DEW: Tax amnesty unconstitutional, encourages corruption

… reminds govt. SC ruling that there cannot be two systems for taxpayers

By Shamindra Ferdinando

Former General Secretary of the Communist Party Dew Gunasekera says the incumbent government should never have considered tax amnesty as part of overall measures to mitigate the growing financial crisis.

Since the 1960s, about dozen tax amnesties had been offered, but they failed to produce the desired results, Gunasekera said.

The former minister was responding to the ruling Sri Lanka Podujana Peramuna (SLPP) declaration that it was ready to offer tax amnesty. Gunasekera predicted that the SLPP’s bid, too, would fail as in previous attempts.

Mahajana Eksath Peramuna (MEP) Chief and the Leader of the House, Dinesh Gunawardena, presented the relevant Bill to the House last Tuesday (20).

Both the Samagi Jana Balavegaya (SJB) and the Janatha Vimukthi Peramuna (JVP) have moved the Supreme Court against the Bill. In terms of the Constitution, such a Bill can be challenged in the Supreme Court within seven days after its tabling in the House. State Finance Minister in the previous UNP government and National List lawmaker Eran Wickremaratne and former MP Sunil Handunetti moved the SC on behalf of the SJB and the JVP, respectively.

Responding to a query, Gunasekera said that he served the Income Tax Department at the time the then Finance Minister Dr. N.M. Perera introduced a tax amnesty on behalf of the SLFP-LSSP coalition during Sirimavo Bandaranaike’s premiership.

In a brief interview with The Island, Gunasekera alleged that the cash-strapped incumbent administration had offered tax amnesty probably because previous governments did so. Declaring that tax amnesties caused further financial deterioration and encouraged fraudulent activities, Gunasekera emphasised that the only remedy was to streamline the revenue collection process by taking tangible measures to tackle corruption and irregularities in the system.

Explosive report

The former lawmaker pointed out that the Finance Bill was presented to Parliament on Tuesday, the day the Committee on Public Accounts (COPA) Chairman Prof. Tissa Vitharana presented an explosive report that dealt with tax evasion. Pointing out that COPA had faulted the Customs and Motor Traffic Department as well as Parliament for the sorry situation; Gunasekera urged the government to implement the recommendations made by the parliamentary watchdog committee.

Gunasekera resigned as the General Secretary, CP, in late August last year. He was replaced by Dr. G. Weerasinghe.

Asked whether the CP would make representations to the SLPP against the move, Gunasekera emphasised that the Supreme Court, during Chandrika Bandaranaike Kumaratunga’s presidency, declared that there couldn’t be two groups of taxpayers. A five-member bench asserted that tax amnesty to those who had defrauded would be unconstitutional, Gunasekera said, adding that the SC gave that opinion when the then President sought an opinion in respect of a tax amnesty declared by the late K.N. Choksy, PC, on behalf of the UNP-led United National Front government. The SC asserted there couldn’t be two systems for taxpayers – one for the honest and another for those who practiced crooked methods.

Gunasekera stressed that it was not a determination but an opinion expressed by the SC in response to a query raised by President Kumaratunga exercising her constitutional privilege. Gunasekera said that Choksy, who had served as a member of Parliament from 1989 to 2010 continuously couldn’t have been unaware of the unconstitutionality of the tax amnesty but didn’t have any choice, but to carry out party directive.

Against the backdrop of the massive devastation caused by the raging Covid-19 epidemic, Sri Lanka should without further delay reach a consensus on a national economic policy meant to revive the economy. The much deteriorated national economy couldn’t be saved from ruination by silly measures such as tax amnesty, the outspoken politician said, urging the government to study the opinion expressed by the SC on the contentious matter of tax amnesty. Pointing out the urgent need to take remedial measures, Gunasekera said that the economy was in such a pathetic state though vast majority of lawmakers representing political parties in the current parliament seemed to be clueless where we were heading. Gunasekera compared the tax amnesty with printing money.

Responding to another query, the former minister said that he was quite surprised that those who had approved the Bill presented in Parliament last week didn’t take the SC opinion on the tax amnesty into consideration.

Both Wickremaratne and Handunetti stated in their petitions that as several provisions in the Bill were inconsistent with the Constitution it should be passed with a special majority in Parliament as well as required the approval by the people at a referendum to become law.

Gunasekera also referred to a recent ruling given by the Supreme Court of India in respect of a two-year-old murder case involving the husband of Madhya Pradesh Bahujan Samaj Party (BSP) lawmaker. The SC declared that India couldn’t have parallel legal systems, one for the rich and another for the poor, Gunasekera said, urging those in authority to be responsible for their actions.

Drastic measures

Pointing out that no less a person than President Gotabaya Rajapaksa admitted that challenge in meeting the annual debt repayment, amounting to USD 4 bn, and Energy Minister declared the banking system faced collapse unless drastic measures were taken, the veteran Communist said that the government should really examine the situation.

Referring to proceedings of parliamentary watchdogs issued since the last general election, Gunasekera said that the government should act on them. Instead of taking punitive action against those large scale defaulters of revenue to the Treasury, officialdom continued with systems which helped the crooks, Gunasekera said. “We should be ashamed of this situation,” the former minister said, adding that the Customs and Motor Traffic Department having deprived the Treasury of staggering Rs 3 bn was a case in point.

At the time of Dr. N.M. Perera’s tenure as the Finance Minister, government revenue had been 24 percent of the Gross Domestic Product (GDP), Gunasekera said. By 2019, it had dropped to 09 percent and perhaps even less now, the former MP said, urging the government to address that issue. According to him, one of the primary reasons for the crisis and overall chaotic situation was wide gap in direct and indirect tax. Ideally direct and indirect taxes should be 65 percent and 35 percent, respectively though at present indirect taxes stood at 85 percent and direct just 15 percent.

Gunasekera said that he couldn’t comprehend why those responsible didn’t make any genuine effort to correct the rapidly deteriorating situation.

Asked whether he backed economist Dr. Harsha de Silva’s call on behalf of the SJB that the government should seek immediate intervention of the International Monetary Fund (IMF) to pave way for restructuring of the outstanding external debt, Gunasekera emphasised that he strongly opposed such intervention. Declaring that the IMF shouldn’t be involved under any circumstances,

Gunasekera urged the government to act fast to streamline the revenue collection process, tackle waste, corruption and irregularities and bring in required amendments with the support of all political parties represented in parliament or face the consequences. He said that Sri Lanka should accept IMF grants provided at times of crisis such as 2004 tsunami and world economic crisis four years later.

Gunasekera appreciated Energy Minister Gammanpila’s admission that the national economy was in such a perilous situation the government couldn’t afford to delay the sharp increase in the price of petrol.

Commenting on the ongoing wave of strikes, Gunasekera said that the government should realize whatever the demands put forwarded by various trade unions affiliated to political parties, their primary intention was salary increase and a range of other benefits. But, the SLPP government lacked the wherewithal to meet those demands, the former MP said. Whatever excuses ruling party politicians gave the naive public, the unpalatable truth was the Treasury couldn’t provide the required funds, Gunasekera said. So, let there be a consensus among political parties that whoever is in power, the Treasury was in a bad shape and austerity measures were needed.

Gunasekera warned of economic catastrophe unless the government took remedial measures. “I sincerely hope, both the government and the main Opposition stop playing politics with issues at hand and take tangible measures. They can begin by consulting COPE, COPA and COPF while the move to bring in tax amnesty can be discarded.”