Sugar scam or tax scam?

Early in the Sirisena administration, there was a ‘treasury Bond scam’ (bandumkara mankollaya) which lawyers, politicians and journalists conjured up into a Central Bank, bond scam (mahabanku badumkara mankollaya). When a fundamental rights case, arising out of the scam, was heard in the Supreme Court, a lawyer for the defence, argued that the matter was a ‘kussiamma job’ in the Central Bank, between the Governor of the Bank and his subordinates, and that the parties in the Central Bank prepared a meal as was ordered by the master. While there was a kernel of truth, in his argument, it was misleading in that officers of the Central Bank were an essential link in the insider dealing, that turned out to be the essential nature of the crime. No assets of the central bank were involved in the transactions and the Bank’s books contain no accounts of any losses arising out of the scam. All the estimated losses were suffered by the state. The dealings were in government bonds. The entire scandal arose in the bond market and revolved around transferring (selling) insider information that enabled a particular dealer in the market to make a killing, at cost to the state, and, incidentally, to other bond dealers. Some senior Central Bank officials, and the Chairman of the Monetary Board (therefore governor of the Central Bank), are among those that have been charged according to law. These allegations arose out of other proceedings after the Supreme Court denied the claims of the complainants that the scandal deserved further inquiry. The moniker ‘mahabanku mankollaya’ helped to perpetuate the myth that Central Bank bonds were involved and that losses were incurred by the Monetary Authority of the country. It diverted attention from the true nature of the crime to a fake nature and thus from those who perpetrated the crime and those who aided and abetted the commitment of the crime to that did not exist.

A commentator, in this newspaper, wrote a few times about the abuse of terms and this newspaper seems to have realized the validity of that man’s claim. Others continue to perpetuate the abuse of terms to propagate fake news. I was annoyed by the cartoon this (15/3) morning in which your cartoonist mentioned a sugar scam. There was none such.

The same fate seems to befall the tax scam (badu mankollaya) arising from the import of sugar and import tax variations for a very brief period of a few months. The tax rate was reduced from Rs. 50 a kilo to Rs.0.25 for a few months and raised again to Rs.50 per kilo, for no substantial reason, other than that of reducing the cost to the consumer (good enough). Large quantities of sugar that were imported at the lower rate of duty, by a few and a very large part of that by one person. Because a few people controlled supplies of sugar they controlled the price of sugar and consumers did not benefit from the lower price that the government expected. It is disingenuous of the Treasury to argue after the event, that they did not know that the few would not reduce prices as the Treasury expected. The same foul game had been played a few years earlier under the Sirisena administration. Treasury economists surely should have known the structure of that market before they took the decision to reduce the rate of duty by a factor of 200 from Rs.50 per kilo to Rs.0.25 per kilo in one fell swoop. The lower import duty was not passed onto the consumer. The Treasury now estimates that the loss to the state was Rs.15.9 billion, not an inconsiderable pot of money. As every loss to someone in the market is always a gain to another, who was that another? The importers, in this instance. Clearly, the scam related to taxes (badu mankollaya) payable to the state. That there was a sugar scandal (seeni mankollaya) is fake news, designed to erase the responsibility of the Treasury for the scam.

Usvatte-aratchi