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Editorial

Don’t eviscerate precious goose

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Thursday 27th February, 2025

The proposed 15% services export tax exemplifies Sri Lanka’s deceptive taxation policy. The NPP government’s Budget 2025 has listed it as a corporate tax, but according to a Bill seeking to amend the Inland Revenue Act, the new tax will apply to all individuals who provide services to external parties and earn foreign exchange. Not even freelancers will be spared. The tax in question will apply to money brought back to Sri Lanka through the banking system.

The services export tax is bound to hinder Sri Lanka’s forex inflow and deliver a crippling blow to the country’s budding tech industry. It may drive Sri Lankan IT professionals working for foreign firms and bringing much-needed forex to park their earnings overseas and/or use informal forex transfer systems such as Hawala and Undiyal bypassing the banking system.

The living conditions of many Sri Lankans who have gone overseas for employment, for want of a better alternative in view of the current economic crisis, are far from satisfactory. Most of these workers are doing odd jobs or have fallen prey to racketeers, as evident from the predicament of dozens of Sri Lankans trapped in the cyber slave camps in Myanmar. Therefore, it defies comprehension why the Sri Lankans earning foreign exchange and helping shore up the country’s forex reserves, without migrating, are not incentivised to earn more in foreign currency instead of being discouraged with taxes.

The government is desperate to increase its revenue to 15% of GDP in keeping with an IMF bailout condition. But in a bid to rally popular support ahead of an election, it has proposed in its Budget 2025 pay hikes for the public sector workers and some relief measures which will take a heavy toll on the state coffers. It is also planning to expand the state service, which is already bursting at the seams, by recruiting as many as 30,000 workers. It cannot increase the existing taxes any more, and its promise to save funds by curtailing state expenditure remains largely unfulfilled. So, it has resorted to measures such as the services export tax regardless of their adverse consequences.

Some international tech companies are expanding their operations in Sri Lanka, and this means more jobs for the local youth and a boost to the country’s forex inflow. The new tax at issue is fraught with the danger of driving those companies as well as talented Sri Lankan youth out of the country. Some of these companies are reportedly planning to shift their operations to other South Asian countries which are offering numerous concessions to them. Is the NPP government promoting foreign investment in other countries? It has failed to be different from its predecessors. It has not been able to attract adequate foreign direct investment despite its braggadocio. It is upbeat about a proposed foreign oil refinery, but cannot specify the economic benefits, which, it says, will accrue to this country! It should try to increase the forex inflow through available sources such as those who work for international firms and earn in foreign currency without leaving the country. These professionals can also be considered Rata Viruwas (an honorific politicians use for expatriate workers), though based here. They deserve encouragement.

It is hoped that the government will give the proposed services export tax a rethink. It must not eviscerate the goose that lays the golden eggs. Let it be urged to explore alternative ways and means of increasing its revenue, such as downsizing the state sector and rationalising its welfare expenditure. It is reportedly planning a heavily subsidised basket of goods in view of the local government polls slated for April. This is an election bribe or chanda gundu. What has the country gained from the fuel subsidy for fishers? The fertiliser subsidy has not helped bring down the prices of rice. Paddy farmers are refusing to sell their produce to the state-owned Paddy Marketing Board, which is trying to build a buffer stock to regulate the rice market.

The Opposition has claimed during the budget debate that online casino is not taxed. If so, why has the government baulked at imposing a new sin tax to boost its revenue and chosen to commit the sin of strangling the local tech sector and driving more Sri Lankan professionals out of the country? If it manages state funds frugally and streamlines revenue collection, it will be able to reduce its overdependence on tax and tariff increases and new taxes.



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Editorial

Fuss about maid’s house and lingering imbroglio

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Thursday 19th March, 2026

Whenever the JVP-NPP government gets into hot water, President Anura Kumara Dissanayake rushes to Parliament and makes special statements; the CID and the national anti-graft commission try to pull a rabbit out of the hat to distract the public. While the government is drawing heavy flak for mismanaging the current fuel quota system, with long queues of vehicles persisting near filling stations, the Commission to Investigate Allegations of Bribery or Corruption has recorded a statement from former President Gotabaya Rajapaksa on an allegation that during President Mahinda Rajapaksa’s government, he, as the Secretary to the Ministry of Urban Development, had a house allocated to a maid of the then Chief Justice (CJ) Mohan Peiris, in an Urban Development Authority housing scheme.

There is no gainsaying that an investigation needs to be conducted to find out whether there were irregularities in the allocation of the aforesaid house and the state suffered any losses therefrom, but there are far bigger issues that need to be addressed. The Rajapaksa government earned notoriety for cronyism, corruption, misuse of state assets, etc., but most of its questionable deals have not been probed. Similarly, the destruction of hundreds of state-owned buildings by the JVP in the late 1980s has gone uninvestigated despite the staggering losses those crimes caused to the state coffers. Maithripala Sirisena, whom the JVP helped secure the executive presidency in 2015, once revealed that the JVP had torched as many as 240 Agrarian Service Centres with paddy storage facilities countrywide during its second reign of terror (1987-89). Now that action has reportedly been taken to reinvestigate crimes, such as abductions, torture and extrajudicial killings in the Batalanda torture chamber in the late 1980s, why the arson attacks on the Agrarian Service Centres, more than 700 state-owned buses, about 14 trains, countless transformers, etc., have not been probed defies comprehension. They were clear violations of the Offences against Public Property Act and must be investigated.

Let the focus now shift from the maid’s house to her employer, Peiris, and some unresolved issues concerning his tenure as the head of the judiciary. One of the first few things that the UNP-led Yahapalana government did after the 2015 regime change was to remove Peiris as CJ. President Sirisena declared the appointment of Peiris as CJ null and void ab initio, and reinstated Dr. Shirani Bandaranayake, claiming that her impeachment had no legal validity. Interestingly, Sirisena himself had spoken and voted in favour of her ‘impeachment’ as a minister in the Rajapaksa government in 2013. Dr. Bandaranayake retired soon after her reinstatement, and Sri Lanka had three CJs on three consecutive days—Peiris, Bandaranayake and her successor K. Sripavan!

Strangely, the Yahapalana government, which claimed that Peiris had functioned as the CJ ‘unlawfully’, stopped short of taking any action against him for having held that position for two years. If it is true that Peiris’ appointment was invalid, as Sirisena and the UNP claimed, then it follows that everything he did as the CJ was unlawful. Peiris drew the CJ’s salary, enjoyed the perks of office, functioned as the Chairman of the Judges’ Institute of Sri Lanka, heard cases, gave judgments and signed vital documents and perhaps even cheques. Why didn’t the Yahapalana government take any action against Peiris and/or the person who appointed him CJ ‘unlawfully’? Sirisena and his erstwhile Yahapalana chums owe an explanation. Shouldn’t the JVP-NPP government probe these issues as well? In fact, it is duty bound to do so because the JVP was an ally of the Yahapalana government.

The UNP’s arguments against the ‘impeachment’ of CJ Bandaranayake were tenable and compelling. The Parliamentary Select Committee, which probed her, was biased; it allegedly refused to allow some witnesses to testify and failed to specify what the due process was. Most of all, the UNP said the resolution passed in a hurry to impeach CJ Bandaranayake had not specifically sought parliamentary approval for her removal. However, if the impeachment process had been flawed, as argued by the UNP and some legal experts, a proper way to right the wrong would have been for President Sirisena to have Parliament undo what it had done. The Yahapalana government, which mustered a two-thirds majority for the 19th Amendment, could have accomplished that task easily. Instead, President Sirisena chose to override Parliament. Sadly, the Bar Association of Sri Lanka egged him on to do what he did, unmindful of the politico-legal consequences of his arbitrary action. The unresolved constitutional imbroglio that arose from glaring violations of due process, high-handed executive action, etc., is certainly far more serious than the allocation of a house for Peiris’ maid and therefore needs to be addressed urgently.

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Editorial

Couple QR-based quota with odd-even rationing

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Wednesday 18th March, 2026

Long lines of vehicles are still seen outside filling stations despite the introduction of the QR-based fuel quota system. They show no signs of going away any time soon. Teething problems associated with the QR-controlled fuel rationing have persisted longer than usual for three reasons—some system flaws, difficulties faced by filling station workers in scanning some QR codes, especially the old ones issued in 2022, and a supply shortfall that has made many pumps run dry. The JVP-NPP government came to power promising a digital economy, among other things, and unveiled an ambitious digital policy in the run-up to the 2024 presidential election. But it has not been able to ensure the smooth reimplementation of the QR-based fuel quota system, which was successfully used in 2022 to resolve a fuel crisis. So much for the government’s digital capability.

Some fillings stations have remained closed during the past several days for want of supplies, causing long queues near the ones where fuel is available albeit in insufficient quantities. The government must find out why these filling stations have not received fuel or whether they are hiding stocks. Its leaders know how the distribution of Ceylon Petroleum Corporation (CPC) fuel stocks was delayed in 2022 as part of a strategy to unsettle the then government. Complaints abound that many foreign-run filling stations do not receive supplies regularly. This is something the government must look into. It is not difficult to imagine how bad the situation would have been if all CPC-owned filling stations had been privatised.

The current fuel shortage is different from what we experienced in 2022, as we argued in a previous comment in response to some false claims made by the Opposition. Today, the country has dollars for oil imports, but the Iran conflict has disrupted global oil supplies, unlike in 2022, when it had no forex to pay for oil, which was readily available in the world market. So, the Opposition should stop comparing apples and oranges, and trying to gain political mileage out of the current fuel crisis.

However, the SLPP-UNP government managed to bring fuel queues to an end by introducing the QR-controlled fuel sales though it had neither dollars nor sufficient petroleum reserves at the time; the country was running on fumes, so to speak. Today, the government says the existing fuel reserves are sufficient for more than one month, and oil shipments are arriving on schedule, but it cannot manage the fuel stocks to ensure a reliable petroleum supply with the help of the QR-based rationing. It also claims that there are sufficient LPG stocks, but it has pathetically failed to resolve the countrywide LPG shortage. It may be recalled that the SLPP-UNP government sorted out a LPG shortage as well in 2022. It managed to do so despite the country’s forex woes and severely depleted gas stocks. The JVP-NPP government has no such problems. Sri Lanka’s Gross Official Reserves amounted to USD 6.0 bn (including a swap facility) at the time of the 2024 regime change. The current government has substantial reserves of foreign currency and fuel, but it cannot do away with the fuel queues, which are reportedly getting longer. Is it that the SLPP-UNP administration, which the JVP/NPP condemned as a failed regime, was more efficient and competent than the incumbent government in meeting the energy needs of the public amidst a crisis?

The biggest problem with the JVP-NPP government is that its leaders try to talk problems away instead of knuckling down to them. They let the grass grow under their feet, and when they begin to act, it is late. The manner in which they have sought to address the current fuel crisis is a case in point. They are in overdrive, doing what they should have done at least two weeks ago. They also had ample time to do a dry run of the QR-based fuel rationing system to prevent technical issues. They have endless meetings and nothing seems to come of them if the persistence of the problems they are intended to address is any indication.

As for long queues of vehicles near filling stations, the solution, in our view, is to replenish stocks expeditiously and couple the QR-based fuel quota system with last-digit or odd-even rationing.

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Editorial

Putting genie back into bottle

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Tuesday 17th March, 2026

US President Donald Trump and Israeli Prime Minister Benjamin Netanyahu prematurely claimed victory in their war on Iran immediately after killing Ayatollah Ali Khamenei and inflicting heavy damage on the Iranian military bases and economic nerve centres. Trump even snubbed UK Prime Minister Keir Starmer, when the latter decided to send a warship to the Gulf region belatedly; he said the US and Israel had already won the war and therefore he did not need British help. But Trump is now asking other countries to send their warships to ensure the safety of the commercial vessels sailing through the Strait of Hormuz, which Iran has closed and is using as an effective strategic lever to mount economic pressure on the US and its allies.

Trump keeps on contradicting himself. He has asked for ships from other countries while claiming that Iran has been ‘beheaded’. When Iran threatened to close the Hormuz Strait, Trump said he would deploy the US warships there. Iran has since attacked 16 or 18 ships in that strait. Trump now says, “Hopefully China, France, Japan, South Korea, the UK, and others that are affected by this artificial constraint will send ships to the area so that the Hormuz Strait will no longer be a threat by a nation that has been totally decapitated.” It was reported at the time of writing, that Trump had demanded help from all NATO allies to reopen the Strait of Hormuz. If Iran has been ‘decapitated’ as Trump claims, why can’t the US deploy its own warships to ensure the safety of vessels passing through the Hormuz Strait?

The response of the US allies to Trump’s request has been muted. China has reportedly rejected his call out of hand, saying the Strait of Hormuz is part of Iranian territory and Iran’s sovereignty must be respected. Why the other countries are wary of deploying their warships in a war the US and Israel have started is understandable. They know how dangerous naval incursions into Iran’s sea will be, with the war having taken an unexpected and unpredictable turn. Iran has unveiled new missile capabilities; it is now firing hypersonic missiles at Israel.

Washington has failed to live up to the expectations of its allies in the Persian Gulf. They expected the US to protect them against Iranian attacks. But they now have Iranian drones and missiles raining down on them, destroying their oil storage facilities and critical infrastructure. The US has sought assistance even from Ukraine, which has been dependent on Washington to fight Russia: it needs Ukrainian help to counter Iranian drone attacks on its allies in the region. This points to a serious military miscalculation the US and Israel have made. Shouldn’t they have done a proper assessment of Iran’s drone capability before going to war? They have spent billions of dollars to defend themselves against low-cost yet extremely destructive Iranian drones. Have Trump and Netanyahu bitten off more than they can chew in their war on Iran?

Trump, who once claimed that he deserved the Nobel Peace Prize more than anyone else, has plunged the entire world into chaos. Economies are groaning under soaring oil prices and global uncertainty. Economists have warned that at this rate the world may have a global recession to contend with sooner than expected. If the Iran conflict intensifies and/or drags on, the day may not be far off when economic hardships drive people to riot in many countries. Most of all, Trump’s military adventurism has severely damaged the foundation of the Washington-led global order, as it were. Iran is reportedly planning to allow passage for a limited number of tankers through the Strait of Hormuz on the strict condition that the cargo is traded in Chinese yuan and not US dollars. This strategy is aimed at not only circumventing US sanctions but also giving a boost to the de-dollarization campaign. The ongoing war has also made the US swallow its pride and do an about-turn on its sanctions on Russian oil.

In a dramatic turn of events, Trump has gone on record as saying that Washington is talking to Iran, but Tehran is not yet ready to make a deal to end the war. Iran has made it clear that it will not end the war on Washington’s terms. Iran’s President Masoud Pezeshkian has stated conditions for ending the ongoing conflict. He demands acceptance of Iran’s rights, reparations, and international guarantees against future aggression.

Had Trump acted wisely, weighing all possible military and economic ramifications of his military campaign and refrained from letting the genie out of the bottle in the Middle East, he would not have had to seek others’ help to force it back in. One can only hope that the other world powers will learn from the unfolding conflict, realise the need to act with restraint and strive to resolve the worsening Middle East conflict soon.

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