Connect with us

Features

Unexplored options to raise revenue

Published

on

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.



Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Features

A long-running identity conflict flares into full-blown war

Published

on

Ayatollah Ali Khamenei / President Donald Trump

It was Iran’s first spiritual head of state, the late Ayatollah Khomeini, who singled out and castigated the US as the ‘Great Satan’ in the revolutionary turmoil of the late seventies of the last century that ushered in the Islamic Republic of Iran. The core issue driving the long-running confrontation between Islamic Iran and the West has been religious identity and the seasoned observer cannot be faulted for seeing the explosive emergence of the current war in the Middle East as having the elements of a religious conflict.

The current crisis in the Middle East which was triggered off by the recent killing of Iranian spiritual head of state Ayatollah Ali Khamenei in a combined US-Israel military strike is multi-dimensional and highly complex in nature but when the history of relations between Islamic Iran and the West, read the US, is focused on the religious substratum in the conflict cannot be glossed over.

In fact it is not by accident that US President Donald Trump resorts to Biblical language when describing Iran in his denunciations of the latter. Iran, from Trump’s viewpoint, is a primordial source of ‘evil’ and if the Middle East has collapsed into a full-blown regional war today it is because of the ‘evil’ influence and doings of Iran; so runs Trump’s narrative. It is a language that stands on par with that used by the architects of the Iranian revolution in the crucial seventies decade.

In other words, it is a conflict between ‘good’ and ‘evil’ and who is ‘good’ and who is ‘evil’ in the confrontation is determined mainly by the observer’s partialities and loyalties which may not be entirely political in kind. It should not be forgotten that one of President Trump’s support bases is the Christian Right in the US and in the rest of the West and the Trump administration’s policy outlook and actions should not be divorced from the needs of this segment of supporters to be fully made sense of.

The reasons for the strong policy tie-up between Rightist administrations in the US in particular and Israel could be better comprehended when the above religious backdrop is taken into consideration. Israel is the principal actor in the ‘Old Testament’ of the Bible and is seen as ‘the Chosen People of God’ and this characterization of Israel ought to explain the partialities of the Republican Right in particular towards Israel. Among other things, this partiality accounts for the strong defence of Israel by the US.

For the purposes of clarity it needs to be mentioned here that the Bible consists of two parts, an ‘Old’ and ‘New Testament’ , and that the ‘New Testament’ or ‘Message’ embodies the teachings of Jesus Christ and the latter teachings are seen as completing and in a sense giving greater substance to the ‘Old Testament’. However, Judaism is based mainly on ‘Old Testament’ teachings and Judaism is distinct from Christianity.

To be sure, the above theological explanation does not exhaust all the reasons for the war in the Middle East but the observer will be allowing an important dimension to the war to slip past if its importance is underestimated.

It is not sufficiently realized that the Iranian Islamic Revolution of 1979 utterly changed international politics and re-wrote as it were the basic parameters that must be brought to bear in understanding it. So important is the Islamic factor in contemporary world politics that it helped define to a considerable degree the new international political order that came into existence with the collapsing of the Cold War and the disintegration of the USSR .

Since the latter developments ‘political Islam’ could be seen as a chief shaping influence of international politics. For example, it accounts considerably for the 9/11 calamity that led to the emergence of fresh polarities in world politics and ushered in political terrorism of a most destructive kind that is today disquietingly visible the world over.

It does not follow from the foregoing that Islam, correctly understood, inspires terrorism of any kind. Islam proclaims peace but some of its adherents with political aims interpret the religion in misleading, divisive ways that run contrary to the peaceful intents of the faith. This is a matter of the first importance that sincere adherents of the faith need to address.

However, there is no denying that the Islamic Revolution in Iran of 1979 has been over the past decades a great shaper of international politics and needs to be seen as such by those sections that are desirous of changing the course of the world for the better. The revolution’s importance is such that it led to US political scientist Dr. Samuel P. Huntingdon to formulate his historic thesis that a ‘Clash of Civilizations’ is upon the world currently.

If the above thesis is to be adopted in comprehending the principal trends in contemporary world politics it could be said that Islam, misleadingly interpreted by some, is pitting a good part of the Southern hemisphere against the West, which is also misleadingly seen by some, as homogeneously Christian in orientation. Whereas, the truth is otherwise. The West is not necessarily entirely synonymous with Christianity, correctly understood.

Right now, what is immediately needed in the Middle East is a ceasefire, followed up by a negotiated peace based on humanistic principles. Turning ‘Spears into Ploughshares’ is a long gestation project but the warring sides should pay considerable attention to former Iranian President Mohammad Khatami’s memorable thesis that the world needs to transition from a ‘Clash of Civilizations’ to a ‘Dialogue of Civilizations’. Hopefully, there would emerge from the main divides leaders who could courageously take up the latter challenge.

It ought to be plain to see that the current regional war in the Middle East is jeopardising the best interests of the totality of publics. Those Americans who are for peace need to not only stand up and be counted but bring pressure on the Trump administration to make peace and not continue on the present destructive course that will render the world a far more dangerous place than it is now.

In the Middle East region a durable peace could be ushered if only the just needs of all sides to the conflict are constructively considered. The Palestinians and Arabs have their needs, so does Israel. It cannot be stressed enough that unless and until the security needs of the latter are met there could be no enduring peace in the Middle East.

Continue Reading

Features

The art and science of communicating with your little child

Published

on

The two input gateways of communication, sight and sound, are quite well developed at birth. In fact, the auditory system becomes functional around 24 weeks in the womb, and the normal newborn can hear quite well after birth. However, the newborn’s vision is a little blurry at birth, and the baby sees the world in shades of grey, while being able only to focus on things 20 to 30 cm (8–12 inches) away. Coincidentally, this is perhaps the exact distance to a mother’s face during breastfeeding. By 2-3 months, there are colour vision capabilities and the ability to track. By 5-8 months, there is depth perception, and by 12 months, there is adult clarity of vision.

By the time a child turns five, his or her brain has already reached 90% of its adult size. This astonishing physical growth is not just happening on its own; it is, to a certain extent, fuelled by experience, and the most vital experience a young child can have is communication with his or her parents.

Modern developmental neuroscience has shifted our understanding of how children learn. We used to think babies were passive sponges, slowly absorbing the world. We now know they are active characters from day one, constantly seeking interaction to build the architecture of their minds. This architecture is not built by apps, vocabulary flashcards, or educational television. It is built through simple, loving, back-and-forth interactions with anyone they come across, but mostly their parents.

The Foundation: Serve and Return (0–12 Months)

Communication with an infant from birth to one year of age begins long before they speak their first word. In the first year, the goal is to master a phenomenon called Serve and Return. This is a basic scenario picked up from the game of tennis. At the start of each game of a set in tennis, a player serves, and the opponent returns the serve. Just imagine a tennis match, where a baby “serves” by making a sound, making eye contact, reaching for a toy, or crying. The job of anyone in the vicinity, who very often are the parents of the baby, is to “return” the ball. If they babble, you babble back. If they point at a cat, you look and say, “Yes, that’s a furry cat!” This simple act does two things. The first is Brain Building, which creates and strengthens neural pathways in the language and emotional centres of the brain. The other is Emotional Security, a thing which teaches a baby that he or she has some help in the learning processes. The baby absorbs the notion that when he or she signals a need, his or her world will respond. This forms the basis of a secure attachment. Scientists have advocated that during this stage, people, especially the parents of a baby, should embrace what is called ‘parentese’. It is the use of a somewhat high-pitched, exaggerated voice. Research has shown that babies pay more attention to parentese than to regular adult speech, helping them to map the sounds of their native language more quickly.

The Language Explosion: Toddlers (1–3 Years)

When a child starts speaking words, the game changes considerably and quite profoundly. This period is defined by a rapid increase in his or her vocabulary and the beginning of grammar. It is very important to narrate everything. The people around, especially the parents, need to become kind of sports commentators for your life. While dressing them, one could say, “First we put on the red sock. After that, we put the other red sock on your left foot.” What we are doing by this is to give them the labels for the world they see.

It is also important to expand, but not truly correct, whatever the child says. If a toddler points to a car and says “Car!”, don’t just say “Yes.” Expand on it: “Yes, that is a big, fast, red car!” You are adding a new vocabulary and grammatical structure through a natural process. If the child says “Me go,” respond with, “Yes, you are going!” rather than correcting and saying “No…, you should say ‘I am going’.”

Toddlers love reading the same book, even one hundred times. While it may be tedious for those around the baby, it is important to realise that such repetition is vital for their learning. They are predicting what comes next, which is a core cognitive skill.

The Preschooler: Building Stories and Logic (3–5 Years)

By age three, the focus shifts from “what” to “why.” Preschoolers are beginning to understand complex emotions, time, and causality. This is the age at which it is best to ask questions which require thought and understanding. Such indirect open-ended questions would sound like “What was the best part of the park today?” or “How do you think that character in the story is feeling?

A preschooler’s world is full of “big feelings” they cannot yet manage. When they are upset because they cannot have a cookie, avoid saying “Don’t cry over nothing.” Instead, name the emotion: “Don’t cry, you can have a cookie after dinner“. This teaches them emotional literacy. Parents and others around in the home could share stories about when they were little, or make up fantasy tales together. Storytelling teaches sequential logic (beginning, middle, end) and strengthens their imagination.

The Absolute Master Class: Learning Through Play

If communication is the fuel for brain development, play is the engine. For a child under five, play is not a break from learning; play is learning. It is how they explore physics (stacking blocks), mathematics (sorting shapes), social dynamics (sharing toys), and language (pretend play). We can boost their development exponentially by weaving communication into their play.

When a child is playing with blocks, dough, or puzzles, they are building fine motor skills and spatial awareness. It is also useful to use three-dimensional words: “Can you put the blue block on top of the red one?” “The puzzle piece is next to your knee.” One could also ask them to describe the texture: “Is the dough soft or hard?

Pretend play, such as acting as a doctor, an engineer, a chef, or a superhero, is one of the most cognitively demanding things a child can do. It requires them to understand symbolic thought and to take on another person’s perspective. Join their world as a supporting character, not the director. If they are the doctor, ask, “Doctor, my teddy bear’s tummy hurts. What should I do?” This encourages them to use vocabulary relevant to the scenario and practice complex social problem-solving.

Playing with water, sand, slime, or safe food products allows children to process sensory information. This is the perfect time for descriptive vocabulary. Use contrasting words: wet/dry, hot/cold, sticky/smooth, loud/quiet.

A few special words for parents. You do not need an expensive degree or specialised toys to build your child’s brain. The most powerful tool you have is your own responsiveness. Modern science tells us that the basic recipe for a thriving child is simple: Look at them when they signal you. Respond with warmth and words. Narrate their world and Join their play.

You are not just talking to your child; you are building his or her future, even via just one conversation at a time. So, go on talking to your child and even make him or her a real-life chatterbox.

Dr B. J. C. Perera

MBBS(Cey), DCH(Cey), DCH(Eng), MD(Paediatrics), MRCP(UK), FRCP(Edin), FRCP(Lond), FRCPCH(UK), FSLCPaed, FCCP, Hony. FRCPCH(UK), Hony. FCGP(SL)

Specialist Consultant Paediatrician and Honorary Senior Fellow, Postgraduate Institute of Medicine, University of Colombo, Sri Lanka.

Continue Reading

Features

Promoting our beauty and culture to the world

Published

on

Tourism is very much in the news these days and it’s certainly a good sign to see lots of foreigners checking out Sri Lanka.

With this in mind, Ruki’s Model Academy & Agency recently had a spectacular event to select Mrs. Tourism Sri Lanka in order to promote Sri Lanka in the international scene.

Nimesha Premachandra was crowned Mrs. Tourism Sri Lanka 2026.

She says she owes her success to Ruki (Rukmal Senanayake), the National Director and model trainer, and personality and advocacy trainer Tharaka Gurukanda.

Nimesha is a school teacher by profession, an actress and TV presenter by passion, and an entrepreneur by spirit.

She believes in balancing grace with purpose, and using her platform to inspire women, while promoting the beauty and culture of Sri Lanka to the world. And this is how our Chit-Chat went:

Nimesha Premachandra: Mrs. Tourism Sri Lanka 2026

01. How would you describe yourself?

I am a passionate, disciplined, and people-oriented person. I love learning, performing, and guiding others, especially young minds, through education.

02. If you could change one thing about yourself, what would it be?

I would probably try to be less self-critical and allow myself to celebrate achievements more often.

03. If you could change one thing about your family, what would it be?

Nothing major. I am grateful for my family’s love and support, which has shaped who I am today.

04. Is Mrs. Tourism Sri Lanka your very first pageant?

No. I have been part of pageants before, but Mrs. Tourism Sri Lanka is very special because it represents purpose, culture, and global representation.

05. What made you take part in this contest?

I wanted to represent Sri Lanka internationally and use this platform to promote tourism, culture, and women’s empowerment.

06. Obviously, you must be excited about participating in the grand finale, in Vietnam; any special plans for this big event?

Yes, I am extremely excited. My focus is to showcase Sri Lankan elegance, hospitality, and authenticity, while building meaningful connections with participants from around the world.

07. How do you intend promoting tourism, in Sri Lanka, during your rein?

I plan to highlight Sri Lanka’s diverse experiences in culture, heritage, wellness, nature, and local hospitality through media appearances, digital storytelling, and tourism collaborations.

08. School?

Kaluthara Balika. School life played a big role in shaping me. I actively participated in sports and performing arts, which later helped me build confidence as an actress and presenter.

09. Happiest moment?

Being crowned Mrs. Tourism Sri Lanka 2026 and seeing the pride in my family’s eyes – definitely one of my happiest moments.

10. What is your idea of perfect happiness?

Peace of mind, good health, and being surrounded by the people I love while doing work that has meaning.

11. Which living person do you most admire?

I most admire Angelina Jolie because she beautifully balances her work as an actress with meaningful humanitarian efforts. She uses her global platform to support refugees, advocate for human rights, and inspire women to be strong, compassionate, and independent.

12. Which is your most treasured possession?

My memories and experiences because they remind me how far I’ve come, and keep me grounded.

13. Your most embarrassing moment?

Like everyone, I’ve had small on-stage mishaps, but they always taught me to laugh at myself and move forward confidently.

14. Done anything daring?

Participating in pageants while balancing teaching, media work, and family life has been one of the boldest and most rewarding decisions I’ve made.

Keen to use her title to promote Sri Lanka globally

15. Your ideal vacation?

A peaceful destination surrounded by nature; somewhere I can relax, reconnect, and experience local culture.

16. What kind of music are you into?

I enjoy soft, soulful music because it helps me relax and stay inspired.

17. Favourite radio station:

I enjoy stations that blend good music with meaningful conversation and positive energy.

18. Favourite TV station:

Sri Lanka Rupavahini Corporation. It’s where it all began for me. It played a significant role in my journey as a TV presenter and helped shape my confidence and passion for media.

19 What would you like to be born as in your next life?

Someone who continues to inspire others because making a positive impact is what matters most.

20. Any major plans for the future?

I hope to expand my work in media and entrepreneurship while continuing my role as an educator and using my title to promote Sri Lanka globally.

Continue Reading

Trending