Boosting state revenue

Monday 29th April, 2024

The Committee on Public Finance (COPF), headed by SJB MP Dr. Harsha de Silva, is reported to have called upon the government to re-evaluate its tax policies, systems and mechanisms to boost state revenue. It has reportedly explained revenue losses in terms of what has come to be known as the Laffer curve, according to which when tax rates are extremely high, they lead to a decrease in taxed activities such as investment and consumption, causing a drop in state revenue, and when tax rates are too low, they fail to yield sufficient revenue for the state.

The SLPP government, under President Gotabaya Rajapaksa, did away with some taxes and slashed others at the expense of state revenue, but it has, under President Ranil Wickremesinghe, moved to the other extreme. The need is for a via media.

Citing reasons for the drop in state revenue, the COPF has highlighted the Excise Department’s failure to bust the fake revenue sticker racket and collect duties on liquor efficiently. However, impervious to logical reasoning and wise counsel, the government continues to labour under the misconception that jacking up taxes is the only way to boost state revenue although unconscionable tax increases lead to tax avoidance or evasion and promote the growth of the so-called underground economy.

The government does not curtail its wasteful expenditure for state revenue to increase. It has embarked on a campaign to shower handouts on the poor ahead of the upcoming presidential election to compass its political ends despite calls for it to rationalise welfare expenditure and ensure that poor relief is properly targeted. State funds are also wasted on useless government ceremonies and politicians’ junkets. Corruption, which is rampant among government politicians and officials, also causes huge losses to the state coffers, as evident from the Health Ministry procurement scams.

The COPF has expressed serious concern about the inordinate delay in digitalising the excise duty collection process. If the Excise Department as well as other revenue-generating agencies such as the Customs could be rid of various malpractices, which deprive the state coffers of billions of rupees annually, perhaps it may be possible to pass the benefits of revenue increases therefrom on to the public. It is the corrupt who fear and resist digitalisation, which could be considered the most efficacious antidote to corruption, for it engenders transparency.

It is hoped that the government will heed the COPF guidelines for increasing state revenue by preventing losses and eliminating waste instead of burdening the public with more taxes.

Fish or cut bait

The SJB and the JVP-led NPP keep challenging each other to a debate on the current state of the economy and how to revive it. At this rate, one wonders whether the debate will ever take place. The two parties are only wasting their time and energy. Given the appalling nature of parliamentary debates on economic affairs and other such vital issues, it is doubtful whether a debate between two Opposition parties, the SJB and the NPP, will leave the public any the wiser.

If either the SJB or the NPP has an alternative to the government’s economic recovery strategy and really feels for the country, it ought to unveil its silver bullet without further delay. There should be ample time for the economic programmes of the SJB and the NPP to be evaluated properly before the next election so that the public will be able to see if they are feasible.

The upcoming battle for the coveted executive presidency will be fought on the economic front. Having been taken for a ride, the public cannot be unaware that it is a mistake for their political allegiances to take precedence over their concerns about the economy. They are not likely to be swayed by promises and political rhetoric again while reliving hardships, shortages of essentials and winding queues.

If the SJB and the NPP are serious about having a debate on the economy, they should have a discussion, decide on a date and be done with it. Let them be asked to fish or cut bait.