government has many reasons that compelled them to increase taxes. They came into power well aware of the debts that the former government got into. Debts amounting to Rs. 10.5 trillion is not something they came to know yesterday or today. Therefore, saying that they have introduced a tax plan now to repay debts the former government took has no grounds. They have not shown the country how much they are going to collect via this tax plan. If the former government could have repaid debts by enforcing taxes, they might have done it.

In that case, there was no need to give power to this government.   When Ranil Wickremesinghe came into power, he instantly offered a range of subsidies and benefits to the average people. Even though they said they would bring a high number of foreign investors, no major agreement has been signed to date in this regard.



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