Opinion

IMF folly – Imputed Rental Income Tax

Published

2 years ago

2024/06/20

By Dr Sirimewan Dharmaratne,
Former Senior Analyst, HM Revenue
and Customs, UK.

While one can only imagine the atmosphere at the discussions with the IMF, what transpires from these meetings, one can presume that there was no resistance or contention to whatever the IMF proposes. The IMF appears to be pretty much dictating the fiscal policies for Sri Lanka to follow. The proposed Imputed Rental Income Tax (IRIT) is a good example how helpless or defenceless Sri Lanka has become to get a bit of money that some oligarchs spend on their yachts. The gravity of this tax is only just gradually sinking in Sri Lanka. Even those in the government, or those wannabes, are clueless as to what this policy is. It is utter stupidity to make statements such as “90% of the property owners won’t be affected” when the policy is not yet even formulated. Without the Sale Price and Rent Register (SPRR), which will be the basis for valuation, it has not been even started, but is required to be completed within a few months. Tax rate has not been determined either. Therefore, it is disingenuous and misleading to say that only 10% of the households will be affected. Further because of the word ‘rental’, some politicians still believe this is a tax on rented properties or on those with ‘commercial value,” whatever that is. But potentially it could be far more sinister!

What is Imputed Rental Income Tax?

This is a highly controversial and nonsensical tax that is imposed in only five countries, namely Iceland, Luxembourg, the Netherlands, Slovenia and Switzerland. None of these are developing countries and even in Switzerland, there is an ongoing debate on its abolition. The tax is imposed on the ‘imputed’ rental income of your own home after deducting mortgage or loan payments. The imputation is based on the rent that you would have to pay to rent a similar property in that location. Once this is determined, there may be some provision for the homeowner to negotiate the imputed value, based on several other factors. In countries where this is imposed, imputed value is negotiated down to be less than half of the potential rental value.

Proposed SPRR

The IMF has suggested implementing this tax by March 2025, once the SPRR is completed within a few months of this year. This will be a monumental task in the informal and disparate property market that exists in Lanka. Except for some properties in high-rise apartment complexes and a few other high-end properties, mainly in Colombo, most rentals and property transactions occur through personal advertisements on newspapers and online. Their rental rates and selling prices are personal information and are unlikely to be recorded anywhere. Further, each property is unique and no two properties, in the same neighbourhood, are the same. This adds to the complexity of determining overarching rental rates, or sale prices, even for a small confined neighbourhood. Also, rents are negotiated, based on personal acquaintances, actual or perceived ability to pay rent and several other factors that cannot be quantified. Often one finds palatial homes in not so desirable neighbourhoods surrounded by very basic abodes. This will make it extremely challenging for authorities to come up with any credible imputed rent register for a myriad of heterogeneous properties strewn all over the island.

This is very much different to developed countries, where there are whole neighbourhoods with pretty much identical properties. Variation is sale prices and rents are very minor within a neighbourhood. Transaction information on only a few properties is enough to impute the sale or rental value of similar properties. In the UK, for example, there are several online property sites that individuals use as guides to advertise properties for sale and rent. Also, since most homes are mortgaged owned, banks have a record of sale prices and mortgages extended to each property. The government and tax authorities have access to all this information almost in real time.

Is this tax realistic in Sri Lanka?

Despite the ill-conceived optimism of the IMF, this tax is highly impractical in Sri Lanka due to aforementioned reasons and certainly not within the suggested time frame. This is an excellent manifestation of what happens when international organisations run out of ideas and are devoid of any sense of reality of the environment that they are working on. In a highly fractured and heterogenous property market, each property will have to be considered individually to calculate the imputed rent as each property is a unique entity. Further, the rental demand for high-end properties in Colombo and its purlieu are by embassies, international organisations and other foreign establishments that can pay high rents, which are out of reach of many ordinary Sri Lankans. While those who are lucky enough to get such clients may demand high rents, to use them to impute rental value of the adjoining property is not possible. For properties of this nature there is an esoteric and limited client base. For the rest of the country, there is a ‘rent ceiling’ that any property could demand, regardless of how grand it is.

Therefore, any kind of rent register has to be either very individualised or fairly prosaic, mostly based on highly conservative estimates in a very parsimonious information environment. Either way, putting together a useful and credible SPRR would be highly contentious and those with means and connections could influence how much their imputed rent would be. This opens up another avenue for widespread corruption, where valuation offices could easily be the new elite surpassing custom offices.

Is this tax fair?

One of the main arguments against IRIT is that it goes against the very principle of taxation. A tax is imposed on a transaction or when an income is generated. This tax is imposed on a non-income generating asset. As such, it is biased against those individuals who are asset rich but cash poor. Sri Lankan house ownership is unique. Most people strive throughout their working years to build a house that eventually becomes their family home. When they retire and income is drastically reduced, it not only becomes their permanent refuge, but also serves as a launching pad for grown up children until they become independent. Few lucky ones acquire homes through bequeath or marriage. For these individuals’ this tax may not be as unfair as for those who have spent their hard-earned money building or acquiring a property. However, the morality of the tax is still questionable. This tax is penalising people for their enterprise. It is in effect disincentivizing people from investing in their future and the welfare of their children. While tax implications can be taken into account in making a decision about going for a higher paying job, or purchasing an item, no one would know what the future tax is when they start to build their own home. It is completely at the mercy of an imperfect and capricious valuation process. Therefore, if applied regressively, this tax would be unfair on the owners of the existing stock of property and could peril the livelihood of those who are living at the margins, but fortunate enough to have their own comfortable home in a desirable location. Those who are planning to get on the property ladder would be no better off either as they would have to consider some random tax that will be imposed once the property is built or acquired.

Why in this predicament?

The reason that Sri Lanka is in this quandary and has to propitiate IMF is due to years of neglect to implement sensible tax policies. Ridiculously low historic personal income taxes and their ad hoc implementation has given a false sense of prosperity that accustomed the populace to a lifestyle that otherwise would not have been possible. If the taxes have been allowed to increase marginally over the years to reflect the true cost of providing public services, the pain would have been much less. To cover the gap that could not be covered by taxes, all elected governments have been borrowing heavily, primarily to support consumption. Even when borrowed for income generation, gratuitous corruption and egregious decisions have rendered most investments liabilities. All the while the debt has been piling up unabated, and passed on from one administration to another. Economic mismanagement and the maintenance of a bloated, inefficient and corrupt public service have finally nailed the coffin in. While decreasing government expenditure through restructuring and privatisation is facing fierce opposition, agreeing to raise taxes and find new sources for taxation appears to be the only way to convince creditors to lend more. But is it?

Tax Gap – Finding tax leakages

One of the main accusations against pervasive taxation is the inability or unwillingness to clamp down on widespread tax evasion. Different groups point out sources where substantial haemorrhage of tax occurs. However, quantifying leakages of tax revenue has hampered putting forward a compelling case against imposing more debilitating taxes. To realise how extra tax can be collected without imposing new taxes, the government needs to know how much tax is lost and then formulate a comprehensive plan to collect. The method to estimate lost tax is by calculating the tax gap. Tax gap calculates the overall deficit in the tax that is due under full compliance and what is actually collected. It can be broken down by sector, such as tax lost through income tax, corporate tax, excise tax. The concept is fairly straightforward although computationally data driven. Rather than agreeing to every outlandish suggestion that the IMF makes, the government should be able to suggest alternative methods to raise taxes without further burdening the long-suffering public. The way to achieve this is by having people who could hold a conversation at their level. Obsequiousness is seen as a sign of weakness that organisations like the IMF have come to expect in developing countries. Unless the government gets its act together and shows that they could put forward fact-based strong arguments, it won’t be able to defend the public from the wrath of the IMF. Without the knowledge of how much tax is lost and a comprehensive plan to collect it, it is not surprising that only one party dominates these discussions.

Repercussions of Excessive Taxation

Studies done in the UK and other countries have shown that excessive tax burden promotes evasion and evasion is self-feeding. When people see others evade taxes, they are also compelled to do so, especially if they see no action is taken. Since taxes don’t give any direct benefits, individuals are more likely to comply if everyone else does. People neither feel good when they pay taxes or feel bad when they evade. Because they feel ‘everyone’ is doing it. All this means that there will be a huge cost making individuals comply with various taxes and associated regulations that are popping up like mushrooms. This will in turn increase government expenditure, negating most or some of the revenue from increased taxation. A complicated tax like IRIT will face significant difficulties and costs through its implementation. Identifying the ownership, imputed rent valuation, adjusting it for various mitigating factors, negotiations, endless legal challenges and distortions to the property market will render this tax unworkable in Sri Lanka. The IMF really should stay away from prescribing specific tax policies that are not suitable for Sri Lanka while the government should be much more erudite in holding their ground and fighting their corner.

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Opinion

War with Iran and unravelling of the global order – II

Published

2 days ago

2026/04/9

Sahan Weerasooriya

A US airstrike on Iran

Broader Strategic Consequences

One of the most significant strategic consequences of the war is the accelerated erosion of U.S. political and moral hegemony. This is not a sudden phenomenon precipitated solely by the present conflict; rather, the war has served to illuminate an already evolving global reality—that the era of uncontested U.S. dominance is in decline. The resurgence of Donald Trump and the reassertion of his “America First” doctrine reflect deep-seated domestic economic and political challenges within the United States. These internal pressures have, in turn, shaped a more unilateral and inward-looking foreign policy posture, further constraining Washington’s capacity to exercise global leadership.

Moreover, the conduct of the war has significantly undermined the political and moral authority of the United States. Perceived violations of international humanitarian law, coupled with the selective application of international norms, have weakened the credibility of U.S. advocacy for a “rules-based international order.” Such inconsistencies have reinforced perceptions of double standards, particularly among states in the Global South. Skepticism toward Western normative leadership is expected to deepen, contributing to the gradual fragmentation of the international system. In this broader context, the ongoing crisis can be seen as symptomatic of a more fundamental transformation: the progressive waning of a global order historically anchored in U.S. hegemony and the emergence of a more contested and pluralistic international landscape.

The regional implications of the crisis are likely to be profound, particularly given the centrality of the Persian Gulf to the global political economy. As a critical hub of energy production and maritime trade, instability in this region carries systemic consequences that extend far beyond its immediate geography. Whatever may be the outcome, whether through the decisive weakening of Iran or the inability of external powers to dismantle its leadership and strategic capabilities, the post-conflict regional order will differ markedly from its pre-war configuration. In this evolving context, traditional power hierarchies, alliance structures, and deterrence dynamics are likely to undergo significant recalibration.

A key lesson underscored by the war is the deep interconnectivity of the contemporary global economic order. In an era of highly integrated production networks and supply chains, disruptions in a single strategic node can generate cascading effects across the global system. As such, regional conflicts increasingly assume global significance. The structural realities of globalisation make it difficult to contain economic and strategic shocks within regional boundaries, as impacts rapidly transmit through trade, energy, and financial networks. In this context, peace and stability are no longer purely regional concerns but global public goods, essential to the functioning and resilience of the international system

The conflict highlights the emergence of a new paradigm of warfare shaped by the integration of artificial intelligence, cyber capabilities, and unmanned systems. The extensive use of unmanned combat aerial vehicles (UCAVs)—a trend previously demonstrated in the Russia–Ukraine War—has been further validated in this theatre. However, unlike the Ukraine conflict, where Western powers have provided sustained military, technological, and financial backing, the present confrontation reflects a more direct asymmetry between a dominant global hegemon and a Global South state. Iran’s deployment of drone swarms and AI-enabled targeting systems illustrates that key elements of Fourth Industrial Revolution (4IR) warfare are no longer confined to technologically advanced Western states. These capabilities are increasingly accessible to Global South actors, lowering barriers to entry and significantly enhancing their capacity to wage effective asymmetric warfare. In this evolving context, technological diffusion is reshaping the strategic landscape, challenging traditional military hierarchies and altering the balance between conventional superiority and innovative, cost-effective combat strategies.

The war further exposed and deepened the weakening of global governance institutions, particularly the United Nations. Many of these institutions were established in 1945, reflecting the balance of power and geopolitical realities of the immediate post-Second World War era. However, the profound transformations in the international system since then have rendered aspects of this institutional architecture increasingly outdated and less effective.

The war has underscored the urgent need for comprehensive international governance reforms to ensure that international institutions remain credible, representative, and capable of addressing contemporary security challenges. The perceived ineffectiveness of UN human rights mechanisms in responding to violations of international humanitarian law—particularly in contexts such as the West Bank and the Gaza Strip, and more recently in Iran—has amplified calls for institutional renewal or the development of alternative frameworks for maintaining international peace and security. Moreover, the selective enforcement of international law and the persistent paralysis in conflict resolution mechanisms risk accelerating the fragmentation of global norms. If sustained, this trajectory would signal not merely the weakening but the possible demise of the so-called liberal international order, accelerating the erosion of both the legitimacy and the effective authority of existing multilateral institutions, and deepening the crisis of global governance.

Historically, major wars have often served as harbingers of new eras in international politics, marking painful yet decisive transitions from one order to another. Periods of systemic decline are typically accompanied by instability, uncertainty, and profound disruption; yet, it is through such crises that the contours of an emerging order begin to take shape. The present conflict appears to reflect such a moment of transition, where the strains within the existing global system are becoming increasingly visible.

Notably, key European powers are exhibiting a gradual shift away from exclusive reliance on the U.S. security umbrella, seeking instead a more autonomous and assertive role in global affairs. At the same time, the war is likely to create strategic space for China to expand its influence. As the United States becomes more deeply entangled militarily and politically, China may consolidate its position as a stabilising economic actor and an alternative strategic partner. This could be reflected in intensified energy diplomacy, expanded infrastructure investments, and a more proactive role in regional conflict management, advancing Beijing’s long-term objective of reshaping global governance structures.

However, this transition does not imply a simple replacement of Pax Americana with Pax Sinica. Rather, the emerging global order is likely to be more diffuse, pluralistic, and multilateral in character. In this sense, the ongoing transformation aligns with broader narratives of an “Asian Century,” in which power is redistributed across multiple centers rather than concentrated in a single hegemon. The war, therefore, may ultimately be understood not merely as a geopolitical crisis, but as a defining inflection point in the reconfiguration of the global order.

Conclusion: A New Era on the Horizon

History shows that major wars often signal the birth of new eras—painful, disruptive, yet transformative. The present conflict is no exception. It has exposed the vulnerabilities of the existing world order, challenged U.S. dominance, and revealed the limits of established global governance.

European powers are beginning to chart a more independent course, reducing reliance on the U.S. security umbrella, while China is poised to expand its influence as an economic stabiliser and strategic partner. Through energy diplomacy, infrastructure investments, and active engagement in regional conflicts, Beijing is quietly shaping the contours of a more multipolar world. Yet this is not the rise of Pax Sinica replacing Pax Americana. The emerging order is likely to be multilateral, fluid, and competitive—a world in which multiple powers, old and new, share the stage. The war, in all its turbulence, may therefore mark the dawn of a genuinely new global era, one where uncertainty coexists with opportunity, and where the next chapter of international politics is being written before our eyes.

by Gamini Keerawella
(First part of this article appeared yesterday (08 April)

Opinion

University admission crisis: Academics must lead the way

Published

3 days ago

2026/04/8

Sahan Weerasooriya

130,000 students are left out each year—academics hold the key

Each year, Sri Lanka’s G.C.E. Advanced Level examination produces a wave of hope—this year, nearly 175,000 students qualified for university entrance. Yet only 45,000 will be admitted to state universities. That leaves more than 130,000 young people stranded—qualified, ambitious, but excluded. This is not just a statistic; it is a national crisis. And while policymakers debate infrastructure and funding, the country’s academics must step forward as catalysts of change.

Beyond the Numbers: A National Responsibility

Education is the backbone of Sri Lanka’s development. Denying access to tens of thousands of qualified students risks wasting talent, fueling inequality, and undermining national progress. The gap is not simply about seats in lecture halls—it is about the future of a generation. Academics, as custodians of knowledge, cannot remain passive observers. They must reimagine the delivery of higher education to ensure opportunity is not a privilege for the few.

Expanding Pathways, Not Just Campuses

The traditional model of four-year degrees in brick-and-mortar universities cannot absorb the demand. Academics can design short-term diplomas and certificate programmes that provide immediate access to learning. These programmes, focused on employable skills, would allow thousands to continue their education while easing pressure on degree programmes. Equally important is the digital transformation of education. Online and blended learning modules can extend access to rural students, breaking the monopoly of physical campuses. With academic leadership, Sri Lanka can build a reliable system of credit transfers, enabling students to begin their studies at affiliated institutions and later transfer to state universities.

Partnerships That Protect Quality

Private universities and vocational institutes already absorb many students who miss out on state admissions. But concerns about quality and recognition persist. Academics can bridge this divide by providing quality assurance and standardised curricula, supervising joint degree programmes, and expanding the Open University system. These partnerships would ensure that students outside the state system receive affordable, credible, and internationally recognised education.

Research and Advocacy: Shaping Policy

Academics are not only teachers—they are researchers and thought leaders. By conducting labour market studies, they can align higher education expansion with employability. Evidence-based recommendations to the University Grants Commission (UGC) can guide strategic intake increases, regional university expansion, and government investment in digital infrastructure. In this way, academics can ensure reforms are not reactive, but visionary.

Industry Engagement: Learning Beyond the Classroom

Sri Lanka’s universities must become entrepreneurship hubs and innovation labs. Academics can design programmes that connect students directly with industries, offering internship-based learning and applied research opportunities. This approach reduces reliance on classroom capacity while equipping students with practical skills. It also reframes education as a partnership between universities and the economy, rather than a closed system.

Making the Most of What We Have

Even within existing constraints, academics can expand capacity. Training junior lecturers and adjunct faculty, sharing facilities across universities, and building international collaborations for joint programmes and scholarships are practical steps. These measures maximise resources while opening new avenues for students.

A Call to Action

Sri Lanka’s university admission crisis is not just about numbers—it is about fairness, opportunity, and national development. Academics must lead the way in transforming exclusion into empowerment. By expanding pathways, strengthening partnerships, advocating for policy reform, engaging with industry, and optimizing resources, they can ensure that qualified students are not left behind.

“Education for all, not just the fortunate few.”

Dr. Arosh Bandula (Ph.D. Nottingham), Senior Lecturer, Department of Agricultural Economics & Agribusiness, Faculty of Agriculture, University of Ruhuna

by Dr. Arosh Bandula

Opinion

Post-Easter Sri Lanka: Between memory, narrative, and National security

Published

4 days ago

2026/04/7

Sahan Weerasooriya

As Sri Lanka approaches the seventh commemoration of the Easter Sunday attacks, the national mood is once again marked by grief, reflection, and an enduring sense of incompleteness. Nearly seven years later, the tragedy continues to cast a long shadow not only over the victims and their families, but over the institutions and narratives that have since emerged.

Commemoration, however, must go beyond ritual. It must be anchored in clarity, accountability, and restraint. What is increasingly evident in the post-Easter landscape is not merely a search for truth, but a contest over how that truth is framed, interpreted, and presented to the public.

In recent times, public discourse has been shaped by book launches, panel discussions, and media interventions that claim to offer new insights into the attacks. While such contributions are not inherently problematic, the manner in which certain narratives are advanced raises legitimate concerns. The selective disclosure of information particularly when it touches on intelligence operations demands careful scrutiny.

Sri Lanka’s legal and institutional framework is clear on the sensitivity of such matters. The Official Secrets Act (No. 32 of 1955) places strict obligations on the handling of information related to national security. Similarly, the Police Ordinance and internal administrative regulations governing intelligence units emphasize confidentiality, chain of command, and the responsible use of information. These are not mere formalities; they exist to safeguard both operational integrity and national interest.

When individual particularly those with prior access to intelligence structures enter the public domain with claims that are not subject to verification, it raises critical questions. Are these disclosures contributing to justice and accountability, or are they inadvertently compromising institutional credibility and future operational capacity?

The challenge lies in distinguishing between constructive transparency and selective exposure.

The Presidential Commission of Inquiry into the Easter Sunday Attacks provided one of the most comprehensive official examinations of the attacks. Its findings highlighted a complex web of failures: lapses in intelligence sharing, breakdowns in inter-agency coordination, and serious deficiencies in political oversight. Importantly, it underscored that the attacks were not the result of a single point of failure, but a systemic collapse across multiple levels of governance.

Yet, despite the existence of such detailed institutional findings, public discourse often gravitates toward simplified narratives. There is a tendency to identify singular “masterminds” or to attribute responsibility in ways that align with prevailing political or ideological positions. While such narratives may be compelling, they risk obscuring the deeper structural issues that enabled the attacks to occur.

Equally significant is the broader socio-political context in which these narratives are unfolding. Sri Lanka today remains a society marked by fragile intercommunal relations. The aftermath of the Easter attacks saw heightened suspicion, polarisation, and, in some instances, collective blame directed at entire communities. Although there have been efforts toward reconciliation, these fault lines have not entirely disappeared.

In this environment, the language and tone of public discourse carry immense weight. The framing of terrorism whether as a localized phenomenon or as part of a broader ideological construct must be handled with precision and responsibility. Overgeneralization or the uncritical use of labels can have far-reaching consequences, including the marginalization of communities and the erosion of social cohesion.

At the same time, it is essential to acknowledge that the global discourse on terrorism is itself contested. Competing narratives, geopolitical interests, and selective historiography often shape how events are interpreted. For Sri Lanka, the challenge is to avoid becoming a passive recipient of external frameworks that may not fully reflect its own realities.

A professional and unbiased approach requires a commitment to evidence-based analysis. This includes:

· Engaging with primary sources, including official reports and judicial findings
·

· Cross-referencing claims with verifiable data
·

· Recognizing the limits of publicly available information, particularly in intelligence matters

It also requires intellectual discipline the willingness to question assumptions, to resist convenient conclusions, and to remain open to complexity.

The role of former officials and subject-matter experts in this discourse is particularly important. Their experience can provide valuable insights, but it also carries a responsibility. Public interventions must be guided by professional ethics, respect for institutional boundaries, and an awareness of the potential impact on national security.

There is a fine balance to be maintained. On one hand, democratic societies require transparency and accountability. On the other, the premature or uncontextualized release of sensitive information can undermine the very systems that are meant to protect the public.

As Sri Lanka reflects on the events of April 2019, it must resist the temptation to reduce a national tragedy into competing narratives or political instruments. The pursuit of truth must be methodical, inclusive, and grounded in law.

Easter is not only a moment of remembrance. It is a test of institutional maturity and societal resilience.

The real question is not whether new narratives will emerge they inevitably will. The question is whether Sri Lanka has the capacity to engage with them critically, responsibly, and in a manner that strengthens, rather than weakens, the foundations of its national security and social harmony.

In the end, justice is not served by noise or conjecture. It is served by patience, rigor, and an unwavering commitment to truth.

Mahil Dole is a former senior law enforcement officer and national security analyst, with over four decades of experience in policing and intelligence, including serving as Head of Counter-Intelligence at the State Intelligence Service of Sri Lanka and a graduate of the Asia Pacific Center for Security Studies in Hawai, USA.

by Mahil Dole
Former Senior Law Enforcement Officer National Security Analyst; Former Head of Counter-Intelligence, State Intelligence Service)