Wednesday 27th December, 2023

Perhaps, nothing represents Sri Lankans’ resentment towards the new tax regime and the aggravation of their economic woes better than the title of today’s comment; it is a literal translation of a slogan written on the rear of a tuk-tuk. It however is relevant only to the ordinary people who pay very high taxes but lead a hand-to-mouth existence. For the wealthy, it is ‘Somalian tax, American life’.

Low as the opinion the public has of the three-wheeler fraternity may be, some trishaw bumper stickers are aphoristic gems effectively conveying very powerful messages. Yesterday’s commemoration of the victims of the 2004 tsunami reminded us of another trishaw slogan, which is ideal for a campaign for ethnic reconciliation—Sinhale, Demale, Marakkale, tsunami wele ekama wale, which roughly rendered into English means that the people belonging to the Sinhala, Tamil and Muslim communities were buried together in mass graves in the aftermath of the 2004 tsunami.

Taxes are a necessary evil, and nobody likes them anywhere in the world. But unlike in the countries where the benefits of taxation accrue to the public in the form of social welfare, education, healthcare, infrastructural development, etc., Sri Lankans have had to pay more taxes in return for very little. This situation has come about due to waste, rampant corruption and the allocation of colossal amounts of public money to enable politicians to live high on the hog.

Even former President Gotabaya Rajapaksa, on whose watch the economy went into a tailspin due to his blunders, which were legion, is maintained with public funds although he ran away, unable to clean up the economic mess he and his Viyathmaga brigade, as it were, created. The members of political families live the life of Riley without any legitimate sources of income; they are obviously doing so at the expense of the taxpaying public.

There is no gainsaying that a state cannot survive without tax revenue. Successive governments chose to ignore dire warnings issued by Sri Lankan economists, who questioned politicians’ wisdom of adopting populist policies and seeking short-term stability at the expense of long-term growth. Calls for increasing state revenue gradually to meet high expenditure went unheeded. Worse, the Gotabaya Rajapaksa government slashed taxes for political expediency, causing a sharp drop in state revenue, and the country is now paying for such short-sighted, harebrained economic policies.

The same government under a new President has moved to the other extreme; it has increased taxes exponentially. If taxes had been fixed at affordable levels and efficiently collected, there would not have arisen any need to overtax the public to the extent of reducing many people to penury and exacerbating the human capital flight.

History is replete with instances of unconscionably high taxes igniting social unrest and serving as a catalyst for rebellions and revolutions. The French Revolution of 1789 stands as a glaring example. In ancient Rome, under Emperor Vespasian, exorbitant taxation was introduced to finance lavish construction projects and military campaigns. Heavy levies, especially on provinces and the lower classes, triggered conflicts like the Jewish-Roman Wars and the Batavian revolt. In 1381, the English Peasants’ Revolt broke out due to the imposition of poll taxes by King Richard II.

The American colonies’ resistance to British taxation, inter alia, led to the American Revolution. The Stamp Act, Tea Act, etc., imposed by the British Parliament created widespread discontent, leading to the call for independence. During the past few years, public protests have erupted in France, Lebanon, Spain, Argentina, Chile and Ecuador against tax and tariff hikes among other things. Sri Lanka has been no exception.

Thus, it may be seen that when oppressive new taxes are imposed or the existing taxes are jacked up unreasonably, they spark social unrest that often lead to the destabilistaion of countries.

The least that the Rajapaksa-Wickremesinghe regime can do to prevent another popular uprising is to eliminate waste, streamline tax collection and prevent corruption in the revenue-generating agencies so that it will be able to increase state revenue without squeezing the public dry. The general consensus is that if the Customs, the Motor Traffic Department, Inland Revenue, Telecommunications Regulatory Authority, etc., are rid of corruption, there will be a steep rise in state revenue overnight. Corrupt deals that government politicians and officials cut with impunity have also taken their toll on the state coffers.

It has now been revealed that public money to the tune of billions of rupees was paid for fake pharmaceuticals procured by the Health Ministry. A shady renewable energy deal is to be struck with a foreign company at the expense of the Sri Lankan public. Sugar tax scams, and corruption and waste at the Ceylon Electricity Board and the Ceylon Petroleum Corporation have also adversely impacted state revenue.

Having crushed Aragalaya, the government seems to be overconfident that it will be able to bulldoze its way through. The ongoing police operations against the underworld may also be a dry run of a crackdown to be launched in case of the eruption of another popular uprising owing to the people’s economic difficulties which are expected to take a turn for the worse next year. But there is no defence whatsoever against People Power. The government had better stop testing the people’s patience, which is wearing thin.