Editorial
Give And Take
Sri Lanka heads into the Sinhala and Tamil New Year at a time of difficulty and hardship unprecedented in our contemporary history. Covid 19 has cost us much, as it has cost nearly all countries in the planet. There have been claims that the worst is over and we continue to hope that this is correct. But that is not something that can be said with certainty. However a semblance of normalcy has returned although sections of the community, such as those dependent on tourism, continue to suffer hardship. Nobody can claim that the economy is in good shape with the rupee plunging to a historic low of Rs. 200 to the U.S. dollar. This must reflect both on the import bill and on external debt servicing and repayment. But tea prices remain good and the weather has been fair. While we can take comfort that we have not yet defaulted on our massive debt servicing and repayment obligations, the situation is far from rosy with our ability to raise new loans at interest rates that are not exorbitant declining by the day.
Although the ever-rising cost of living continues to impose hardship on both the poor and the middle class, this has been something that has been always with us for a very long time. Although incomes have grown, prices have grown much faster and we know too well that the value of money is now a fraction of what it was. This has particularly hurt savings and the prevailing low interest rates have dealt a kidney punch to large numbers of retired people dependent on interest income for their livelihood. While grumbling continues, people have learned to cope as best as they can. Despite all the negatives, the rulers continue to project a bold front. But there is no escaping the reality that the government has rapidly lost popularity since the last elections, both presidential and parliamentary.
No ban on New Year travel has been imposed although there are inherent risks, in the covid context, of large numbers of people going home to their villages from crowded urban centers they work in. This has been a long-held tradition and it would be a brave government that would interfere however much prudence dictates otherwise. While most people wear masks while moving around in public places, enforcing social distancing in crowded public transport will be next to impossible. Thus the powers that be have resorted to the easier way of leaving the choice to the good sense of the people rather than enforcing strict rules controlling movement. Although other countries have seen spikes of infection by being lenient on holiday travel, Sri Lanka will hopefully have better luck post avuruddhu.
We run on this page today a contribution from the Pathfinder Foundation of Mr. Milinda Moragoda, our High Commissioner-designate to New Delhi cautioning the government against taking too strong a stance on import substitution – a direction in which it is clearly moving. Given Moragoda’s political orientation, Pathfinder may be seen to be sticking its neck out by advocating a hemin hemin policy. Nobody would reasonably object to government imposing certain import bans to encourage local production as in the recent case of turmeric. There is no debate that we must grow crops that we can rather than import them. But governments must always strike the right balance between the interests of producers and consumers. When Prime Minister Dudley Senanayake pushed a massive food production drive during his 1965-70 government, he used to say at public meetings in agricultural areas that enormous foreign exchange expenditure was being incurred for the import of potatoes that some foreign experts had once-upon-a-time said cannot be economically grown here.
But Welimada farmers disproved them. Thereafter potatoes have been successfully grown even in Jaffna although we have not achieved self-sufficiency. “Why should we pay farmers in potato growing countries for their produce when we can pay that money to our own farmers?,” the prime minister used to ask. “But when we enforce a policy to ensure that our cultivators got the money flowing abroad, our opponents accuse the government of kicking the poor man’s ala hodda.” This was also true of chillies and onions where import substitution policies worked to benefit local farmers although at a cost to consumers. Jaffna farmers garlanding one-time Agriculture Minister Hector Kobbekaduwa with onions and chillies when he ran for president against J.R. Jayewardene was testimony to this policy. But it has not worked as successfully as it might have where local sugar production was concerned. Despite this country being endowed by conditions enabling sugar cane growing, we are nowhere near self-sufficiency although different governments have used tariff barriers to ensure better prices to domestic cane growers. Unfortunately we have a local sugar industry which makes more money out of its potable alcohol byproduct than from its sugar.
We have to be always conscious of the trade balance and cannot forget that Europe and the USA are the biggest markets for our garment industry. The ongoing restrictions on motor vehicle imports has no doubt saved us much foreign exchange but we cannot butter our bread on both sides by adopting one sided trade policies. That there must be give and take is a fact of life and it would be useful for the concerned authorities to take note of the Pathfinder perception that “openness to trade improves the tgrowth, employment and income trajectories of economies.”
Editorial
Taxpayer friendly Inland Revenue Dept. urgent need
Many compliant taxpayers have expressed their frustration with the Inland Revenue Department (IRD) for insisting that the Return of Income for the year of assessment 2023/2024 be filed as an electronic return (e-return). It is perplexing why such a requirement is being enforced in a country such as ours where computer skills are woefully lacking. In many other countries the taxpayer is entitled to submit a return either electronically or by hard copy (paper). The choice should be with the taxpayer and not the IRD. In some countries, any tax refunds to individuals are inevitably delayed for those who submit manual returns compared to those who submit e-returns. This incentivises the taxpayer to embrace technology. But here, it is forced down the taxpayer’s throat.
A fundamental principle must be that tax compliance should not result in the taxpayer having to incur additional cost or physical/mental stress in fulfilling their civic obligation of paying their income tax. Many senior citizens are not computer savvy enough to navigate through complex returns or do not have access to a laptop or other paraphernalia needed to upload supporting documents. Therefore, many individual taxpayers who struggle to complete their returns by themselves are now forced to engage the services of a professional tax consultant or accountant to submit their returns. This is an additional cost that taxpayers should not be burdened with. We understand that the IRD reluctantly accepted hard copy (paper) returns from some senior citizen who insisted they could not submit an e-return.
The IRD should concentrate on getting more people liable to pay tax to do so, thus widening the tax net instead of penalizing those who settle their dues but may delay submitting their return for the above mentioned reasons. The Inland Revenue Act provides penalties for failure to file a return on time and for criminal proceedings as well as issuing default assessments where necessary. It has often been said, with good reason, that the IRD bullies people who pay their taxes and submit their returns and does little to tackle blatant evasion which is rampant.
We have been told that taxpayers who receive interest income from fixed deposits are required to enter a significant amount of information into the e-return, which is tedious and unnecessary, particularly if the taxpayer can submit or upload a certificate from the deposit taker confirming the interest received and the advance income tax deducted at source. As in other countries, it is up to the IRD and the deposit taking institutions to devise a compliant digital platform that will enable such information to be uploaded to the IRD’s Random Access Management Information System (RAMIS).
IRD invested hugely in setting up RAMIS but was unable to utilize it effectively over many years. The banks and other deposit, too, have not played their part in this because many banks are not issuing certificates to their customers that disclose all the information required by the IRD. Time was when a blanket 15 percent withholding tax (WHT) was imposed at source on interest and dividend income with no further liability thereafter. This undoubtedly imposed hardship on those not liable for income tax in obtaining notoriously slow refunds from the department and was an advantage to high income earners. Nevertheless, like PAYE (Pay As You Earn) tax, it was an easy collection method for IRD.
After the November deadline for submitting the annual return for 2023/24 passed, the IRD issued a circular extending the deadline for submitting tax returns for that year until December 7. The circular cites the difficulties taxpayers encountered last week due to the inclement weather that prevailed in the country. No mention has been made of the RAMIS system being more or less inaccessible in the days leading to the deadline, as it could not deal with too many taxpayers trying to access the system at the same time! The circular also mentions that IRD officials will offer special support until December 6, 2024, for those who visit the department for technical assistance to submit their return online. This is most welcome.
According to currently available information, about a million taxpayers are registered with the IRD. This seems insufficient, considering that more than eight million are employed, and the income threshold for paying income tax is Rs. 100,000 monthly. It will be interesting to know as to how many of the million have submitted their tax returns by the due date or will do so in the next few days and weeks. Undoubtedly, people need to be tax-compliant, but it is also necessary for the IRD to make the process easy for taxpayers to make payments and submit their annual income tax returns.
The IRD currently does not accept cheques for settling tax obligations. A taxpayer must make a direct bank transfer or settle his/her dues through a banker’s pay order. This imposes an unfair added cost on tax payers as well as the inconvenience of having to visit the bank for this purpose. This requirement clearly is intended to ensure that tax cheques do not bounce. But the department is empowered to impose penalties on those whose cheques are dishonoured. Why impose additional burdens on taxpayers accustomed to meet their obligations by writing a cheque instead of visiting a bank and paying for the issue of a banker’s pay order?
The bottom line is that the IRD must be more taxpayer friendly than it is at present. Printing platitudes like “Thank you for paying your taxes” on its stationary is just not enough. Honest taxpayers with files on record must not be bullied, as is often done at present, and burdens like the compulsory online payment requirement now imposed as well as the ‘no cheques’ rule must done away with. Also, the department must take note of the resentment of people who pay taxes long seeing those who do not getting away Scott free.
Editorial
From ‘traitors’ to ‘racists’
Saturday 7th December, 2024
The Rajapaksa governments used labels such as ‘traitor’ and ‘terror sympathiser’ to vilify their political opponents. They effectively created a bogey to rally support for their repressive actions, on the pretext of protecting national security, which they made out to be their raison d’etre. They succeeded in marketing their brand of patriotism to retain their hold on power and go on enriching themselves until they bankrupted the economy, provoking the public into rising against them. Most of those who voted for them became so frustrated in the end that they switched their allegiance to the JVP-led NPP, enabling its mammoth electoral wins.
The NPP government has moved to the other extreme. It promptly dubs those who flag potential threats to national security as ‘racists’ and enemies of ethnic reconciliation in a bid to prevent its opponents from criticizing its policies and actions aimed at consolidating its electoral gains in the North and the East. Several persons have already been arrested over what the government calls the dissemination of false information to promote racial disharmony and derail its reconciliation efforts. The CID has gone to the extent of using the much-dreaded Prevention of Terrorism Act (PTA), which the NPP bigwigs condemned during their opposition days, to deal with some social media activists who have highlighted a recent commemoration of slain LTTE members, including Velupillai Prabhakaran. It is a case of using a sledge hammer to crack a nut.
Thankfully, the draconian police action against the aforesaid suspects has not passed muster with the judiciary. When some of them were arrested and produced in court, recently, Colombo Chief Magistrate Thilana Gamage pointed out that the CID should have taken action against the organisers of the commemorations at issue rather than those who reported on them. The suspects were released on bail. On Thursday, Colombo Additional Magistrate Manjula Ratnayake likened such police action to shooting the messenger, when the CID produced in court another person arrested for using social media to highlight the commemoration of dead LTTE members. That suspect was also granted bail.
If anyone abuses social media to incite racial hatred and disseminate misinformation to disrupt social order by destabilising ethno-religious relations and instigating violence, he or she must be severely dealt with, according to the law. But that task does not require the invocation of the PTA; there are enough and more other laws that can be used for that purpose. Above all, arrests must not be politically motivated, and the police must not provide their service to the politicians in power as stormtroopers or hunting Mastiffs on the pretext of bringing ‘the enemies of national reconciliation’ to justice. They must desist from making arrests at the behest of politicians. Many police high rankers unashamedly did political work for previous governments so much so that one wondered whether they had sold their souls to the rulers of the day, such as the Rajapaksa brothers, Ranil Wickremesinghe and Maithripala Sirisena. Worryingly, some of those puppets in uniform are occupying key positions in the Police Department and serving the interests of the incumbent government. No wonder they swoop on the critics of their current political masters at the drop of a hat.
The Rajapaksas realised that they had failed to fool all the people all the time, only when they had to head for the hills, with angry mobs in close pursuit, after bankrupting the country. Their method of labelling and vilifying their political opponents came with a short sell-by date. It will be a huge mistake for the JVP/NPP leaders not to learn from the dreadful experience of the Rajapaksas. Demonising political rivals is no substitute for effective governance and fulfilling promises.
Editorial
Mega crises and ad hoc remedies
Friday 6th December, 2024
Sri Lanka is facing a severe rice shortage, and the situation is bound to take a turn for the worse unless remedial action is taken forthwith. The country has produced enough paddy, according to the Department of Agriculture, and the government itself has said there are sufficient stocks of paddy! If so, why has a rice shortage occurred?
Minister of Trade and Commerce, Food Security and Cooperative Development Wasantha Samarasinghe told Parliament on Wednesday that rice millers had agreed to release 200,000 kilos of rice daily to be sold at the maximum retail price (Rs. 220 a kilo) through the Sathosa retail outlets. Implying that all necessary action had been taken to break the back of the rice crisis, Samarasinghe claimed that a banking issue that had prevented millers from increasing the amount of rice released to the market had been sorted out with a presidential intervention. He should have revealed what that issue was. The NPP leaders are beginning to sound like apologists for the powerful millers, just as their predecessors did.
Sathosa has only 443 retail outlets countrywide, and obviously they cannot cater to more than 22 million people belonging to about 5.1 million families. The Ministry of Agriculture informs us that Sri Lanka’s daily rice consumption is about 6,500 MT and the amount of rice the millers have reportedly offered to release a day is woefully inadequate to meet the demand for rice.
The harebrained manner in which successive governments have sought to tackle the rice issue exemplifies a local saying; what they have been doing is ‘like using a loincloth to control dysentery’.
The government says it has decided to lift restrictions on rice imports temporarily and the State Trading Corporation and Sathosa will import 70,000 MT of rice urgently. When imported rice stocks will arrive here is anyone’s guess, and the possibility of private importers colluding to keep the price of imported rice artificially high cannot be ruled out; the paucity of regulations as well as the impotence of governments and the Consumer Affairs Authority (CAA) allows anti-competitive practices to thrive at the expense of consumers.
In October 2024, addressing an NPP election rally in Polonnaruwa, President Anura Kumara Dissanayake declared that there were sufficient stocks of rice in the country and ruled out the possibility of importing rice. A senior economist attached to the Hector Kobbekaduwa Agrarian Research and Training Institute, reportedly informed President Dissanayake at a meeting, in October, that the country had sufficient rice stocks, according to the Agriculture Department database, and there was no need for rice imports. He brought to the notice of the President that rice shortages occurred whenever millers were asked to adhere to the prices stipulated by the CAA. Minister Samarasinghe and NPP MP and National Organiser of the All Ceylon Farmers’ Federation, Namal Karunaratne, have also confirmed that the country has sufficient rice stocks. Thus, it is clear that the large-scale millers have created an artificial shortage of rice to jack up prices.
On listening to President Dissanayake and other NPP stalwarts during their election campaigns, people must have expected them to get tough with the millers, after forming a government, and ensure that the interests of consumers and farmers would prevail. But the action they have taken to solve the rice crisis is anything but tough. The President’s recent meeting with a group of powerful rice millers responsible for market manipulations looked like a convivial confab.
When rice imports get underway, the large-scale millers usually release more rice to the market, as we have seen over the years, and imported rice remains unsold as Sri Lankans prefer local rice varieties. Most of all, changes in market dynamics cause paddy prices to fall during harvesting periods much to the detriment of farmers’ interests. Millers laugh all the way to the bank. Everything possible must be done to prevent unsold imported rice stocks from ending up as animal feed.
The government must summon courage to grasp the nettle if it is genuinely desirous of safeguarding the interests of rice consumers and paddy farmers. Ad hoc remedies and mere rhetoric won’t do.
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