JR tells Rajiv “We can forgive but we cannot forget”
(Excerpted from volume ii of the Amunugama autobiography)
It was at this dismal stage that a new development in the long drawn out negotiations emerged. Due to his cricketing contacts Gamini became close to N Ram of the Kasturi family controlling `The Hindu’ newspaper which though originating in Madras had an all-India coverage with a strong presence in New Delhi. This was later seen when ‘The Hindu’ destabilized the Rajiv regime with their ‘scoop’ on the Bofors scandal.
The Kasturis were Brahmins who were on top of the South Indian social register. In their background correspondence Ram and Gamini had the concurrence of Rajiv Gandhi, if not of the Indian foreign policy establishment. It is said in JRJ’s biography by Wriggins and De Silva that at this stage the LTTE through back channels had indicated that they were in favour of an agreement if the Northern and Eastern provinces were joined. A new element of an Indian guarantee of an enforcement of an agreement between the two parties now entered the scene.
As Bernard Tillekeratne has written “Ram’s letter of 12th June 198 7….. outlined a set of proposals on the important precondition that India would be the mediator in all the discussions and even more importantly that it would underwrite the implementation of any agreement reached. This letter was one of the first positive developments that culminated in the Indo-Lanka Accord of 29th July 1987”.
Regarding the allocation of powers to the Provincial Councils JRJ cut the Gordian knot by suggesting that we adopt ‘in toto’ the provisions of the Indian constitution regarding the devolution of powers to the States. Thus, there would be three lists as in India – the powers of the Centre, the powers of the Provincial Councils and a concurrent list in which certain powers were exercised by both the centre and the periphery.
Earlier the discussion centered on devolution only to the North-Eastern Provincial Council. JRJ decided that all areas in the country should be brought under the second tier scheme. Once this formula was accepted the difficult task of ‘selling’ it to the Sinhala and LTTE protagonists were undertaken by the two parties. The Indian operation was undertaken by Dixit and his political secretary in Colombo. After his deputy met Prabhakaran and his advisors in the Vanni several times, though it was later disputed by the LTTE, Dixit informed New Delhi that he had succeeded in persuading the LTTE leaders to lay down their arms once the agreement was signed.
JRJ was for the immediate signing of the accord as he knew that opposition would build up not only from the SLFP and JVP but also from factions within his own Government. It became clear that Premadasa was against such an agreement and was being set up as a virulent opponent of India with Athulathmudali’s encouragement. Once I was asked to bring some documents to the Cabinet room while Cabinet sessions were in progress. As I climbed up the stairs I ran into Prime Minister Premadasa rushing down the steps in anger. However there was no one following him to cool him down as they usually do in those Cabinet dramas.
Gamani Jayasuriya who represented the Sinhala Buddhist lobby resigned in protest. During this time I associated with Gamani Jayasuriya as we were both members of the Governing Council of CNAPT (Ceylon National Association for the Prevention of Tubercolosis)in which my friend of University days, Fonseka, was secretary. Fonseka, who was a well-known astrologer, had predicted that Gamani would be the Prime Minister when this fracas was over. After resigning Gamani would visit Fonseka almost daily to check whether his prediction was coming true. In the event it did not happen and Gamani died suddenly, a very disappointed man. All this showed that the time was fraught with confusion and society was in turmoil which was to break out in a long period of terror.
I was one of the few participants who was present at President’s House when the Indo-Lanka accord was signed in the afternoon of July 29. I accompanied Gamini Dissanayake for the signing of the accord by Rajiv Gandhi and JRJ. Rajiv was accompanied by Foreign Minister Narasimha Rao and advisor Natwar Singh. On our side, Foreign Minister Hameed, Hurulle, Minister of Buddhist Affairs, Minister Devanayagam representing the Tamils and the Eastern Province and Gamini Dissanayake were present. The Prime Minister Premadasa, Athulathmudali and, surprisingly, Ronnie de Mel boycotted the meeting.
It was clear that both Rajiv and JRJ looked on Gamini as the coming man in Sri Lanka. In JRJ’s eyes his search for a loyal follower for future UNP leadership was focused now without a doubt on Gamini. When all the signing was done Rajiv went up to a mike set up in the spacious garden and said a few words of conciliation. All eyes were on JRJ when he ambled up to the mike cool as he could be under the circumstances, and gave a mini lecture on Indo-Sri Lanka relations. He ended up by looking Rajiv straight in the eye and, distilling in words the agony that India had imposed on him by their derailing of his efforts to remake Sri Lanka, said to India; “We can forgive but we cannot forget”. He then led Rajiv on foot to his office in President’s square for a no holds barred Press Conference presided over by the two leaders.
This Press Conference was a historic one. The whole of Colombo was shut down and there was an eerie silence in the administrative square which housed the President’s office. The area was guarded by a strong police contingent. Only a few hours before, the armed services had evicted a large contingent of protesters led by Bhikkhus and the SLFP, who had staged a sit in near the Fort Railway station. Mrs. Bandaranaike herself had been present and had been bundled out by the Police adding to the violence that was unleashed by UNP goons against the protesters who were non-violent.
We could hear the police sirens from the battle grounds in the Pettah. Later we heard that about a dozen protesters were killed. There were reports that gangs of protesters were approaching Colombo city from the suburbs. JR appeared to be unfazed before the media but I knew that he was worried by the rising violence which was passing from SLFP control to the violent hotheads of the JVP. JRJ dominated the press conference with his short introduction and the taking of questions from the global media.
When asked by the press as to the delay in reaching an agreement he blamed himself He said, “It was a lack of courage on my part, a lack of intelligence on my part, a lack of foresight on my part”. It was a bravura performance rarely seen in modern politics. Rajiv looked on stunned by JRJ’s candour. The press then asked him ‘who else’ hoping to cast the net wide. JRJ replied with a smile ‘the media’ drawing a laugh from Rajiv and the hard-bitten journalists who had come to cover the historic event.
Looking back this conference was the biggest event dominated by JRJ during the last days of his regime. He spoke bravely when the country was in flames and his own fate was in the balance. From now on he was put on the defensive by the JVP, supported by the SUP, which unleashed a violence in the South which could not be contained by him and was to spill over to the Premadasa era till the JVP leaders were physically eliminated in 1989. Sri Lanka entered an era of uncertainty and social disruption which blighted the legacy of President Jayewardene which held spectacular promise in its first years. The monolithic UNP which held sway earlier was fragmented and it took all the leader’s skills to even keep it together and pass the baton on to Premadasa. But on that day the future was uncertain and posters threatening to ‘Kill the old man’ began to appear all over the country. An attempt was made on Rajiv’s life by a JVP indoctrinated naval rating and two Indian destroyers steamed into Colombo harbour to show that India will not stand idly by. It was a time of a national tragedy and all eyes were on the implementation of the Accord. The violence unleashed by the JVP compelled JRJ to ask Rajiv for the induction of the Indian Peace Keeping Force [IPKF] which was the first time after independence that a foreign military force was stationed in strength in the country with their own command structure and tasks which were identified by their own leaders.
The President could not deal with the military situation in his own country as he could not do battle in both the North and South of the country at the same time. It must be mentioned here that our military top brass concurred with this decision though they were unhappy to be ‘confined to barracks in the North’. This was particularly so because the Jawans’ who were flown in from South Indian bases were of poor quality.
On a visit to Katunayake I saw them emplane for the North from there. Sonic were dragging well fed goats with them, obviously for a tasty ‘mutton curry’ in their camp. Others were crowding the duty free shop buying everything available on their payday. Though they were under orders to confine themselves to the Northern and Eastern theatre, their intelligence had not indicated that Trincomalee district was multi-ethnic. Due to the activity of the IPKF and the LTTE and the enforced inactivity of the Sri Lankan army, the Sinhalese and Muslims of the East started to stream south for safety, adding more pressure on JRJ who could not depend on Premadasa or Lalith to support him. Only Gamini Dissanayake stood by him and I shuttled between ‘Braemar’ at id Dixit’s residence to seek information on the plans of the IPKF, since the chain of command was broken. To make matters worse, Dixit himself was not kept informed by the Indian Military in Trincomalee and he was getting alarmed and even threatening quit if he was being undercut by Delhi.
LTTE and JVP Reaction
According to the Indo-Lanka agreement the LTTE was to hand over their weapons to the Sri Lankan armed forces under Indian supervision. What actually happened was a farce which was enacted by the LTTE in violation of the agreement. The LTTE hid its heavy weapons and only offered a token pistol to the army. The other Tamil parties were ready to comply but had the legitimate fear that once they disarmed, they would be massacred by the LTTE. Government made plans for reconstruction of the North and East. The Indian High Commission under Dixit went on overdrive to please Rajiv but the media and the opposition in the South began a virulent campaign against the Indians. For the first time the hitherto monolithic UNP began to crack, largely because the PM and his coterie of MPs showed their displeasure in no uncertain terms.
Premadasa made his famous Angoda Temple speech criticizing the Accord and by implication the President. SLBC brought the tapes of the speech to me and asked for instructions regarding broadcasting it that night with the news. At this point news of my dilemma had reached Premadasa through his henchmen in SLBC.I got a call from Wijayadasa the PM’s Secretary, telling me that his boss was very disturbed by the delay and that I should not be guided by Gamini Dissanayake’s advice on this matter. It was a hot potato and I took the tapes and the DG of SLBC Anura Goonesekere to ‘Braemar’ for the President’s instructions. JRJ was worried and did not have his usual ‘sang froid’. He asked me what we should do and I suggested that we should use an edited version leaving out the venomous attacks. He agreed and we broadcast a watered down version that night.
That seemed to have satisfied the PM who had been informed by his henchmen that we would censor his speech ‘in toto’. Perhaps he was spoiling for a fight on this issue. JRJ on the other hand was very keen to retain the PM’s support at this crucial juncture. He was aware that the SLFP had dangled a carrot before Premadasa saying that the SLFP would back him and Mrs. B would not enter the fray if he sabotaged the Accord. It was a time of moves and countermoves and the Government which was designed to last forever and a day was on the edge of crumbling. Two Southern MPs who had ridden on JRJ’s coattails did not vote for the 13th amendment designed to give effect to the Accord. Another MP from the south who was considered to be a tough guy from Tangalle was murdered by the JVP on his way back from Colombo to his electorate.
The JVP under Rohana Wijeweera who was in hiding with his top leaders as his party was proscribed, launched a murderous attack on all those who supported the Accord, including the leaders of the left-particularly the LSSP, CP and the NLSSP who though advocates of revolution were ill prepared for political violence on this massive scale. While the LTTE had murdered left leaders of the North, the JVP followed suit by murdering leftists in the South. The CP which was active in the grassroots in the South and was a rival to the JVP was decimated.
An early indication of the ruthlessness of the JVP was the horrific murder of the popular student leader of the Colombo campus named Daya Pathirana who opposed their taking control of the student movement which was a power base for their politics. Another innovation of the JVP was the mass induction of young monks, particularly from the universities, as a cover for their political work and military operations. As De Silva and Wriggins have written, many of these monks made bloodcurdling threats which even embarrassed JVP members. As the encounters became even more violent some of these monks gave up robes and emerged as front line leaders of the party. Others, as I have described earlier, jumped ship by migrating to Europe where their supporters had infiltrated the new temples built by JVP oriented migrants in the hig cities.
While the JVP and its allies stepped up their protests, the North saw a period of peace which was acclaimed by the international community. A relief and rehabilitation package was negotiated with international donors and inter district movement, particularly visits of Buddhists to Nagadipa, was encouraged. University administrators held their annual conference in Jaffna and we were able to arrange special railway trips from Colombo to Jaffna. Local and foreign journalists were encouraged to report from the North and business slowly resumed, particularly in respect of agricultural produce which was in high demand in the South. The situation was slowly returning to normal when several unfortunate events, some by design, upset the fragile peace. The first was the internecine conflict between the Tamil militants.
Many non LTTE groups became close to the IPKF and on occasion became their informers and proxies. At this stage the LTTE launched murderous attacks on the other Tamil parties partly because they had not given up their claim to be the ‘sole representative’ of the Tamil people and partly because the truce with the Sinhala forces enabled them to turn their attention to the rivals closer home who were being disarmed by the IPKF. The upshot was that ‘the short stay’ of the IPKF promised by Rajiv became a farce and they got bogged down in a disastrous war which finally led to the assassination of Rajiv himself. The LTTE was refusing to play by the Indian playbook and the country was slipping further and further into a cycle of violence over which nobody had control. This was a nightmare period for JRJ, who assailed in the North and South, had to confront dissatisfaction within his party ranks, led by the PM no less. Soon it became life threatening to the party leaders when an assassination attempt was launched by a JVP cadre who was a senior member in the party, inside Parliament itself The mistrust in the party had grown to such an extent that the PM was initially suspected of being one of the conspirators.
While the UNP parliamentary group was meeting as customary in a committee room in parliament an employee opened a door to the room and lobbed a hand grenade into it. Without doubt the target was JRJ whom the JVP had built up as a hate figure. Luckily for the 81 year old President the grenade hit his desk and rolled away from him and exploded further away killing the MP for Morawaka, Abeywickreme. Lalith Athulathmudali was seriously injured and had to be rushed for emergency surgery. the Prime Minister was also injured but not seriously. According to the President he had been saved because the PM had pushed him under the table so that the shrapnel did not hit him. Within a short time after the attack I got a telephone call to say that the President wanted me to come immediately to the Army OPS Combine office in Flower road.
When I went there JRJ had just arrived with blood splattered all over his tunic. He was in shock and asked us what we should do? I had read much about the Kennedy assassination and told him that we had to immediately do two things. One was to ensure that there was no further attacks due from a wide ranging conspiracy and secondly to inform the country that he was safe and that the conspiracy had failed. He agreed and I sent for a Rupavahini camera crew and alerted the channels about an imminent announcement by the President.
JRJ wanted a few minutes to compose himself and faced the cameras in a live broadcast with the blood on his tunic seen clearly. He identified the attack as an assault on democracy and went out of his way to assure the public that the PM, though slightly injured, was safe. That took the sting out of the speculation that the PM had engineered this attack. It was a miracle that the President had survived but it added to his woes as a leader and encouraged some ministers, especially Ronnie de Mel and Nissanka Wijeratne to think of jumping ship. JRJ by shrewdly bringing in the PM as a victim ensured that the party would not be weakened further. The Thirteenth Amendment
Action now shifted to the 13th amendment which was to give legal effect to the provisions of the Indo-Lanka agreement. Challenges to it were launched by different opposing parties including the alliance of major opponents called the Mavbima Surakeeme Viyaparaya [MSV] which was led by Maduluwawe Sobhita. It was a powerful organization and with the JVP raising the ante with violence, the judgement of the full bench of the Supreme Court on the Constitutional amendment bill became absolutely crucial.
JRJ was confident of his two third majority in Parliament. But if it came to a need for approval in a referendum, the bill was as good as dead. Everybody was on tenterhooks while awaiting the verdict. Premadasa also realized at this juncture that he had gone too far. This was a period when, for the first time, JRJ and Premadasa were really estranged. With all the hostility to Premadasa in the party JRJ had stood by him and had given him his due. He remembered the time when he and Dudley had paid a salary to the up-and-coming Premadasa with their personal funds. Even at this stage he was loath to discipline the PM but he sent a clear message that he was annoyed by removing Sirisena Cooray from the Executive Committee of the party, together with Ronnie de Mel who had resigned from the Cabinet by then.
Premadasa then pulled back stating that he was willing to abide by the decision of the Supreme Court regarding the 13th amendment. This was because he had been assured by Raja Wanasundera who was a senior judge sitting on this very bench, that a referendum will become necessary. Raja was a close friend of M Fernando who acted as Premadasa’s emissary on this issue. But this tactic backfired because Justice Parinda Ranasinghe provided a majority to the verdict of the Bench of judges which held that a referendum was not necessary and that the amendment could be passed with a two third majority in Parliament. JR cracked the whip, and the Bill was passed in the midst of unprecedented security, when the MPs had to be bussed with an armed escort to Parliament and back to the heavily guarded hotel in Colombo which was booked for them. The PM true to his word moved the Bill in Parliament. But Colombo was like a war zone and the Government appeared to be tottering. This was a nightmare for JRJ, with his party officials being killed en masse and even some of his MPS like De Silva of Habaraduwa and Tikiri Banda of Galagedera being killed in a brutal fashion.
UN COP28: What to know about the climate summit in Dubai
World leaders, government representatives and delegates are set to gather for the annual United Nations climate change summit, known as the Conference of the Parties or COP28 in Dubai, the United Arab Emirates (UAE).
Reining in fossil fuels and carbon emissions are expected to be topping the agenda of the 13-day summit (November 30 to December 12). International funding to help countries adapt to climate change will also be hotly debated as developing countries have been demanding more contributions from the industrialised nations.
An ambitious loss and damages fund agreed last year to support poorer nations to help manage the negative effects of climate change has yet to be put into place. World leaders agreed to the fund after COP27 last year, but they have failed to reach consensus on the most important questions of all – which states will pay into it and how much.
Countries will also face the first review of their progress towards the Paris Agreement, a landmark international treaty on limiting carbon emissions that was signed at the COP21, almost eight years ago.
Although the UAE was the first Middle Eastern country to ratify the agreement, people are deeply divided over hosting the summit in a nation that has been termed as part of the problem for its reliance on fossil fuels, which account for more than 75 percent of global greenhouse gas emissions. Some are now also criticising the inclusion of oil and gas-linked representatives in such summits at all.
As the debate around COP28 and its impact continues, here’s what to know about this year’s conference and what makes it significant.
What, when, where is COP28?
COP is the primary decision-making body of The United Nations Framework Convention on Climate Change (UNFCCC), established in 1992.
Representatives of 197 countries who have signed or are “parties” to the UNFCCC will participate primarily through debates and negotiations.
COP28 will begin on November 30 and continue for almost two weeks, while the exact schedule for each day will be published a night prior. Pre-sessions for the conference began on November 24.
The conference will be held at Expo City in Dubai, UAE.
Why is COP28 important?
The COP28 will take place in the backdrop of devastating floods and heatwaves, fierce wildfires and the Earth’s hottest summer on record this year.
The event is considered an opportunity for countries to better rein in climate change by devising improved targets and measures through tools such as finance, technology and capacity-building.
The conference comes weeks after a UN report said greenhouse gases in the atmosphere hit a record high in 2022. Based on countries’ current climate plans, the report says, global carbon emissions by 2030 will be cut by only two percent compared with 2019 levels, far short of the 43 percent fall needed to limit warming to 1.5 degrees Celsius since pre-industrial levels.
Although the 1.5 degree Celsius target became binding in the 2015 Paris Agreement, the goal was first adopted after COP16, more than a decade ago.
A report from the World Meteorological Organization in May also found that with current trends, the world may temporarily breach the 1.5 degrees Celsius target in 2027.
As states scramble to catch up before climate change risks spike further, they will not be immune to crises around the world.
“For years parties have been struggling to agree to a fossil fuel phase-out, and the challenge to reach an agreement was made worse by the fiscal crises precipitated by the pandemic and energy crisis following the war in Ukraine,” said Olivia Rumble, director of Climate Legal in South Africa.
What is the agenda and theme for COP28 in Dubai?
A primary objective of COP each year is to review and calibrate the implementation of the UNFCCC terms, Paris Agreement, and Kyoto Protocol, a binding treaty agreed in 1997 for industrialised nations to reduce greenhouse gas emissions.
This year, member states will negotiate while facing their first Global Stocktake (GST) – a scorecard analysing countries’ progress towards the Paris Agreement – so they can adapt their next climate action plans which are due in 2025.
“Countries will be hard-pressed to make concessions to agree on the principal reasons for historic failures and what they believe needs to be done going forward to make meaningful progress on the agreement’s goals,” said Rumble.
Parties will also seek to operationalise the loss and damages fund after developing nations proposed in September that developed countries should disperse at least $100bn to them by 2030.
Additionally, this year’s presidency has set four themes to be at the forefront of the summit:
- Fast-tracking the energy transition: revolves around renewable energy, and food and agricultural systems.
- Fixing climate finance: aims to prioritise the Global South in adaptation finance and help vulnerable communities rebuild after climate disasters, among other targets.
- Nature, people, lives, and livelihoods: geared towards food systems, nature-based solutions, and protecting against extreme weather events and biodiversity loss.
- Inclusivity, in climate management: includes youth involvement and improved communication between different sectors and agencies.
However, focusing on specific themes such as financing strategies must also be accompanied by a revamping of global structures to be effective across the world.
While this year’s climate financing agenda aims to better support developing nations with emergency funding, such mechanisms currently lack effective needs analysis and involve the inefficient distribution of funds. High debts imposed on such countries through global financing structures also reduce their ability to invest in the maintenance of climate projects.
“Renewable energy and energy efficiency will mean little to African countries without significant reforms to the global financial architecture to make these targets achievable. This includes revising risk ratings and perception of investment risk in Africa,” said Rumble.
Who will and will not attend COP28 in Dubai?
More than 140 heads of state, senior government leaders and at least 70,000 participants are expected to attend COP28.
Some of the notable figures who have confirmed their attendance so far include:
- Britain’s King Charles III, who will also deliver an address at the opening ceremony
- Rishi Sunak, prime minister of the United Kingdom
- Pope Francis of the Catholic Church
- Humza Yousaf, first minister of Scotland
- Indian Prime Minister Narendra Modi.
US President Joe Biden is not expected to attend but the country will be represented by top officials such as Special Presidential Envoy for Climate John Kerry.
The summit will be divided into a “blue zone” with sessions for UN-accredited participants such as state representatives only, and a “green zone” with events and exhibits for registered participants from the public and civil society.
What are the controversies around COP28?
Many environmentalists and other analysts have raised concerns about COP28’s choice of president.
Sultan al-Jaber, CEO of the Abu Dhabi National Oil Co, has been tasked with changing the world’s climate course while the company he heads is one of the world’s largest oil producers. The UAE is the world’s seventh-largest liquid fuel producer.
In May, al-Jaber faced criticism for referring to the need to phase out “fossil fuel emissions” — using techniques such as carbon capture — instead of phasing out fossil fuels themselves.
Others have questioned the UNFCCC for involving the fossil fuel industry in its discussions and failing to generate sufficient progress towards the 1.5-degree goal.
In September, more than 200 civil society organisations, including Amnesty International, wrote an open letter to the UAE government to follow certain demands in the lead-up to COP28. On top of calling for labour reforms, and abandoning plans to step up oil and gas production, the letter demanded that the UAE refrain from surveilling COP28 attendees.
The country has said it will allow environmental activists to “assemble peacefully” for protest acts during the summit.
Budget, Taxation Turmoil and Policy Blunders – Part II
Last week, we delved into a significant event in New Zealand, where a group of affluent individuals expressed a willingness to voluntarily pay more taxes, only to have the tax authority reject their offer. This incident prompts questions about the fairness of the current tax system, particularly in relation to the lower tax rates paid by the wealthiest citizens. Drawing parallels with Sri Lanka, the discussion advocates for the implementation of mandatory Tax Identification Numbers (TINs) in developing economies, underlining the necessity for a more equitable tax system.
We observed a unique situation in Sri Lanka where, despite per capita GDP growth, the tax-to-GDP ratio has been on a decline. The introduction of some naïve tax policies, such as the abolition of mandatory PAYE Tax, the increase in tax and VAT allowances, in 2019/2020, were also discussed.
The projection for Sri Lanka’s tax revenue as a percentage of GDP is expected to rise from 7.3% in 2022 to 12.1% in 2024, with the World Bank emphasizing the importance of maintaining tax revenues above 15% of GDP for economic growth. Projections for Sri Lanka’s GDP per Capita indicate a gradual increase over the next few years, reaching around US$4098.00 in 2025.
Sri Lanka compared
According to a map available on the Internet, depicting global comparison of Tax-to-GDP ratio, Sri Lanka is bracketed with several economically challenged African nations as well as Afghanistan and Bangladesh within its region. Notably, it ranks lower than many neighbouring countries including India, Nepal, Bhutan, Pakistan, and Indonesia etc.
On the contrary, countries with higher income levels, such as US, UK, Australia and any European countries, demonstrate considerably elevated tax-to-GDP ratios, ranging from 20% to 30%, and, in some cases such as UK France, the Netherlands, New Zealand and Denmark, reaching as high as 40% to 45%.
Figure 1 plots countries based on their GDP per capita and tax revenue as a percentage of GDP. Countries with income levels like Sri Lanka (ranging between US $2,000-4,000) are highlighted within the circle. Sri Lanka’s tax-to-GDP ratio falls significantly below the average. For instance, Morocco and Georgia, with GDP per capita figures of US $2,931 and US $3,529, respectively—comparable to Sri Lanka’s GDP per capita of US $3,369—both countries collect 24 percent of GDP as tax revenue, whereas Sri Lanka collects only 11 percent.
The tax revenue as a percentage of GDP for middle-income countries has shown a relatively stable trend over the years. The values range from around 10.7% in 2005 to an expected 11.4% in 2024 (Forecast).
Sri Lanka’s tax revenue as a percentage of GDP has experienced fluctuations during the period. Notable peaks are observed in 2006, 2007, and reaching up to 14.6% in 2015 and was par with the Middle-Income countries, followed by a decline again from 2019. The values have varied, with a dip to 7.8% in 2021, indicating a substantial decrease. Projections for 2022 and 2023 show a gradual increase, with the budget for 2024 aiming at a significant rise to 12.1%. (See Figure 2).
Hence, the tax revenue for Sri Lanka, while exhibiting fluctuations, generally appears to be on a recovery path after a notable decline in recent years. The budgeted figure for 2024 suggests an ambitious target, aiming for a substantial increase in tax revenue as a percentage of GDP.
Not only arbitrage but
In countries like the United States, income tax stands out as the primary revenue source. This is facilitated by nearly zero import duties, typically set at 5 percent or less, and the absence of a value-added tax (VAT). In contrast, Europe relies heavily on a value-added tax, often around 20 percent, but does not impose import duties. In Sri Lanka, despite the relatively high import duties borne by the average citizen, the government only receives a fraction of this revenue. This is a result of the diversion of substantial sums to domestic protectionists through the practice of tax arbitrage, coupled with instances of tax avoidance (commonly referred to as tax minimization) and evasion, often involving manipulations and collusion.
Tax arbitrage involves exploiting differences in tax policies or rates across different jurisdictions to gain a financial advantage. In the context of domestic protectionists, individuals or entities within a country capitalize on tax differences among regions. This strategy often involves the strategic use of tax regulations or loopholes to minimize or entirely avoid tax liability. Notably, corruption plays a crucial role in this dynamic. Given the prevalent culture of corruption, extending from the top echelons of the state to even lower-level positions in Sri Lanka, these tactics can be readily implemented by astute business individuals, both on a large and small scale.
Not only anomaly but
A noteworthy aberration in Sri Lanka’s tax structure is its disproportionate reliance on taxes related to international trade for tax revenue in comparison to its income level. Global patterns indicate that the proportion of taxes on imports as a share of total tax revenue tends to decrease as income levels rise. For instance, a study by Loewy, titled ‘Taxation: 21st Century Issues and Challenges’, revealed that trade taxes contribute to approximately 25% of total tax revenue in low-income countries, 12% in lower-middle-income countries, 9% in upper-middle-income countries, and less than one percent in high-income countries.
Contrary to these trends, in Sri Lanka’s case, taxes imposed solely on imports constitute nearly 20% of the government’s total tax revenue—a significantly high figure for a lower-middle-income country (Figure 3). The country’s substantial reliance on international trade for tax income has proven to be a risky proposition for the government. While restricting imports is essential to address the trade deficit, it comes at the cost of reduced government revenue and an exacerbated budget deficit. Conversely, increasing imports would boost government revenue but intensify the trade deficit. Consequently, a strategic shift away from trade-related taxes becomes crucial for the government to generate revenue without destabilizing the country’s macroeconomic environment.
Share of expenses on government servants
Government spending in Sri Lanka was 48% in 2019 to public sector salaries and pensions but now only 44% allocated for 2024 as mentioned before. In the most recent budget presentation, over 35% of government expenditure was directed towards public sector salaries, pensions, and public welfare, emphasising their importance in government spending. In a specific breakdown, it is mentioned that Rs. 92 billion was allocated to pay the salaries of public sector employees in July 2022. Moreover, a historical perspective indicates the significance of government spending on salaries, dating back to 1950. Overall, public sector salaries and pensions play a crucial role in Sri Lanka’s government expenditure, reflecting a substantial commitment to the welfare of government employees.
Another anomaly is too many armed forces
Sri Lanka’s armed forces strength of 317,000 personnel is financially unsustainable because of its considerable annual expenditure of Rs.423 billion (410 in 2023), which is 1.88% of the GDP. Comparisons with other nations, including Australia and the Netherlands, reveal significantly smaller military forces. Sri Lanka’s post-civil war armed forces maintenance highlights the country’s unique revenue-based fiscal consolidation strategy, focusing on tax increases without traditional cost-cutting measures.
This analysis reveals three main anomalies in Sri Lanka’s tax structure, including a decline in taxpayers after significant tax cuts. The essay emphasizes the importance of sustaining tax revenues for economic growth and explores the country’s tax-to-GDP ratio, positioning it against global comparisons (over 15% of GDP). Notably, it highlights the overdependence on international trade taxes, the disproportionate spending on government servants, and the financial challenges posed by the substantial size and expenditure on the armed forces. The narrative suggests a need for strategic reforms to navigate the intricate fiscal landscape.
(The writer, a senior Chartered Accountant and professional banker, is Professor at SLIIT University, Malabe. He is also the author of the “Doing Social Research and Publishing Results”, a Springer publication (Singapore), and “Samaja Gaveshakaya (in Sinhala). The views and opinions expressed in this article are solely those of the author and do not necessarily reflect the official policy or position of the institution he works for.)
How Hamas built a force to attack Israel on 7 October
Five armed Palestinian groups joined Hamas in the deadly 7 October attack on Israel after training together in military-style exercises from 2020 onwards, BBC News analysis shows.
The groups carried out joint drills in Gaza which closely resembled the tactics used during the deadly assault – including at a site less than 1km (0.6 miles) from the barrier with Israel – and posted them on social media.
They practised hostage-taking, raiding compounds and breaching Israel’s defences during these exercises, the last of which was held just 25 days before the attack.
BBC Arabic and BBC Verify have collated evidence which shows how Hamas brought together Gaza’s factions to hone their combat methods – and ultimately execute a raid into Israel which has plunged the region into war.
‘A sign of unity’
On 29 December 2020, Hamas’s overall leader Ismail Haniyeh declared the first of four drills codenamed Strong Pillar a “strong message and a sign of unity” between Gaza’s various armed factions.
As the most powerful of Gaza’s armed groups, Hamas was the dominant force in a coalition which brought together 10 other Palestinian factions in a war games-style exercise overseen by a “joint operation room”.
Prior to 2018, Hamas had formally coordinated with Palestinian Islamic Jihad (PIJ), Gaza’s second largest armed faction and – like Hamas – a proscribed terrorist organisation in the UK and other countries.
Hamas had also fought alongside other groups in previous conflicts, but the 2020 drill was billed in propaganda as evidence a wider array of groups were being unified.
Hamas’s leader said the first drill reflected the “permanent readiness” of the armed factions.
The 2020 exercise was the first of four joint drills held over three years, each of which was documented in polished videos posted on public social media channels.
The BBC has visually identified 10 groups, including PIJ, by their distinctive headbands and emblems training alongside Hamas during the Strong Pillar drills in footage posted on the messaging app Telegram.
Following the 7 October attack, five of the groups went on to post videos claiming to show them taking part in the assault. Three others issued written statements on Telegram claiming to have participated.
The role of these groups has come into sharp focus as pressure builds on Hamas to find dozens of women and children believed to have been taken as captives from Israel into Gaza by other factions on 7 October. Three groups – PIJ, the Mujahideen Brigades and Al-Nasser Salah al-Deen Brigades – claim to have seized Israeli hostages on that day.
Efforts to extend the temporary truce in Gaza were said to be hinging on Hamas locating those hostages. The structure was set up in 2018 to coordinate Gaza’s armed factions under a central command.
While these groups are drawn from a broad ideological spectrum ranging from hard-line Islamist to relatively secular, all shared a willingness to use violence against Israel.
Hamas statements repeatedly stressed the theme of unity between Gaza’s disparate armed groups. The group suggested they were equal partners in the joint drills, whilst it continued to play a leading role in the plans to attack Israel. Footage from the first drill shows masked commanders in a bunker appearing to conduct the exercise, and begins with a volley of rocket fire.
It cuts to heavily armed fighters overrunning a mocked-up tank marked with an Israeli flag, detaining a crew member and dragging him away as a prisoner, as well as raiding buildings.
We know from videos and harrowing witness statements that both tactics were used to capture soldiers and target civilians on 7 October, when around 1,200 people were killed and an estimated 240 hostages were taken.
Telling the world
The second Strong Pillar drill was held almost exactly one year later.
Ayman Nofal, a commander in the Izzedine al-Qassam Brigades – the official name for Hamas’s armed wing – said the aim of the exercise on 26 December 2021 was to “affirm the unity of the resistance factions”.
He said the drills would “tell the enemy that the walls and engineering measures on the borders of Gaza will not protect them”.
Another Hamas statement said the “joint military manoeuvres” were designed to “simulate the liberation of settlements near Gaza” – which is how the group refers to Israeli communities.
The exercise was repeated on 28 December 2022, and propaganda images of fighters practising clearing buildings and overrunning tanks in what appears to be a replica of a military base were published to mark the event.
The exercises were reported on in Israel, so it’s inconceivable they were not being closely monitored by the country’s extensive intelligence agencies.
The Israel Defense Forces (IDF) have previously carried out air strikes to disrupt Hamas’s training activities. In April 2023, they bombed the site used for the first Strong Pillar drill.
Weeks before the attacks, female surveillance soldiers near the Gaza border reportedly warned of unusually high drone activity and that Hamas was training to take over observation posts with replicas of their positions.
But, according to reports in the Israeli media, they say they were ignored. Brigadier General Amir Avivi, a former IDF deputy commander in Gaza, told the BBC: “There was a lot of intelligence that they were doing this training – after all, the videos are public, and this was happening just hundreds of metres from the fence (with Israel).”
But he said while the military knew about the drills, they “didn’t see what they were training for”.
The IDF said they “eliminated” Nofal on 17 October 2023, the first senior Hamas military leader to be killed during the conflict.
Hiding in plain sight
Hamas went to great lengths to make sure the drills were realistic.
In 2022, fighters practised storming a mock Israeli military base built just 2.6km (1.6 miles) from the Erez crossing, a route between Gaza and Israel controlled by the IDF.
BBC Verify has pinpointed the site in the far north of Gaza, just 800m (0.5 miles) from the barrier, by matching geographic features seen in the training footage to aerial images of the area. As of November 2023, the site was still visible on Bing Maps.
The training camp was within 1.6km (1 mile) of an Israeli observation tower and an elevated observation box, elements in a security barrier Israel has spent hundreds of millions of dollars constructing.
The mock base is on land dug several metres below ground level, so it may not have been immediately visible to any nearby Israeli patrols – but the smoke rising from the explosions surely would have been, and the IDF is known to use aerial surveillance.
Hamas used this site to practise storming buildings, taking hostages at gunpoint and destroying security barriers.
BBC Verify has used publicly available information – including satellite imagery – to locate 14 training sites at nine different locations across Gaza.
They even trained twice at a site less than 1.6 km (1 mile) from the United Nations’ aid agency distribution centre, and which was visible in the background of an official video published by the agency in December 2022.
Land, sea and air
On 10 September 2023, the so-called joint committee room published images on its dedicated Telegram channel of men in military uniforms carrying out surveillance of military installations along the Gaza barrier.
Two days later, the fourth Strong Pillar military exercise was staged, and by 7 October, all the tactics that would be deployed in the unprecedented attack had been rehearsed.
Fighters were filmed riding in the same type of white Toyota pickup trucks which were seen roaming through southern Israel the following month.
The propaganda video shows gunmen raiding mock buildings and firing at dummy targets inside, as well as training to storm a beach using a boat and underwater divers. Israel has said it repelled attempted Hamas boat landings on its shores on 7 October.
However, Hamas did not publicise its training with motorcycles and paragliders as part of the Strong Pillar propaganda.
A training video posted by Hamas three days after 7 October shows fences and barriers being demolished to allow motorcycles to pass through, a tactic they used to reach communities in southern Israel. We have not identified similar earlier videos.
Footage of fighters using paragliding equipment was also not published until the 7 October attack was under way.
In a training video shared on the day of the attack, gunmen are seen landing in a mock kibbutz at an airstrip we have located to a site north of Rafah in southern Gaza.
BBC Verify established it was recorded some time before 25 August 2022, and was stored in a computer file titled Eagle Squadron, the name Hamas uses for its aerial division – suggesting the paragliders plan was in the works for over a year.
The element of surprise
Before 7 October, Hamas was thought to have about 30,000 fighters in the Gaza Strip, according to reports quoting IDF commanders. It was also thought that Hamas could draw on several thousands of fighters from smaller groups.
Hamas is by far the most powerful of the Palestinian armed groups, even without the support of other factions – suggesting its interest in galvanising the factions was driven by an attempt to secure broad support within Gaza at least as much as bolstering its own numbers.
The IDF has previously estimated 1,500 fighters joined the 7 October raids. The Times of Israel reported earlier this month the IDF now believes the number was closer to 3,000.
Whatever the true number, it means only a relatively small fraction of the total number of armed operatives in Gaza took part. It is not possible to verify precise numbers for how many fighters from smaller groups took part in the attack or the Strong Pillar drills.
While Hamas was building cross-faction support in the build-up to the attack, Hisham Jaber, a former Brigadier General in the Lebanese army who is now a security analyst at the Middle East Centre for Studies and Research, said he believed only Hamas was aware of the ultimate plan, and it was “probable they]asked other factions to join on the day”.
Andreas Krieg, a senior lecturer in security studies at Kings College London, told the BBC: “While there was centralised planning, execution was de-centralised, with each squad operationalising the plan as they saw fit.”
He said he had spoken to people inside Hamas who were surprised by the weakness of Israel’s defences, and assessed militants likely bypassed Israel’s surveillance technology by communicating offline.
Hugh Lovatt, a Middle East analyst at the European Council on Foreign Relations, said Israel would have been aware of the joint training drills but “reached the wrong conclusion”, assessing they amounted to the “standard” activity of paramilitary groups in the Palestinian territories, rather than being “indicative of a looming large-scale attack”.
Asked about the issues raised in this article, the Israel Defense Forces said it was “currently focused on eliminating the threat from the terrorist organisation Hamas” and questions about any potential failures “will be looked into in a later stage”.
It could be several years until Israel formally reckons with whether it missed opportunities to prevent the 7 October massacre. The ramifications for its military, intelligence services and government could be seismic.
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