How tax revision that caused revenue loss of Rs 500-600 bn triggered collapse …

Dr. Godahewa dealt with anatomy of developing crisis

By Shamindra Ferdinando

SLPP lawmaker Dr. Nalaka Godahewa has alleged that those who managed the economy during Gotabaya Rajapaksa’s tenure as the president conveniently failed to take remedial measures though alleged faults were pointed out.

Dr. Godahewa, a key member of the dissident group that voted against the emergency said the then President Gotabaya Rajapaksa could have averted the disastrous consequences if corrective measures were taken. However, the decision makers remained committed to previously taken decisions regardless of the consequences, one-time Viyathmaga activist alleged.

Addressing a group of supporters at Gampaha recently, Dr. Godahewa cited the much disputed tax restructuring that had been introduced soon after Gotabaya Rajapaksa’s overwhelming victory at the 2019 presidential election. Pointing out that tax revisions deprived the government Rs 500-600 bn annually, the Gampaha District MP questioned the failure on the part of the decision makers to take remedial measures. Action could have been taken in 2020 or 2021, but the powers that be chose to ignore criticism pertaining to the tax revisions, Dr. Godahewa said.

The government abolished a range of taxes, including PAYE (Pay As You Earn), NBT (Nation Building Tax), Withholding tax, Capital Gain tax imposed on the Colombo Stock Exchange, Bank Debit tax and unprecedented reduction of VAT (Value Added Tax). In addition to those revisions 15% VAT and the 2% NBT which amounted to 17% imposed on all goods and services were unified and reduced to 8%, effective from Dec 01, 2019. Controversial decision in this regard has been taken at the first cabinet meeting of the Gotabaya Rajapaksa government held on Nov 27, 2019.

Total income dropped to Rs 1,373 in 2020, though total revenues for 2018 and 2019 had been Rs 1,950 bn and Rs 1,900 bn, respectively.

Shouldn’t those decision makers be held responsible for a much bigger budget deficit and continuously printing of money to meet a shortfall of Rs 2,000 bn annually? he asked.

Though Easter attacks, the pandemic and the resultant body blow to the vital tourism sector and steep drop in migrant worker remittances aggravated the situation, the first time entrant to parliament primarily faulted President Gotabaya Rajapaksa for the current crisis. Dr. Godahewa said that having repeatedly assured the electorate he wouldn’t allow family rule, President Rajapaksa placed the economy in the hands of those who mismanaged the economy over the past several decades. Dr. Godahewa pointed out that following the general election in August 2020, those who had been rejected in 2015 received cabinet portfolios. In the wake of the country being declared bankrupt, those who had been overwhelmingly rejected in 2019 received an opportunity to regain power.

The former media minister was referring to UNP leader securing parliamentary approval to complete the remainder of Gotabaya Rajapaksa’s mandate.

Dr. Godahewa asked whether longstanding issues at hand could be addressed by the above-mentioned two groups swapping political power from time to time and in some instances working together. The outspoken politician quoted Fitch Ratings as having recently stated that far reaching changes couldn’t be expected under President Ranil Wickremesinghe’e leadership as those who had been rejected by the people were behind him.

Dr. Godahewa was referring to the SLPP engineering Wickremesinghe victory at the July 20 presidential contest. Dr. Godahewa backed Dullas Alahapperuma, who obtained 82 votes whereas Wickremesinghe polled 134. The group that voted for Wickremesinghe largely backed the imposition of emergency with 120 voting for and 63 against in the 225 member parliament.

MP Godahewa said that the country could overcome the daunting economic challenges. The MP said that he was not sure whether the incumbent Cabinet-of-Ministers had the capacity and the commitment to implement what was agreed during consultations among political parties in the run-up to Wickremesinghe election as the President. Whatever the developments, now that Wickremesinghe has been installed as the President, the new administration should be given the time and the space to address the issues, he said.

Lawmaker Godahewa strongly censured the electorate for habitually electing the same corrupt lot though they always demanded what he called a system change. The MP warned the electorate that there was absolutely no point in demanding ‘a system change’ if they exercised their franchise for those who ruined the country.

Declaring that there could be fresh protests similar to the massive public eruption on July 09 in Colombo, Dr. Godahewa urged the electorate to correctly identify those responsible.

Former Finance Minister Ali Sabry, PC, appearing on Swarnavahini in early June named the then President’s economic advisor (Dr. PBJ), Governors of the Central Bank (Prof. W.D. Lakshman and Ajith Nivard Cabraal) and the Treasury Secretary (S.R. Attygalle) as the culprits.

Dr. Godahewa said that the government required as much as USD 5-6 bn annually to settle loans amounting to USD 24.7 bn taken between 2004 and 2019. The MP emphasized the urgent need to examine the utilization of these funds, particularly unproductive investments made over the years. The former private sector top executive questioned whether a part of foreign loans obtained at exorbitant rates had been robbed.

The lawmaker said today the public had forgotten the Treasury bond scams that had been perpetrated in Feb 2015 and March 2016, finalization of 99-year- leasing of the Hambantota port to China in 2017 at terms utterly disadvantageous to Sri Lanka, sharp drop in economic development from 5.5% to 2.1% and depreciation of the Rupee by 40 percent during yahapalana administration. At the time, Gotabaya Rajapaksa won the presidency in late Nov 2019, the country had USD 7.6 bn in reserves sufficient to meet the import bill for a couple months, Dr. Godahewa said.

Referring to a recent controversial public declaration made by Public Administration Secretary Priyantha Mayadunne, Dr. Godahewa said that those who had recklessly expanded the public sector at the expense of the overall financial stability, too, should accept the responsibility for the current crisis.

The MP pointed out that there had been approximately 500,000 public sector employees in 2004 but over the years the total increased to a staggering 1,402,000. Dr. Godahewa cited the 2021 figures to highlight the crisis. Of Rs 1,238 bn tax revenue, Rs 1,115 bn or 90 percent of the total had been spent on public sector salaries and pensions.

Stressing the extreme difficulty in raising USD 500 mn required for fuel imports, particularly for power generation, Dr. Godahewa alleged that those who deliberately delayed power generation projects, too, should accept the blame for Sri Lanka’s current predicament.

Dr. Godahewa queried how the sudden introduction of mandatory use of carbonic fertilizer without a proper study ruined the agriculture sector. Those who decided on the agriculture policy as well as proponents of that move, too, should be held responsible for the overwhelming crisis.

Much touted projects to send trained personnel abroad and expansion of the information technology sector couldn’t achieve desired results as those entrusted with the said tasks failed, the former minister said.