When taxes spur brain drain

Thursday 15th December, 2022

The Rajapaksa-Wickremesinghe regime is jacking up taxes and tariffs and adopting other such draconian measures as if it thought that the ordinary people bankrupted the country and therefore should be made to undergo untold suffering by way of punishment. Government leaders are apparently labouring under the delusion that they are doing the public a favour by trying to straighten up the economy. The perpetrators of economic crimes against the nation are masquerading as its saviours!

The vast majority of legislators tasked with the management of public finance are cretins, but the biggest problem the country faces is that the wise counsel of the few intelligent MPs goes unheeded. SJB MP Dr. Harsha de Silva has been striving to knock some sense into ruling party counterparts who seem to be the descendants of Mahadena Mutta, the self-proclaimed pundit who, according to legend, beheaded a goat whose head had got stuck in a pot, and then smashed up the pot to save the poor animal’s head. The government pundits, in their wisdom, slashed taxes immediately after the 2019 regime change, and now they have jacked up taxes exponentially to ‘save the economy’.

The only thing that gives Citizen Silva the feel of the First World is the new tax system. There is some consolation for the taxpayers in the Global North; their children benefit from their tax money, and in this country, too, benefits of taxes accrue to children, one may say, but the problem is that the real beneficiaries are the progeny of politicians and their cronies.

Young members of the parasitic political families live high on the hog without doing any work despite their parents’ humble origins. It is only natural that the ordinary youth who work extremely hard and pay taxes, or are denied opportunities to be gainfully employed due to decades of economic mismanagement under successive governments, are resentful, and their anger finds expression in street protests from time to time.

Dr. de Silva has urged the government to be considerate towards the country’s hardworking professionals whose earnings are to be taxed at the rate of 36% in most cases. He has pointed out that unconscionably high taxes will aggravate brain drain, and the country will be the loser. His argument that a revenue shortfall arising from the tax reductions he has proposed could be met by other means makes sense. If India can do so, as he says, there is no reason why Sri Lanka should not follow suit. A large number of Sri Lankan professionals, especially IT experts, have already migrated, and at this rate the country will be left with only politicians and their children.

The government has to curtail its wasteful expenditure, and that will be half the battle in bringing taxes down to affordable levels. One of the reasons given for huge tax increases is the need to look after the needy. The State, no doubt, is duty-bound to protect the vulnerable sections of society but its welfare expenditure has to be rationalised.

Welfare programmes are aimed at enabling politicians in power to compass their ends by allocating funds for poor relief with a generous hand. Instead of launching a sustainable poverty eradication scheme with the economic empowerment of the poor as its goal, successive governments have increased the dependency of the poor on handouts, which serve as election bribes. One of the main causes of the current economic crisis was the haphazard distribution cash handouts during the Covid-19 lockdowns. The Rajapaksa administration did so with an eye to the 2020 general election. Even the well-to-do people were given pandemic relief. Excessive money printing that the politically-determined relief programmes necessitated and the resultant increase in the money supply caused inflation to soar and the rupee to depreciate against the dollar.

Let the government be urged to heed expert views on the proposed taxes and act accordingly without testing people’s patience and driving away young professionals who bring in a great deal of forex.