Hands off EPF, ETF!

Thursday 10th February, 2022

The interval in hell is over, as it were. The government has gone into overdrive to squeeze the public dry. Worse, it is planning to use the recently-unveiled Surcharge Tax Bill to help itself to workers’ savings by levying a 25% tax on the profits of the Employees’ Provident Fund (EPF) and the Employees’ Trust Fund (ETF).

Opposition Leader Sajith Premadasa, addressing Parliament on Tuesday, pointed out the impact the new Bill would have on the EPF, among others, if ratified. He said the EPF had about Rs. 3 trillion, and its profits would be around Rs. 250 billion, on which the government would levy a tax amounting to Rs. 65 billion. This is a frightening proposition for private sector workers. Premadasa and SJB MP Dr. Harsha de Silva deserve praise for fighting hard to defeat the government’s sinister plan.

Labour Minister Nimal Siripala de Silva has also opposed the proposed tax on the EPF and the ETF. Let him be thanked for his courage to do so.

Workers’ savings in the EPF are made available to governments at very low interest rates, as trade unions point out. If the government goes ahead with its plan to tax the EPF, etc., hapless workers will suffer a double whammy.

The Rajapaksas’ obsession with the EPF and the ETF is only too well known, and it is not surprising that the present administration is also licking its chops. The present-day leaders do not seem to learn from their past mistakes.

In June 2011, all hell broke loose when the Mahinda Rajapaksa regime sought to implement a private sector pension scheme, which would have effectively put an end to EPF lump sum payments and docked about 2% from private sector workers’ salaries. Police opened fire on a workers’ protest at the Katunayake Free Trade Zone, killing one protester and injuring several others. When the Budget 2010 proposed the controversial private sector pension scheme, we argued that the government was courting trouble. The proposed system may have looked beneficial to workers, but that administration had other ideas. It wanted to step up the utilisation of EPF money.

Successive governments have pampered the public sector, which at present has more than 1.5 million workers whereas the country could manage with only half that number. They have exploited private sector workers to shower pay hikes and allowances on state employees, who are also the main beneficiaries of Finance Minister Basil Rajapaksa’s 229-billion-rupee relief package.

All workers deserve decent salaries, but there is a pressing need to downsize the public service, which is a drain on the state coffers, and workers toiling in the private sector must not be made to fund pay hikes or relief for their public sector counterparts.

The government needs money. But it must not make private sector workers pay for its sins. Immediately after coming back to power in 2019, it introduced huge tax cuts and the beneficiaries were mostly its cronies. Then it allowed its friends to put various rackets through at the expense of the state coffers; the sugar tax scam is a case in point. It caused huge losses in the agriculture sector by doing the right thing—green agriculture initiative—the wrong way—by imposing a blanket ban on agrochemicals overnight. Now, it is paying compensation to farmers who have suffered crop losses and been reduced to penury. It also threw a lot of money around, for political reasons, on the pretext of granting economic relief during the first round of pandemic-related lockdowns. Its failure to manage the economy properly also adversely impacted the state revenue. Before imposing new taxes, it must curtail its wasteful expenditure.

It is hoped that trade unions will take up the cudgels on behalf of the private sector workers.