Friday 5th January, 2024

The UNP is in overdrive to shore up what remains of its image with an eye to the next election. It is bragging that the country has posted a primary surplus after a lapse of more than two decades. It insists that credit for this be given to President Ranil Wickremesinghe, who is also the Minister of Finance.

A positive primary balance is no mean achievement for an insolvent nation. As for the countries troubled by staggering outstanding public debt, achieving a primary surplus could be considered very important, but the fact remains that necessary as it may be, it is not sufficient for achieving debt reduction, which requires a multi-pronged strategy and the proper implementation thereof.

The government has a long way to go before it can put the economy on an even keel. It is hoped that the UNP supporters who lit firecrackers at Sirikotha and made a spectacle of themselves when the IMF announced the release of the first tranche of its loan, in March 2023, will not do likewise to celebrate the marginal primary surplus.

In increasing state revenue, the SLPP-UNP administration seems to think that the end justifies the means. Blind to the social costs of its extreme actions, it has resorted to jacking up taxes and tariffs exponentially without exploring alternative means of boosting state revenue. Ironically, TIN (Tax Identification Number) has been made mandatory for even young citizens aged 18, whose parents have been reduced to penury and left with no alternative but to beg for alms, with empty ‘tins’ in hand. Sri Lanka must be the only country where a bunch of failed, corrupt rulers who deserve to be thrown behind bars for bankrupting the economy are allowed to stay in power, live the high life at the expense of the public and, worse, punish the victims of their economic crimes by increasing taxes and tariffs in the name of economic recovery.

If the Rajapaksa-Wickremesinghe government streamlines revenue collection and expands the personal tax base, it will be able to lessen its dependence on indirect taxes, which affect the entire population. Tax increases alone will not help the government achieve its revenue targets. For instance, the enhanced VAT regime has sent liquor prices up, but there is no guarantee that the government will be able to rake in the projected revenue from the tax increase, for it has failed to eliminate the revenue sticker racket; liquor manufacturers can continue to release part of their output into the market surreptitiously and avoid taxes thereon. Successive governments have not taken action to rid the revenue generating state agencies, such as the Customs and the Department of Motor Traffic, of corruption, which is believed to cost the state coffers billions of rupees a year.

The government has also not cared to curtail its expenditure while asking the public to tighten their belts. This is an election year, and the ruling party politicians have embarked on an election campaign in all but name by spending public funds. They are stumping the country on the pretext of attending official events. It is time laws were brought in to prevent politicians from spending taxpayers’ money on election campaigns.

Chief Government Whip and Minister Prasanna Ranatunga has unwittingly disclosed, in a bid to turn public opinion against the Opposition for disrupting last month’s VAT debate in Parliament, that a single parliamentary sitting costs the public as much as Rs. 10 million. More often than not, parliamentary sessions are inquorate, and debates serve little purpose. Serious thought should therefore be given to downsizing Parliament and curtailing the cost of maintaining it.

Let the government be urged to be mindful of the social, political and economic consequences of overtaxation. Extremely high taxes hamper economic growth in the long run. It greatly reduces the people’s spending power and thereby limits consumer activity, and investment. It also discourages entrepreneurship and innovation and reduces job creation and competitiveness. Overall, it adversely impacts quality of life, as evident from the increasing number of public protests against overtaxation, which leads to tax evasion or avoidance, taking its toll on state revenue.

The government had better stop bleeding the public dry at least for its own sake. People’s anger has reached a tipping point. A cantankerous ruling party politician who attended a meeting in Anuradhapura the other day had to head for the hills to the accompaniment of a cacophony of boos from the people present there. This could be considered the portent of the onset of another tsunami of public consternation.