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‘Cash-strapped country being overwhelmed by corruption’



Mega Airbus, US PR deals: Eran questions govt. silence

By Shamindra Ferdinando

Samagi Jana Balavegaya (SJB) MP Eran Wickremaratne says that in spite of revelations of massive waste, corruption and irregularities in the public and private sector, Sri Lanka lacked a system to deal with those exposed here as well as persons implicated as a result of judicial actions overseas.

National List MP Wickremaratne pointed out that action hadn’t been taken against those exposed.

The former State Finance Minister said that the failure on the part of Sri Lanka to take follow up action on two specific judgments given by British and US courts in January 2020 and Feb 2021, respectively, clearly exposed the situation.

Wickremaratne served as the Deputy Minister of Investment Promotions and Highways of the Yahapalana 100-day government before being elevated as State Finance Minister.

The former CEO of the NDB who gave up that post in 2010 to enter parliament on the UNP National List served two terms before switching allegiance to the SJB in early 2020.

Lawmaker Wickremaratne told The Island that the country was in such a precarious situation, financially, the incumbent government should put in place a system to deal with corruption. The MP said that he used last Friday’s debate on two COPE (Committee on Public Enterprises) reports tabled in Parliament this year to underscore the need to address the issue at hand.

The country had been overwhelmed by unbridled corruption, the former banker said, urging the Parliament to pay attention to the much deteriorated financial accountability or face the consequences.

Lawmaker Wickremaratne emphasized the urgent need for a strong independent body that could inquire into corruption cases whoever exercised political power.

Responding to another query, the SJB heavyweight questioned the rationale in COPE investigations as well as inquiries undertaken by two other parliamentary watchdog committees, the COPA (Committee on Public Accounts) and COPF (Committee on Public Finance) if those exercising political power conveniently ignored the disclosures. Similarly, the country couldn’t ignore decisions given by foreign courts in respect of Sri Lankans or cases involving Sri Lankans.

The NL MP said that Sri Lanka’s failure at least to properly examine the rulings given by a British court in respect of corruption in the procurement of aircraft to SriLankan Airlines and the US court as regards Sri Lanka government being duped to the tune of USD 6.5 mn by US political promoter Imaad Shah Zuberi highlighted the weakness in our system.

MP Wickremaratne said that the incumbent government owed an explanation regarding the handling of SriLankan Airlines case.

The MP told the parliament: “In 2013 Airbus engaged a wife of a person, concerned with the purchase of Aircraft for Sri Lankan Airlines through an intermediary company, and pursuant to that engagement, Airbus company had offered up to USD 16.84 mn to the said intermediary company to influence SriLankan Airlines to purchase ten Aircraft and four more on lease basis. In fact USD 2 mn had been paid at that particular time as commission to the intermediary. The judgment mentioned that the seriousness of the criminality in this case has been acknowledged by all sides. It was proven in the Southwark High Courts in Great Britain in the case between the Director of Serious Frauds Office and Airbus where the judgment pronounced on January 31, 2020 said Airbus and SriLankan Airlines had committed a major fraud.”

When interrupted by Agriculture Minister Mahindanda Aluthgamage MP Wickramaratne challenged the SLPP to take legal action if politicians of the yahapalana government had been involved in the Airbus fraud.

MP Wickremaratne was referring to SriLankan Airlines ex-Chief Executive Kapila Chandrasena and his wife Priyanka Wijenaike who surrendered to the CID following the disclosure of payments received by Airbus in a sales contract made in 2013.

Chandrasena received appointment as Sri Lankan Air Lines Chairman in Nov 2018 in the wake of constitutional coup staged by the then President Maithripala Sirisena.

MP Wickremaratne asked what had happened to the investigation ordered by President Gotabaya Rajapaksa into the Airbus deal after the British court ruling.

The incumbent administration also owed an explanation regarding payment of USD 6.5 mn to an American of Pakistani origin lobbyist Imaad Shah Zuberi, who was given a 12 year prison term for falsifying records to hide his work as a foreign agent while lobbying high-level US officials. US federal judge found him guilty on several counts, including defrauding Sri Lanka of USD 6.5 mn. MP Wickremaratne pointed out that the then government had paid USD 6.5 mn for what was called an image building exercise. “All these are proven cases, but what has the Sri Lankan Government done about this?” The MP pointed out while the rest of the world took tangible measures against corruption, the COPE seemed satisfied with disclosures with no final investigation or justice.

MP Wickremaratne said that the parliamentary watchdog committee should state its position on the British and UK rulings.

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Heat index, the temperature felt on the human body is expected to increase up to ‘Caution’ level at some places in Northern, North-Central, North-western and Eastern provinces and Monaragala and Hambanthota districts.

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472,553 candidates have applied to to sit this years examination which will be held at 3568 examination centers

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Personal income tax shock dims economic activities



ECONOMYNEXTSri Lanka’s personal income tax hikes have hit economic activity in the first quarter though despite currency stability helped businesses cut prices, Hemas Holdings, a top consumer goods group has said.As the currency stabilized, as central bank ended contradictory money and exchange policy conflicts, businesses had cut prices. Mainstream economists generally claim that price falls lead to delayed transactions and try to generate positive inflation through money printing, though businesses believe otherwise.

“The market witnessed price reductions and promotional trade schemes to stimulate consumption,” Hemas Holding told shareholders in the March quarterly statement.

“However, changes made to the personal income tax structure severely impacted modern trade sales volumes as consumers rationalised their purchases under reduced disposable income levels.”

Sri Lanka hiked personal income tax rates in 2023. Value added taxes were raised to 15 percent from 8 percent last year. Another 2.5 percent cascading tax was imposed on top of VAT, the effect of which was estimated to be around 4.5 or more through the cascading effect.

While value added tax allows the government to get tax revenues after citizens make transactions and getting the economy to work, based on best decisions needed to drive the economy to satisfy real needs, income tax kills economic decisions and transfers money to state actors, analysts say.

Net gains on income tax therefore comes at a cost of lost value added tax as well as killed real economic activities which would otherwise have been based on decisions of those who earned the money.

UK also almost doubled VAT in 1979, also to 15 percent, cut the base income tax rate and widened thresholds above inflation to give choice to individuals, amid criticism from Keynesian style or mainstream economists to recover the economy, after two back-to-back IMF programs failed to deliver concrete results, analysts point out.At Hemas Holdings, group revenues went up 52.6 percent to 32 billion rupees in the March 2023 quarter from year earlier amid price inflation as the rupee fell, and cost of sales went up 45.1 percent to 22.2 billion rupees, allowing the group to boost gross profits 72 percent to 9.8 billion rupees, interim accounts showed.

However, administration costs went up 54 percent, selling and distribution costs went up 36 percent, and finance costs went up to 1.3 billion rupees. Profit after tax was flat at 1.06 billion rupees.Sri Lanka’s central bank stabilized the rupee in the second half of 2022 after the rupee collapsed from 200 to 360 to from two years of money printing and also removed a surrender rule in March allowing the exchange rate appreciate.

The US Fed also tightened policy from March 2022 helping bring down global commodity prices after triggering inflation not seen for 40 years through Coronavirus linked money printing or accommodating a real shock through monetary expansion.

“While the modern trade channels witnessed a slow down due to the adverse impact of the tax reforms and high cost of credit on the middle-class urban population, the general trade channels experienced significant growth and increased foot fall,” Hemas told shareholders.

“The decline in global commodity prices in the second half of the year, enabled the business to make price reductions across the portfolio.

“However, the benefit of appreciation of the Sri Lankan Rupee in March 2023 was not seen during the quarter due to the lag effect but is expected to realise in the quarters to come, provided the current economic conditions prevail.”

Hemas is also has operations in Bangladesh where the central bank is also buying up government securities with tenors as long at 20 years to mis-target the interest rate, triggering forex shortages and depreciating the Taka, according to analysts who study the country.

Inflation had hit 9.3 percent in Bangladesh by March.

“In the face of numerous challenges including slowdown in the global economy, depreciation in Taka, heightened inflation and depleting foreign currency reserves, the country entered an IMF programme in January 2023,” the firm said.

“The value-added hair oil market witnessed a degrowth, as consumers curbed consumption in many non-essential items and switched to value-for-money alternatives.”

Mainstream economists mis-target rates to boost growth known as either monetary stimulus or bridging an output gap, though the effort result in instability and economic contractions.

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