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Unexplored options to raise revenue

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A protest against tax hikes

by Neville Ladduwahetty

What Sri Lanka has achieved since it declared itself insolvent is hailed by some with much optimism. The “relative stability” currently experienced is presented by the Governor of the Central Bank “as the outcome of a united effort from the outset” (The Island, December 26, 2023). The focus of that collaborative effort was on monetary policy as stated by the Governor who went on to add, “Now the Central Bank has independence that insulates monetary policy from political interference and thus the institution has been strengthened.  The other side of the coin is the government’s fiscal policy.    People elect their representative to make fiscal policy to direct the economy…” (Ibid).  This separation of responsibilities holds the government and the Parliament collectively responsible for the impact of its fiscal policies on the livelihood of the People through the choices reflected in the 2024 Budget as it has been with previous Budgets.

For instance, the choices made were that expenditure should be Rs.6.98 Trillion and the projected Revenue should be Rs.4.107 Trillion resulting in a deficit of Rs.2.88 Trillion. This in a nutshell was the decision of the Government and that of the majority in Parliament when they passed the Budget.    The bulk of the projected Revenue of Rs. 4.107 Trillion reflects an increase of the 2023 Budget by 1.27 Trillion (45%).    The taxes that are of relevance to the comments addressed below to meet this increase are those collected from VAT amounting to 720 Billion and only Rs. 50 Billion from personal taxes (Public Finance Data and Analysis).

While the attention and preoccupation of the Central bank and the Government over the last two years was on monetary and fiscal policies, the social impact of the crisis on the People appear to have received less attention, judging from the priorities selected to raise revenues.

SOCIAL IMPACT of CRISIS

The Ceylon Today of December 27, covers a few key features from a report released by the Department of Census and Statistics (DCS) on December 22.    The DCS report stated that ” survey findings indicate that currently 54.9 per cent of households in Sri Lanka are currently indebted,…The highest proportion of indebtedness is from mortgage matters (31 per cent) followed by banks (21.9 per cent) and the money lenders (9.7 per cent) … 91 percent of the households experienced an increase in their total average monthly expenditure, 22 percent of households have got indebted due to the economic crisis, the schooling of 54.9 percent of individuals (aged 3 – 21) was also affected by the economic crisis and 7 per cent of total population changed their health treatment procedures… Among households that reported an increase in their average monthly expenditure, the most commonly reported reason, accounting for 99.1 percent, was the increase in food expenses”.

Continuing the DCS report states: “The primary strategy adopted by the majority (53.2) percent of guardians/parents of school going children affected by the economic crisis was to either reduce their expenditure on new stationery or to completely stop such purchases…as new uniforms…. Additionally, reducing the frequency of attending tuition classes” (Ibid).

RAISING PROJECTED REVENUE

The social background presented above is the context in which projected revenue is to be raised.     In addition, “Nearly half of the labour force receives less than Rs. 30,000 monthly salary while 3.91 million families out of 5.8 million families are seeking state assistance to continue their livelihoods” (Daily Morning, December 28, 2023).    In short, IF 2/3 of the families are receiving state assistance, they are not in a position to contribute to the projected increase in revenue of Rs. 720 Billion from VAT.

On the other hand, the personal taxes of only Rs. 50 Billion are collected from those who, at a minimum are assured of food security while additional VAT taxes amounting to Rs. 720 Billion, which is 14.4 times personal taxes, have to be collected from a much broader swath of the population, the majority of whom are victims of food security.

This reflects the imbalance in the choices opted for when formulating fiscal policy.     Whether this imbalance, particularly in regard to VAT, is the result of preferences of the IMF as a ready means of raising revenue or from sections of society with influence, is not known.     Whatever the case may be, IF the economic situation in the country as reflected in the surveys conducted by the Department of Census and Statistics is taken into account with the seriousness it deserves, imposing the burden of the increased VAT on an already beleaguered populace could lead not only to political instability but also the inability to raise the projected contributions from VAT.     Furthermore, if the preoccupation of a large section of the population is on survival and other priorities, a drop in demand due to increased hardships is bound to have an impact on inflation.

The potential of these collective consequences could very well outweigh the expectations of improved stability hoped for.    On the other hand, it would be prudent to explore options that have not been explored before to raise revenues at a minimum cost to the vulnerable.

EXPLORING OPTIONS to RAISE REVENUES

One area that has not been explored, except for passing reference, is taxes relating to property.    The reluctance to do so may be because property taxes impact those who own property.    On the other hand, advanced economies use property taxes as the source to fund primary and secondary education and other community-based services.    Since such practices do not exist in Sri Lanka, it is imperative that current practices adopted to assess property values are reviewed and drastically revised.

For instance, within the Municipality of Colombo there are properties with a market value of over Rs. 100 Million, yet their annual property taxes are in the range of Rs. 2500 to 3000; not enough to cover the cost of garbage collection.   In more exclusive neighborhoods the property taxes are in the range of 0.05 % of their market values even for new high-rise units.

The Colombo Municipality is reported to collect Rs. 5.7 Billion in property taxes.    There are 13 other Municipalities in the rest of Sri Lanka.    Taking into account that they are not as affluent as Colombo, they could perhaps contribute about Rs. 3.0 Billion each by way of increased property taxes.    Thus, if property taxes are significantly increased collectively, the total contribution could be in the range of about Rs. 40 to 45 Billion, which incidentally is close to the Rs. 50 Billion by way of personal income tax figured as contributing to meet the increase in Revenue needed by the 2024 Budget.    If increased property taxes at the rate of 1 Billion each from the 37 Urban Councils are added, they too could contribute an additional Rs. 30 to 40 Billion, thus making the total contributions from property taxes significant enough not to be scoffed at.

Over the last two years, Sri Lanka has been actively engaged with the IMF on issues relating to Debt Restructuring.  One of the primary issues raised by the IMF is the need to increase Revenues with a view to reducing Budget deficits.     Over these two years, the Inland Revenue Department should have been aware that it would be called upon to play a major role in this exercise.

Despite this awareness, the number of files relating to Personal Income Tax increased from 204,467 to 500,196 ONLY “by end November 2023” as admitted by the Commissioner of the IRD at a Presidential Media briefing.     The Commissioner had also stated that “it was possible to raise (taxes) to 1,500 billion by widening the tax base and by changing tax rates,” (ECONOMYNEXT, December 29, 2023).

Since this represents a 50% increase over the 2019 tax Revenue, the awareness of such a possibility would have convinced the Government that the policy of raising Revenues from VAT to the extent reflected in the 2024 Budget would amount to an overkill with serious social implications.

The two hundred thousand plus files that had existed throughout 2023 represent ONLY ONE per cent of the population, which according to the UNDP Country Economist, Dr. Gunasekara “owns 31% of the total personal wealth in the country, while the bottom 50% owns less than 4% of the overall wealth in the country” (Daily FT, December 21, 2023).

Had the IRD exercised due diligence over the past years and in particular during the last two years, the country could have secured a significant amount of funds to mitigate not only past Budget deficits, but also the 2024 Budget to the point of reducing the funds needed through VAT, thereby easing the burdens on the “bottom 50%”, most of whom are already victims of poverty.

Another serious omission is the reluctance of the Government and the Central Bank to repeal the existing Exchange Control Act with a view to exercising greater control and jurisdiction over Dollar funds that are involved in foreign transactions.     Such a measure has the potential to improve reserves without having to resort to the temptation of more loans that someday have to be restructured and paid back.

CONCLUSION

The primary aim of the Central Bank and the Government appears to have been to please the IMF in order to secure the long-awaited second tranche of the 2.9 Billion loan.  The compulsion for this is because continued funding from the IMF would be viewed favourably by the international community to seek further loans.

The hard reality is that all the government can hope for is to explore fresh sources of raising revenues with the view of mitigating the burdens imposed not only on those that contribute to employment but also the vulnerable sectors of society.    For instance, manufacturing and other sectors that provide employment have already expressed their deep concerns about the negative impact of raising additional revenue from increased VAT. Furthermore, the situation of the bottom 50% especially regarding food would be more acute than it currently is; a fact that would have a direct bearing on the ability to raise the projected revenues. How their frustrations are going to manifest, particularly in an election year, is not known.    What is known to them, however, is the awareness that they ultimately are the victims who end up paying the price for the misguided policies of failed governments and interest groups.

A report in The Daily Morning titled, “South Asia’s food crisis is alarming” states: “Misguided priorities combined with short-term political thinking have made South Asia the epicenter of the world’s food insecure – hunger zone… According to the FAO’s latest report… many struggle to manage two square meals for their family. Clearly, government policies on food accessibility and distribution are not working on the ground.     The underlying problem runs deep as 74.1 percent of Indians, 82.8 percent of Pakistanis, 76.4 per cent of Nepalis, 66.1 percent of Bangladeshis and 55.5 percent of Sri Lankans face serious difficulties in managing a healthy meal for their family” (December 29, 2023).

Although Parliament approved the 2024 Budget, it is too early for the populace to experience the full impact of its provisions. Therefore, instead of waiting for the bottom 50% to experience its full impact and face its consequences, it would be more prudent for the Government to explore hitherto unexplored options on lines similar to those presented herein, and take steps to mitigate the severity of the measures and policies in the 2024 Budget so that, they could breathe easier in these grim times and sustain the “relative stability” currently experienced.



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Mannar’s silent skies: Migratory Flamingos fall victim to power lines amid Wind Farm dispute

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Victims: Flamingos / Birds found dead in Mannar

By Ifham Nizam

A fresh wave of concern has gripped conservationists following the reported deaths of migratory flamingos within the Vankalai Sanctuary—a globally recognised bird habitat—raising urgent questions about the ecological cost of large-scale renewable energy projects in the region.

The incident comes at a time when a fundamental rights petition, challenging the proposed wind power project, linked to India’s Adani Group, remains under examination before the Supreme Court, with environmental groups warning that the very risks they highlighted are now materialising.

At least two flamingos—believed to be part of the iconic migratory flocks that travel thousands of kilometres to reach Sri Lanka—were found dead after entanglement with high-tension transmission lines running across the sanctuary. Another bird was reportedly struggling for survival.

Professor Sampath Seneviratne, a leading ornithologist, expressed deep concern over the development, noting that such incidents are not isolated but indicative of a broader and predictable threat.

“These migratory birds depend on specific flyways that have remained unchanged for centuries. When high-risk infrastructure, like poorly planned power lines, intersect these routes, collisions become inevitable,” he said. “What we are witnessing now could be just the beginning if proper mitigation measures are not urgently implemented.”

Environmentalists argue that the Mannar region—particularly the Vankalai wetland complex—is one of the most critical stopover sites in South Asia for migratory waterbirds, including flamingos, pelicans, and various species of waders. The sanctuary’s ecological value has also supported a niche with growing eco-tourism sector, drawing birdwatchers from around the world.

Executive Director of the Centre for Environmental Justice, Dilena Pathragoda, said the incident underscores the urgency of judicial intervention and stricter environmental oversight.

“This tragedy is a direct consequence of ignoring scientifically established environmental safeguards. We have already raised these concerns before court, particularly regarding the location of transmission infrastructure within sensitive bird habitats,” Pathragoda said.

“Renewable energy cannot be pursued in isolation from ecological responsibility. If due process and proper environmental impact assessments are bypassed or diluted, then such losses are inevitable.”

Conservation groups have long cautioned that the installation of wind turbines and associated grid infrastructure—especially overhead transmission lines—within or near sensitive habitats could transform these landscapes into lethal zones for avifauna.

An environmental activist involved in the ongoing legal challenge said the latest deaths validate earlier warnings.

“This is exactly what we feared. Development is necessary, but not at the cost of biodiversity. When projects of this scale proceed without adequate ecological assessments and safeguards, the consequences are irreversible,” the activist stressed.

The debate has once again brought into focus the delicate balance between renewable energy expansion and biodiversity conservation. While wind energy is widely promoted as a clean alternative to fossil fuels, experts caution that “green” does not automatically mean “harmless.”

Professor Seneviratne emphasised that solutions do exist, including rerouting transmission lines, installing bird diverters, and conducting comprehensive migratory pathway studies prior to project approval.

“Globally, there are well-established mitigation strategies. The issue here is not the absence of knowledge, but the failure to apply it effectively,” he noted.

The timing of the incident is particularly worrying. Migratory flamingos typically remain in Sri Lanka until late April or May before embarking on their return journeys. Conservationists warn that if hazards remain unaddressed, larger flocks could face similar risks in the coming weeks.

Beyond ecological implications, experts also highlight potential economic fallout. Wildlife tourism—especially birdwatching—contributes significantly to local livelihoods in Mannar.

 Repeated reports of bird deaths could deter eco-conscious travellers and damage the region’s reputation as a safe haven for migratory species.

Environmentalists are now calling for immediate intervention by authorities, including a temporary halt to high-risk operations in sensitive zones, pending a thorough environmental review.

They stress that protecting animal movement corridors—whether elephant migration routes or avian flyways—is a fundamental pillar of modern conservation.

As the controversy unfolds, one question looms large: can Sri Lanka pursue sustainable energy without sacrificing the very natural heritage that defines it?

Pathragoda added that for now, the sight of fallen flamingos in Mannar stands as a stark reminder that development, if not carefully planned, can carry a heavy and irreversible cost.

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‘Weaponizing’ religion in the pursuit of power

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President Donald Trump; miscalculating in M-E / Ayatollah Khomeini; Architect of Iranian Revolution

A picture of US President Donald Trump apparently being prayed for by supporters, appearing in sections of the international media, said it all loud and clear. That is, religion is being flagrantly leveraged or prostituted by politicians single-mindedly bent on furthering their power aspirations.

Although in the case of the US President the trend took on may be an exceptionally graphic or dramatic form, the ‘weaponizing’ of religion is nothing particularly new, nor is it confined to only religiously conservative sections of the West. For example, in South Asia it is an integral part of politics. The ‘South Asian Eight’ are notorious for it and it could be unreservedly stated that in Sri Lanka, the latter’s ethnic conflict would be more amenable to resolution if religion was not made a potent weapon by ambitious politicians of particularly the country’s South.

The more enlightened sections of Christian believers in the US may not have been able to contain their consternation at the sight of the US President apparently being ‘blessed’ by pastors claiming adherence to Christianity. Any human is entitled to be blessed but not if he is leading his country to war without exhausting all the options at his disposal to end the relevant conflict by peaceful means.

More compounded would be his problem if his directives lead to the death of civilians in the hundreds. In the latter case he is stringently accountable for the spilling of civilian blood, that is, the committing of war crimes.

However, the US along with Israel did just that in the recent bombings of Iran, for instance. The majority of the lives lost were those of civilians. If the US President is endowed with a Christian conscience he would have paused to consider that he is guilty of ordering the taking of the life of another human which is forbidden in the teachings of Jesus Christ.

Moreover, the ‘pastors’ praying over the US President should have thought on the above lines as well. May be they were in an effort to curry the President’s favour which is as blame-worthy as legitimizing in some form the taking of civilian lives. Apparently, the realisation is not dawning on all Christian conservatives of the US that some of these ‘pastors’ could very well be the proverbial false prophets and the latter are almost everywhere, even in far distant Sri Lanka.

However, the political reality ‘on the ground’ is that the Christian Right is a stable support base of the Republican Right in the US. Considering this it should not come as a surprise to the seasoned political watcher if the Christian Right, read Christian fundamentalists, are hand-in-glove, so to speak, with President Trump. But it is a scathing indictment on these rightist sections that they are all for perpetrating war and destruction and not for the fostering of peace and reconciliation. Ideally, they should have impressed on their President the dire need to make peace.

That said, political commentators should consider it incumbent on themselves to point out that religion is being ‘weaponized’ in Iran as well. Theocratic rule in Iran has been essentially all about perpetuating the power of the clerical class. The reasons that led to the Islamic Revolution in Iran are complex and the indiscreet Westernization of Iran under the Shah dynasty is one of these but one would have expected Iran to develop from then on into a multi-party, pluralistic democratic state where people would be enjoying their fundamental rights, as enshrined in the Universal Declaration of Human Rights, for example.

Moreover, Iran should have taken it upon itself to be a champion of world peace, in keeping with its Islamic credentials. But some past regimes in Iran had vowed to virtually bomb Israel out of existence and such regional policy trajectories could only bring perpetual conflict and war. Considering the current state of the Middle East it could be said that the unfettered playing out of these animosities is leading the region and the world to ‘reap the whirlwind’, having recklessly ‘sowed the wind’.

However, religious fundamentalism-inspired conflict and war has spread well beyond the Middle East into almost every region since 1979, the year of the Islamic Revolution in Iran. So much so, knowledgeable opinion now points out that religious identity has come to replace nationalism as a principal shaper of international politics or “geopolitics”, as quite a few sections misleadingly and incorrectly term it.

Elaborating on the decisive influence of religious identity, the well known and far traveled Western journalist Patrick Cockburn says in his authoritative and comprehensive book titled, ‘The Age of Jihad – Islamic State and the Great War for the Middle East’ at page 428 in connection with the war in Chechnya ; ‘If nationalism was not entirely dead, it no longer provided the ideological glue necessary to hold together and motivate people who were fighting a war. Unlike the Islamic faith, it was no longer a belief or a badge of identity for which people would fight very hard.’ (The book in reference was published by VERSO, London and New York).

In his wide coverage of Jihadist Wars the world over Cockburn goes on to state that today a call from a cleric could motivate his followers to lay down no less than their lives for a cause championed by the former. The 9/11 catastrophe alone should convince the observer that this is indeed true.

However, as often pointed out in this column, there is no alternative but to foster peace and reconciliation if a world free of bloodshed and strife is what is being sought. Fortunately we are not short of illustrious persons from the East and West who have shone a light on how best to get to a degree of peace. Besides Mahatma Gandhi of India, who was the subject of this column last week, we have former President of Iran Mohammad Khatami, who made a case for a ‘Dialogue of Civilizations’ rather than a ‘Clash of Civilizations’.

The time is more than ripe to take a leaf from these illustrious personalities, for, the current state of war in the Middle East has raised the possibility of a war that could transcend regional boundaries. The antagonists are obliged to exhaust all the peaceful options with the assistance of the UN system. Besides, war cannot ever have the blessings of the sane.

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Venerable Rahula Thera’s 35-year green mission and national Namal Uyana

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Venerable Rahula Thera

It was 35 years ago, on March 28, 1991, that Venerable Rahula Thera, then a young monk, embarked on a journey to the Na forest in Ulpathagama, Palagama, in the Anuradhapura District. Today, three and a half decades later, this mission stands as living proof of the enduring bond between Buddhist philosophy and the natural world.

Marking the 35th year of this green mission, Rahula Thera’s relentless dedication has transformed the National Namal Uyana into an environmental landmark admired not only across Sri Lanka but around the globe, as well.

When studying the life of Venerable Rahula Thera, one cannot ignore the profound connection between Buddhism and the environment. Buddhism is a philosophy deeply attuned to nature. The historical use of the sacred “Na Ruka” by all four Buddhas: Mangala Buddha, Sumana Buddha, Revata Buddha, and Sobhita Buddha — for enlightenment —demonstrates that from time immemorial, Buddhism has maintained a sacred bond with the Na tree. From the birth of Siddhartha to his enlightenment, the propagation of the Dharma, and even the great Parinirvana, all of these milestones unfolded in verdant, living landscapes.

Venerable Rahula Thera did not embark on the Namal Uyana mission seeking government support or personal gain. His commitment sprang from a deep devotion to the Buddha’s teachings on grove cultivation. A grove cultivator is one who spreads compassion for nature. As the Vanaropa Sutta teaches:

Venerable Rahula Thera reclaimed Namal Uyana which was then under the control of timber smugglers and treasure hunters. The term “Wanawasi” does not merely mean living in a forest; it signifies finding rest and enlightenment through nature, free from the destructive roots of greed, sin, and delusion.

Another defining aspect of Venerable Rahula Thera’s 35-year mission is the purification of the human mind. He has consistently taught the thousands who visit Namal Uyana that a person who loves a tree will never harm another human being. As the Dhamma proclaims:

It is important to remember that Venerable Rahula Thera devoted his life, without fear, speaking the truth and taking necessary action, tirelessly advancing the national mission he began. From 1991 to the present, he has worked with every government elected by the people, maintaining impartiality and independence from political ideology. Yet, he never hesitated to raise his voice fearlessly against any individual, of any rank or party, who committed wrongdoing.

Religious and Social Mission

The National Namal Uyana is not merely a forest; it is a magnificent heritage site, dating back to ancient times. Scattered across the landscape are boundary walls, the remains of ancient monastery complexes, and stone carvings believed to date back to the reign of King Devanampiyatissa. In earlier centuries, this sacred land had served as a meditation sanctuary for hundreds of monks. The name “National Namal Uyana,” by which this ecological and archaeological treasure is known today, was introduced by Venerable Rahula Thera in 1991. The government’s later recognition of the site as the National Namal Uyana stands as a significant achievement for both religion and national heritage.

Venerable Rahula Thera is a monk who has lived a life of renunciation. A striking example of this is his decision not to assume the position of Chief Incumbent of the National Namal Uyana Viharaya, instead entrusting the temple to the Ramanna Nikaya and its trustees. In doing so, he set a precedent for the contemporary Sangha. The Thera himself stated that he was merely the trustee of Namal Uyana, not its owner.

Legacy and Continuing Inspiration

The 35th anniversary of Venerable Wanawasi Rahula Thera’s arrival at Namal Uyana is not merely the commemoration of a period of time; it is a message of nature to future generations. Through his work, the Thera revived the ancient Hela tradition of loving trees and venerating the environment as something sacred. This religious and environmental mission remains unforgettable.

The revival experienced by Namal Uyana, after the arrival of Venerable Wanawasi Rahula Thera, is beyond simple description. Some of the major accomplishments achieved under his leadership include:

* Securing and protecting the largest Rose Quartz (Rosa Thirivana) reserve in South Asia.

* Restoring the Na forest spread across hundreds of acres, providing shelter to numerous rare plants and animal species.

* Transforming the area into a living centre for environmental education, offering practical learning experiences for thousands of schoolchildren and university students.

* Drawing the attention of world leaders and international environmentalists to Sri Lanka’s unique environmental heritage.

In recognition of his immense contribution to environmental conservation, Venerable Rahula Thera was honoured with the Presidential Environment Award and the Green Award in 2004—a significant moment in his life. Yet the Thera himself has always remained devoted to the work rather than the recognition it brings, making such appreciation even more meaningful.

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