News
‘Abolition of range of taxes in Nov 2019 triggered crisis’
‘Welcome fuel price hike, stresses need to increase gas price’
By Shamindra Ferdinando
Former Governor of Uva, Southern and Central Province Rajith Keerthi Tennakoon says the government is paying a huge price for the continuing failure to streamline the tax collection process, corrupt practices and the utterly unwise decision to change the tax policy immediately after the change of government in Nov 2019.
Civil society activist Tennakoon alleged that the Treasury lost well over Rs. 500 bn due to a controversial decision to do away with a range of taxes, including PAYE (Pay As You Earn), NBT (Nation Building Tax), Withholding tax, Capital Gain tax imposed on the Colombo Stock Exchange, Bank Debit tax and unprecedented reduction of VAT (Value Added Tax).
Tennakoon said that the 15% VAT and the 2% NBT which amounted to 17% imposed on all goods and services were unified and reduced to 8%, effective from the first of December 2019.
Tennakoon said that the decision was taken at the first cabinet meeting of the incumbent government held on Nov 27, 2019.
The civil society activist turned political henchman under President Sirisena, asked whether ordinary people benefited from those tax cuts though the government spokespersons repeatedly said so.
Referring to the Central Bank Report 2020, Tennakoon said that the total revenue for 2018 and 2019 had been Rs 1,950 bn and Rs 1,900 bn, respectively, whereas it dropped to Rs 1,373 in 2020. Tennakoon asked whether the government carried out a proper study before such a drastic revision of tax policy was implemented or simply went ahead with it in view of the parliamentary election scheduled for April of the following year. The election had to be put off for August 2020 due to the first Covid-19 eruption, Tennakoon pointed out, urging the government to undertake a tax review immediately or face the consequences.
The total government revenue as a percentage of the GDP (Gross Domestic Product) dropped to 9.05% in 2020 from 12.6% in the previous year whereas tax revenue dropped to 8.5% from 11.6%, Tennakoon said.
He however welcomed the government decision to increase fuel prices. Declaring the upward price revision announced by Energy Minister Udaya Gammanpila on June 11 was timely, the former Governor said that the country would have been in a far worse situation if the unrealistic old pricing structure was retained.
Tennakoon said that the Opposition hadn’t really understood the crisis the country was in. If they actually examined the situation, it wouldn’t have moved a No Confidence Motion (NCM) against Energy Minister Gammanpila over the increase in fuel prices, Tennakoon said.
Instead, he argued that the NCM should have been moved against the government for jeopardizing the national economy by foolish political decision to abolish a sound tax structure in place, the former Executive Director of polls monitoring body CAFFE (Campaign for Free and Fair Elections) said.
Tennakoon questioned the rationale in demanding that the fuel prices be brought down at a time all political parties represented in parliament should address the overhanging foreign and local debt as a menacing national challenge. Pointing out that the country’s growing oil bill could overwhelm the national economy unless remedial measures were taken, Tennakoon emphasized that there should be a national consensus on the fuel pricing formula regardless of the government in power.
Those who demanded Minister Gammanpila’s resignation over the fuel price increase were conveniently silent now because they were aware of the actual situation, Tennakoon said.
Responding to another query, Tennakoon urged the government to revise the prices of domestic and industrial gas without further delay.
Tennakoon said that the government should take the public into confidence. It shouldn’t hesitate to explain the difficulties experienced due to choking of major revenue sources- remittances from Sri Lankans working abroad, tourism, garments and other exports, he said.
The civil society activist applauded the stand taken by the Energy Minister amidst attacks on him. Nothing that Presidential Secretariat, too, acknowledged the threat faced by the banking system due to CPC and CEB debt to Bank of Ceylon and People’s Bank to the tune of Rs 737 bn and President Gotabaya Rajapaksa acknowledging the daunting challenge in annual debt payment amounting to USD 4 bn, Tennakoon said that the country was experiencing worst post-independence crisis.
Whatever various government spokespersons uttered, the country was in such economic turmoil, the situation couldn’t be reversed only by restructuring the country’s debt with the IMF’s intervention, Tennakoon said.
Referring to the recent report of COPA (Committee on Public Accounts) report handed over to the Parliament on July 20, Tennakoon pointed out the failure on the part of the Inland Revenue, Sri Lanka Customs and Excise Department was quite shocking. The Finance Ministry couldn’t absolve itself of the responsibility for proper overseeing of the tax collection structure, Tennakoon said.
Commenting on shocking revelations made by a 22-member parliamentary watchdog in its latest report, Tennakoon emphasized corruption paved the way for irregularities. Such practices caused automatic losses to the Treasury, he said. Alleging that successive governments turned a Nelsonian eye to such brazen corrupt practices, Tennakoon said that the national economy was now in such a precarious situation, immediate remedial measures were required to thwart a calamity.
Quoting from CBSL reports, Tennakoon said that the country’s overall debt now stood at over 16.2 trillion. The government should realize that the issue at hand couldn’t be addressed by printing money and propaganda, Tennakoon said. The SLPP should never have abolished the entire range of taxes at the onset of the new administration, Tennakoon said, urging the government to examine the need to change the overall tax structure. How could they justify overly indirect taxes whereas the direct tax regime remains absurdly low?
Tennakoon insisted that the national economy couldn’t be saved by giving tax amnesty to defaulters. Such tax amnesties announced by successive governments since the 1960s didn’t produce the desired results, he said.
News
Unions resist tripartite EPF management plan
… warn of dire consequences
A group of trade unions and civil society groups has requested President Anura Kumara Dissanayake to abandon his government’s controversial plan for the proposed tripartite management of the EPF.
The group has told the President: “We strongly object to the government’s plan to transfer the EPF to a tripartite board—jointly promoted by the Employers’ Federation of Ceylon (EFC), International Monetary Fund (IMF) and the International Labour Organisation (ILO)—and to increase the investments of those funds within private equity and debt markets.
“While the EFC and the government jointly project this plan as a ‘modern governance framework’, it poses a serious threat to the EPF’s financial stability, fiduciary conduct, and returns to workers’ life savings, with severe consequences for broader macroeconomic stability. Rather than replacing the corruption existing in the public sector, this tripartite framework paves the way for a corporate takeover of the EPF. Through this, the fund is exposed to unlawful business practices such as insider trading using internal information of EPF investments, conflicts of interest and corporate bailouts of unstable private companies.
“Sri Lanka’s corporate sector has a tremendously negative track record, which you alluded to during your victorious election campaign in 2024. This was recently unravelled by the multi-billion-dollar illicit capital flight through trade misinvoicing, which your administration is now actively working to curb in the imports sector.
“The recent banking sector fraud exceeds Rs. 13 billion; widespread corporate tax evasion destabilised the fiscal position (Sri Lanka Auditor General’s Department Annual Reports) and consequently inflated the tax burden on the general public. The EFC has found it convenient to remain silent about these crimes, possibly assuming that their silence would preserve their social standing. Considering this inherent corruption within Sri Lanka’s corporate sector and its disregard to the living standards of the general public, there is no realistic basis to integrate corporate interests to actively manage the EPF. The corporate sector of Sri Lanka has not developed sufficiently on technical and ethical grounds to safely entrust the largest retirement savings pool in the country. The EPF is a captive fund that has no mechanism for the owners to divest if the management is corrupt. This further increases the possibility of corporate fraud when the management of the fund is jointly held with the corporate sector.
“Furthermore, during the recent public discussion with trade unions, Deputy Minister of Finance Dr. Anila Jayantha pointed out that the domestic debt restructuring (DDR) would inflict a loss of Rs. 600 billion to the EPF. Our independent calculations—formally submitted as an affidavit to the Supreme Court approved by the Federation of University Teachers’ Associations in 2024—reveal that nominal loss alone is Rs. 634.4 billion. When factoring in foreclosed reinvestment returns, the true loss skyrockets to Rs. 1,711 billion, wiping out 48% of the fund’s projected gross income for the 2023 – 2028 period. Under the pretext of safeguarding the banking system, this colossal robbery preserved high yields on government bonds held by commercial banks and high-net-worth individuals, subsequently reaping them astronomical profits. Now, the exact same plunder is rearing its head again disguised as a tripartite committee.”
“The main arguments supporting our resistance and viable alternatives for optimising EPF management directly under the Central Bank of Sri Lanka (CBSL), are outlined below.
“Objections to the government’s tripartite proposal:
1. The “International best practice and conflict of interest fallacies”
The government holds that tripartite management of pension funds is the “international best practice” and that there is a “conflict of interest” in CBSL managing the EPF. They are key pillars justifying government’s tripartite proposal.
These two positions are shockingly misleading given that four of the five largest pension funds in the world, in Norway, Japan, the U.S., and Singapore, are managed directly by state bodies or central banks. Therefore, ‘international best practice’ in pension fund management is the exact opposite of what the government and the IMF are proposing. We hence reject these baseless positions.
2. Corporate captivity and bailouts
It is clear that the EFC is desperately pushing for this proposal at a time of global uncertainty, to cushion the effects of the crisis and maximise gains. Under corporate influence within the proposed tripartite board, the private conglomerates can use the multi-trillion-rupee EPF to continue their unstable commercial operations without having to risk their own capital or savings to do so. This will severely erode the financial stability of the EPF and its returns.
3. Risk of front running
“Because the EPF is a colossal fund, its investment decisions can alter asset prices. This creates immense monetary value for the information generated by its investment decisions. Corporate representatives on the proposed tripartite board will be perfectly positioned to use this information to trade ahead of the EPF (front-running), buying assets cheaply and dumping them onto the EPF at inflated prices for guaranteed corporate gain, resulting in a reduction of returns to the EPF.
4. Unavoidable loopholes
“Presence of a separate group of investment analysts, trade union representatives and government officials within the proposed tripartite structure cannot prevent pre-market corporate access to EPF’s investment decisions. Investment proposals made by the analysts has to be first approved by the proposed tripartite committee, making it impossible to prevent corporate access to insider information on EPF investments.”
News
Two arrest warrants issued for Gnanasara thera
The Colombo High Court and Court of Appeal yesterday issued arrest warrants for the Bodu Bala Sena general secretary Galagoda Aththe Gnanasara in a case involving an alleged statement insulting Islam.
The arrest warrants were issued on Tuesday and Wednesday. The Court of Appeal issued an open warrant two weeks after the court rescinded the presidential pardon granted to the thera when he was serving a six-year term for contempt of court.
The Appeals Court also imposed a travel ban on the monk and ordered that the Controller General of Immigration and Emigration be informed of the restriction.
The case was taken up before Colombo High Court Judge Buddhika C. Ragala. Gnanasara Thera was not present when the case was called.
A medical report was submitted stating that Thera was unwell, while his sureties also failed to appear before court. His counsel, Asoka Weerasuriya, told court that his client wished to bring the case to an early conclusion and that representations had been made to the Attorney General in that regard.
However, after considering the submissions, the High Court judge said he was not satisfied with the medical report submitted on behalf of the accused. The court also noted the failure of the sureties to appear.
The judge subsequently ordered that Gnanasara Thera be arrested and produced before court.The Attorney General filed the case under provisions of the Penal Code, alleging that remarks made by Gnanasara Thera concerning the Holy Quran amounted to an insult to Islam.
News
CA dismisses GR’s writ petition against arrest
A two-member bench comprising Court of Appeal President Justice Rohantha Abeysuriya and Justice Sarath Dissanayake yesterday (1) dismissed a writ petition filed by former President Gotabaya Rajapaksa seeking judicial intervention to prevent his arrest under the Prevention of Terrorism Act (PTA) in connection with the ongoing investigations into 2019 Easter Sunday terror attacks.
The writ petition was rejected in limine.
In the petition, the former President cited Inspector General of Police Priyantha Weerasooriya, Criminal Investigation Department (CID) Director Shani Abeysekera, the Officer-in-Charge of the CID’s Special Investigations Unit and the Attorney General as respondents. The ex-President sought the court intervention after the arrest of former head of the State Intelligence Service (SIS) retired Maj. Gen. Suresh Sallay over the Easter Sunday attacks.
Since then , former Director of Directorate of Military Intelligence (DMI) has been named as a suspect.
Earlier, the Fort Magistrate’s Court imposed a travel ban on him in relation to investigations stemming from allegations made by Asad Moulana in the Channel 4 documentary on the Easter attacks.
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