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‘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.


Post-war reconciliation: Lanka ready to accept support of int’l partners



UN-Prez tells UNGA

President Gotabaya Rajapaksa yesterday (22) declared his readiness to engage all domestic stakeholders, and to obtain the support of international partners and the United Nations, in the post-war reconciliation process.

Addressing the 76th UNGA, President Rajapaksa said that it was his government’s firm intention to build a prosperous, stable and secure future for all Sri Lankans, regardless of ethnicity, religion, or gender. “However, history has shown that lasting results can only be achieved through home-grown institutions reflecting the aspirations of the people.

The following is the full text of President’s speech: “The COVID-19 pandemic has had a devastating impact on humanity. I sympathise deeply with all who have lost their loved ones during the pandemic. I thank frontline healthcare and essential workers around the world for their dedication and commend the World Health Organisation for its crisis response.

I also greatly appreciate the rapid advances made by the scientific and medical communities in devising vaccines and treatment protocols to combat the virus.

At the same time, we must recognise that the challenges surrounding production, distribution, deployment and acceptance of vaccines must be overcome urgently if the spread of dangerous new virus strains is to be prevented.

Ensuring that everyone, everywhere, is vaccinated is the best way out of the pandemic.

Although still a developing nation, Sri Lanka has been very successful in its vaccination programme.

We have already fully vaccinated nearly all those above the age of 30.

Everyone over the age of 20 will be fully vaccinated by the end of October.

We will start vaccinating children over 15 years of age in the near future.

The rapid progress of vaccinations was enabled by coordinated efforts between healthcare workers, Armed Forces and Police personnel, Government servants, and elected officials.

In collaboration with the WHO, Sri Lanka is establishing a Regional Knowledge Hub to facilitate exchange of lessons learnt from COVID-19 and support countries to recover better.

Sri Lanka also benefitted greatly from financial and material support provided by bilateral and multilateral donors to manage the pandemic.

I thank these nations and institutions for their generosity.

The increased global cooperation visible during this ongoing crisis is greatly encouraging.

However, there is still more to be done.

Mr. President,

The economic impact of the pandemic has been especially severe on developing countries.

This has placed the implementation of the 2030 Agenda for Sustainable Development Goals at considerable risk.

It is vital that more initiatives including development financing and debt relief be adopted through international mechanisms to support developing nations and help them emerge from this uncertain situation.

Sri Lanka too has suffered greatly due to the pandemic.

In addition to the tragic loss of life, our economy has been deeply affected.

The lockdowns, together with general movement restrictions, reduced international travel, and slower global growth have affected nearly all sectors of our economy.

Tourism, one of Sri Lanka’s highest foreign exchange earners and a sector that supports nearly 14% of the population, has been devastated.

This industry, together with small and medium businesses in many other sectors, received Government support through interest moratoriums and other financial sector interventions.

Daily wage earners and low-income groups were also supported through grants of cash and dry rations during lockdowns, adding significantly to state expenditure.

In addition to their immediate impact, these economic repercussions of the pandemic have limited the fiscal space available to implement our development programmes.

Mr. President,

As devastating as the consequences of the pandemic have been to humanity, the world faces the even greater challenge of climate change in the decades to come.

As emphasised in the recent report by the Intergovernmental Panel on Climate Change, the unprecedented effect of human activity on the health of the planet is deeply worrying.

Addressing the grave threats posed by climate change and the loss of biodiversity requires decisive and urgent multilateral action.

As a climate-vulnerable country, Sri Lanka is deeply aware of the dangers of climate change.

Sri Lanka’s philosophical heritage, deeply rooted in Lord Buddha’s teachings, also emphasises the vitality of preserving environmental integrity.

It is in these contexts that Sri Lanka is a Commonwealth Blue Charter Champion and leads the Action Group on Mangrove Restoration.

Through the adoption of the Colombo Declaration on Sustainable Nitrogen Management, which seeks to halve nitrogen waste by 2030, Sri Lanka has also contributed to global efforts to reduce environmental pollution.

Having participated virtually in the Pre-Summit held in April, I trust that the United Nations Food Summit later this month will result in actionable outcomes to promote healthier, more sustainable, and equitable food systems globally.

Such outcomes will be crucial to human health as well as to the health of our planet.

Sustainability is a cornerstone of Sri Lanka’s national policy framework.

Because of its impact on soil fertility, biodiversity, waterways and health, my Government completely banned the use of chemical fertilisers, pesticides, and weedicides earlier this year.

Production and adoption of organic fertiliser, as well as investments into organic agriculture, are being incentivised.

I appreciate the encouragement received from many global institutions and nations for our efforts to create a more sustainable agriculture in Sri Lanka.

The conservation of our environment is one of our key national priorities.

We aim to increase forest cover significantly in the coming decades.

We are also working to clean and restore over 100 rivers countrywide, and to combat river and maritime pollution.

We have also banned single use plastics to support ecological conservation.

Sri Lanka recognises the urgent need to reduce use of fossil fuels and support decarbonisation.

Our energy policy seeks to increase the contribution of renewable sources such as solar, wind and hydropower to 70% of our national energy needs by 2030.

Mr. President,

Sri Lanka welcomes the support of the international community as it engages in the task of reviving its economy and carrying out its national development programme.

We intend to make full use of geostrategic location and our robust institutions, strong social infrastructure, and skilled workforce, to attract investment and broaden trade relationships.

My Government is focusing on extensive legal, regulatory, administrative and educational reforms to facilitate this, and to deliver prosperity to all our people.

Sri Lanka has enjoyed universal adult franchise since pre-Independence.

The democratic tradition is an integral part of our way of life.

My election in 2019 and the Parliamentary election in 2020 saw Sri Lankan voters grant an emphatic mandate to my Government to build a prosperous and stable country, and uphold national security and sovereignty.

In 2019, Sri Lanka experienced the devastation wrought by extremist religious terrorists in the Easter Sunday attacks.

Before that, until 2009, it had suffered from a separatist terrorist war for 30 years.

Terrorism is a global challenge that requires international cooperation, especially on matters such as intelligence sharing, if it is to be overcome.

Violence robbed Sri Lanka of thousands of lives and decades of prosperity in the past half century.

My Government is committed to ensuring that such violence never takes place in Sri Lanka again.

We are therefore acting to address the core issues behind it.

Fostering greater accountability, restorative justice, and meaningful reconciliation through domestic institutions is essential to achieve lasting peace.

So too is ensuring more equitable participation in the fruits of economic development.

It is my Government’s firm intention to build a prosperous, stable and secure future for all Sri Lankans, regardless of ethnicity, religion, or gender.

We are ready to engage with all domestic stakeholders, and to obtain the support of our international partners and the United Nations, in this process.

However, history has shown that lasting results can only be achieved through home-grown institutions reflecting the aspirations of the people.

Sri Lanka’s Parliament, Judiciary and its range of independent statutory bodies should have unrestricted scope to exercise their functions and responsibilities.

Mr. President, Excellencies, Distinguished Delegates.

If, in keeping with the theme of our General Debate today, we are to truly build resilience through hope, we must all strive towards the common good.

It is the role of the United Nations to facilitate this by treating all sovereign states, irrespective of size or strength, equitably, and with due respect for their institutions and their heritage.

I request the United Nations and the international community to ensure the protection of the Buddhist heritage of Afghanistan.

I call on the member states of this august Assembly to work together in a spirit of true cooperation, generosity, goodwill, and mutual respect to foster a better and more sustainable future for all humanity.”

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Acquisition of Yugadanavi power plant and right to build new LNG terminal: US firm says agreement finalised



US based energy firm, New Fortress Energy Inc. on Tuesday (21) announced that it had executed a definitive agreement with the Sri Lankan government for New Fortress’ investment in West Coast Power Limited, the owner of the 310 MW Yugadanavi Power Plant based in Colombo, along with the rights to develop a new LNG Terminal off the coast of Colombo.

Issuing a press release, New Fortress Energy Inc., said as a part of the transaction, New Fortress will have gas supply rights to the Kerawalapitya Power Complex, where 310 MW of power is operational and an additional 700 MW scheduled to be built, of which 350 MW is scheduled to be operational by 2023.

Given below is the statement: “New Fortress will acquire a 40% ownership stake in WCP and plans to build an offshore liquified natural gas (LNG) receiving, storage and regasification terminal located off the coast of Colombo. New Fortress will initially provide the equivalent of an estimated 1.2 million gallons of LNG (~35,000 MMBtu) per day to the GOSL, with the expectation of significant growth as new power plants become operational.

“The 310 MW Yugadanavi Power Plant currently has a long-term power purchase agreement to provide electricity to the national grid that extends through 2035. This power plant consists of General Electric turbines and is configured to run on natural gas in a combined cycle.

“”This is a significant milestone for Sri Lanka’s transition to cleaner fuels and more reliable, affordable power,” said Wes Edens, Chairman and CEO of New Fortress Energy. “We are pleased to partner with Sri Lanka by investing in modern energy infrastructure that will support sustainable economic development and environmental gains.”

“The Kerawalapitya Power Complex is the foundation of the baseload power that serves the country’s population of 22 million people. Delivering cleaner and cheaper fuels to Sri Lanka will support the country’s growth for years to come.”

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Sri Lanka a dumping ground for toxic burnt oil from ship engines !



By Ifham Nizam

Environment Minister Mahinda Amaraweera has questioned some Central Environmental Authority (CEA) officials for permitting more than 20 individuals to collect waste burnt out oil from ships without having facilities to purify it.

However, it was claimed that most of those individuals were backed by some senior politicians and the Authority didn’t have any say.

The Minister has decided to conduct a comprehensive investigation into the toxic waste oil racket through the Presidential Special Investigation Division.

Amaraweera said the racket had been going on for a long time. “This racket is causing a huge amount of foreign exchange loss to the country and causing huge environmental damage,” he added.

Accordingly, steps would be taken by the Presidential Investigation Division to stop the racket and investigate the huge amount of money that has changed hands, the Minister said.

“After the President returns from his visit to New York, I will hold discussions with him and submit a factual report on the amount of money lost to the country in dollars through this racket,” Minister Amaraweera said.

The CEA has so far issued 27 permits for the disposal of waste fuel oil. However, only four companies have the facility to refine it. About 20,000 to 25,000 tonnes of burnt out waste oil are shipped into the country annually. But the country has capacity to refine only 4,800 tonnes a year by licensed companies. It is not clear what happens to the remaining 15,200 tons of waste oil.

The Minister said that issuing licences to companies and individuals who did not have fuel refining facilities was wrong.

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