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Editorial

Income tax

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It is very clear at present that the new income tax net cast by the Ranil Wickremesinghe government has provoked a situation that may well become unmanageable and ominous signs of this are clearly emerging. Strident protests from groups including doctors, university academics and others including port and airport employees and many others have been becoming increasingly strident over the past several days. Hints of direct trade union action, obviously meaning strikes, have been made. Whether a government, already on the back foot following Inter University Students’ Federation (IUSF) Convenor Vasantha Mudalige’s release on bail and angry public opinion railing against blatant efforts to postpone the scheduled local elections. can fend off the tax protests remains to be seen.

All those protesting on this account well know that the government is desperately cash strapped and needs to urgently harness revenue to keep the wheels of state turning. On its part, the government also is too well aware of the inability of most of the protesters to bear the new income tax burden in the face of galloping inflation, particularly food, electricity and a host of other goods and services are concerned. But there is very little that it can do about it. Wickremesinghe’s and his government’s obdurate refusal to abandon or cut down on Saturday’s 75th Independence anniversary bash, said to have cost Rs. 200 million, has only aggravated public fury about the new income tax burden placed upon the people.

The very small number of personal income tax payers in this country have always felt unfairly treated, believing they have been singled out for harsh treatment while the vast majority remained untouched. They could not be more wrong. All the people of the country pay taxes and how! As one famous newspaper editor of the past pungently put it, “every time you strike a match or flush the toilet, you are paying a tax.” We all know the platitude that the only thing that is certain in life is death and taxes. Indirect taxes unlike those that are direct (like income tax) by far account for the lion’s share of tax revenue. Populations of developed countries, particularly in Europe and North America, pay high income taxes. But they, unlike us in Sri Lanka, get good returns for what they pay. We, in this land like no other, can only grin cynically when we see signs proclaiming “Your tax rupees at work” at road digs and construction sites and think “like hell” to ourselves.

Equity is a basic principle of taxation long ignored in this country. Go back to 1977 and the early years of opening our long shackled economy by the J.R. Jayewardene government with Ronnie de Mel as finance minister. That was when public service emoluments were freed of income tax on the argument that top public servants were paid much less than their private sector counterparts and this hindered government’s ability to hold competent managers in the public sector hierarchy. The contention was not altogether without merit but there were many fallacies as well. Public servants from the colonial days have enjoyed non-contributory pensions which is not the case (with very few exceptions) in the private sector. Dr. N.M. Perera, as finance minister in Mrs. Bandaranaike’s United Front government of 1970 tried, without success, to withdraw the pension benefits from new entrants to the public service. He sensibly proposed that they be paid a retirement benefit like what is offered by the EPF to private sector employees with contributions from both employer and employee. The failure of this effort has left a ticking time bomb on the taxpayer’s lap to this day.

At a post-budget press conference following freeing public sector salaries from income tax, then Finance Minister De Mel was asked whether parliamentary emoluments too would be similarly exempted. He ducked the question saying “that hasn’t been decided yet.” Of course the benefit was extended to MPs too. Cabinet Spokesman Bandula Gunawardene told a post-cabinet news briefing a few days ago said that the IMF wanted all those earning Rs. 45,000 a month to be made liable to income tax. The government tried its best to push it to a monthly Rs. 150,000 and finally settled at Rs. 100,000. There were those who didn’t believe the minister on the premise that an institution like the IMF would not have got into micro details but would have broadly prescribed a percentage of GDP that must be gathered as tax revenue. However it wasn’t long before the president himself confirmed Gunawardene’s claim.

There’s no avoiding the reality that Sri Lanka’s income tax base is far too narrow and needs to be widened substantially. This would mean that people who have never paid income tax would caught up in the tax net and would deeply resent being compelled to pay. This is particularly so in the context of the value of money reducing sharply, most so in recent months. The country is also saddled with an Inland Revenue Department entrenched in a tradition of harassing already squeezed lemons to increase tax collection in a society where evasion is widely prevalent, often among professionals who should know better. The government must also be cognizant of the untaxed, lavish non-cash benefits of politicians deeply resented by the people. However that be, whether the government will be allowed to implement the announced scheme or be compelled to backpedal remains to be seen.



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Editorial

Who will guard the guards?

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Tuesday 8th April, 2025

The Opposition has been protesting against what it describes as a veiled threat issued by President Anura Kumara Dissanayake, at a recent NPP Local Government (LG) election rally. The United Republican Front led by former Minister Champika Ranawaka has complained to the Election Commission (EC) that President Dissanayake has made a statement, implying that his government will make financial allocations expeditiously only to the local councils the NPP will win in the upcoming LG polls, and others will find it difficult to obtain state funds.

One can argue that it is not legally possible for a government to deprive the local councils controlled by the Opposition of funds, but threats of fund cuts or restrictions, made by the President himself, could demoralise the people who intend to vote for parties other than the NPP in next month’s LG polls. Political power takes precedence over the law, ethics and morals, in this country, and therefore anything is possible.

In politics, words can be as impactful as actions, shaping public opinion and influencing decisions. One may recall that in 2015, the then President Maithripala Sirisena, as the SLFP leader, queered the pitch for his bete noire, former President Mahinda Rajapaksa, who was contesting that year’s general election as the prime ministerial candidate of the SLFP-led UPFA. In the run-up to that crucial election, Sirisena said in a television interview something to the effect that Rajapaksa would not be appointed Prime Minister even if the UPFA won enough seats to form a government. His statement had a devastating impact on the morale of UPFA supporters who wanted to make Rajapaksa Prime Minister. The rest is history. Besides, former Minister S. B. Dissanayake was sentenced to prison for contempt of the Supreme Court over a derogatory remark he made, at a public rally in 2003, about the judiciary and its rulings.

Meanwhile, there are numerous questionable practices pertaining to Sri Lankan elections. Political leaders in power, such as the President, the Prime Minister and Ministers, conduct election campaigns at a substantial cost to the state coffers, as we have argued over the past so many years. When the Presidents and other government leaders stump for their parties, across the country, the public has to bear the cost of their travel, security, etc. The Presidents and Prime Ministers even travelled in the Air Force helicopters for campaign purposes. The state-owned media outfits are misused as propaganda organs of the party in power although they belong to the people who hold diverse political views. A large number of meetings of state officials are held on some pretext or another, ahead of elections, to give a boost to the ruling party’s campaign. These practices are not only unethical but also tantamount to violations of the election laws, as they place the ruling party at an advantage at the expense of its rivals in elections. All Presidents, namely J. R. Jayewardene, R. Premadasa, D. B. Wijetunga, Chandrika Bandaranaike Kumaratunga, Mahinda Rajapaksa, Maithripala Sirisena, Gotabaya Rajapaksa and Ranil Wickremesinghe unflinchingly used state resources for election campaigns. The public expected a radical departure from the past when they voted the JVP-led NPP into office last year. But what is unfolding on the political front does not offer much hope.

As for presidential statements, it was while speaking at a temple ceremony in the South in 1989 that the then President Premadasa announced his decision to ask India to withdraw the IPKF (Indian Peacekeeping Force) from Sri Lanka. Thus, the Executive Presidents’ statements should not be taken lightly, no matter where they are made.

How can a level playing field be ensured in the upcoming LG polls when the incumbent President himself goes around, issuing a veiled threat that the local councils will face fund cuts or restrictions unless they are controlled by his party––the NPP? It has been revealed in Parliament that at the height of a rice shortage, a few months ago, the NPP government did not supply some popular varieties of rice to the cooperative societies won by its rivals. Such action amounts to collective punishment meted out to the public for defeating the NPP in elections. So, the presidential threat in question, albeit veiled, cannot be dismissed as mere platform rhetoric. The JVP has demonstrated that it is capable of far worse things than fund cuts. The EC therefore must act on the complaints the Opposition has lodged in respect of the presidential statement if it is to arrest the erosion of public trust and confidence in the electoral process. That is also the only way the EC can prevent the public from thinking less of it.

As for President Dissanayake’s statement at issue and the EC’s alleged lukewarm response thereto, Juvenal’s famous question comes to mind: Quis custodiet ipsos custodes? — Who will guard the guards themselves?

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Editorial

Transparency compromised

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Monday 7th April, 2025

Indian Prime Minister Narendra Modi’s Sri Lanka visit saw the signing of seven MoUs between New Delhi and Colombo. Prominent among them are the MoU on the implementation of HVDC Interconnection for import/export of power, the MoU on cooperation among the governments of India, Sri Lanka, and the United Arab Emirates on developing Trincomalee as an energy hub, and the MoU on defence cooperation between India and Sri Lanka.

The signing of those MoUs, especially the one on defence cooperation, on 05 April, is a textbook example of irony. The significance of that day may not have been lost on keen political observers. The JVP, which leads the ruling NPP coalition, launched its first abortive insurrection on 05 April 1971, and one of the five classes it held to indoctrinate its new recruits, before sending them on a suicidal mission, was on Indian expansionism.

There is no gainsaying that Sri Lanka must not allow its land, sea and airspace to be used against India in any manner—or against any other nation for that matter. President J. R. Jayewardene, in his wisdom, got too close to the US in a bipolar world, and antagonised India in the process. He had the scourge of separatist terror and the Indo-Lanka Accord to contend with. The JVP went all out to scuttle the implementation of that accord, albeit in vain. The US and India have closed ranks today in a bid to thwart China’s rise, and a government led by the JVP has signed an MoU with India on defence cooperation!

The NPP government has violated one of the fundamental tenets of good governance––transparency. There has been no transparency about the aforesaid MoUs, especially the one on defence cooperation.

When the JVP/NPP was in the Opposition, it would flay governments for signing vital MoUs and pacts without transparency. It has kept Parliament in the dark about the MoUs in question. It is apparently emulating its bete noire, Ranil Wickremesinghe, not only in managing the economy but also signing vital MoUs!

India has demonstrated its ability to render Sri Lankan political parties malleable. PM Modi can justifiably pat himself on the back for having tamed the once anti-Indian JVP, which unleashed brutal violence purportedly to extricate Sri Lanka from what it described as India’s tentacles, in the late 1980s.

In 2024, the Modi government gave a diplomatic leg-up to the JVP/NPP, enabling its rise in national politics as a political party with some international recognition, and boosting its chances of winning elections. There is reason to believe that the JVP-led NPP would not have been able to win any parliamentary seats in the North and the East if it had not been in the good books of India. Interestingly, in October 2015, Dissanayake himself stated in Parliament that Jaffna had become a den of RAW spies. “They attempt to create political instability in Jaffna and we should put a stop to it,” he said. Today, the JVP is at India’s beck and call! In 2021, the then former MP Dr. Nalinda Jayatissa, who had been a member of the Parliamentary Select Committee that probed the Eastern Sunday terror attacks (2019), told BBC that he believed India had been behind the carnage, and his conclusion was based on ‘investigative evidence’. Dr. Jayatissa is the incumbent Media Minister. The JVP/NPP no longer inveighs against India for what it accused the latter of, in the past. Worryingly, its government stands accused of having blocked local media out of some key events related to PM Modi’s Sri Lanka visit over the weekend.

It is toe-curling to see some JVP leaders who resorted to mindless terror in a bid to scuttle the signing of the Indo-Lanka Accord , in 1987, going all out to justify the inking of an MoU on defence cooperation between their government and India, more than three and a half decades later. The signing of that particular MoU marked the JVP’s biggest-ever Machiavellian U-turn. If it had refrained from unleashing terror in 1987, tens of thousands of lives and state assets worth billions of US dollars could have been saved. Most of all, how would the JVP have reacted if a previous government had entered into MoUs with India?

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Editorial

Bottom trawling: Right and Might

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Indian Prime Minister Narndra Modi’s three-day visit here was predictably heralded by a blaze of publicity in the local press and electronic media. This was no cause for surprise given that good relations with our giant neighbour, or Big Brother as some would prefer to style it, must remain the cornerstone of Sri Lanka’s foreign policy. New Delhi accurately judged in which direction the political winds were blowing well ahead of last year’s presidential and parliamentary elections and invited the soon to be President Anura Kumara Dissanayake to visit India where he was well received. Weeks after being elected president, and scoring a better than two thirds majority in the parliamentary election that followed shortly thereafter, Dissanayake paid a state visit to India, his very first after being elected and was very warmly welcomed.

Prime Minister Modi is now here on a reciprocal visit and has a crowded agenda including a visit to Anuradhapura where he will pay homage to the sacred Jaya Sri Maha Bodhiya, grown from a sapling of the bo tree in India under which the Buddha attained enlightenment; and formally inaugurate the Maho-Anuradhapura railway signaling system and the newly upgraded Maho-Omanthai railway line, both assisted by India. Several memorandums of understanding, including possibly a Defence Co-operation Agreement, kept under wraps at the time of writing this comment, are due to be exchanged. Official word on the subject is that matters to be covered in the MOUs include energy, digitization, security and healthcare along with agreements relating to India’s debt restructuring assistance. But no details have been forthcoming.

Additionally, the visiting prime minister and his delegation who will have bilateral discussions with Sri Lanka’s president is also due to virtually inaugurate several India assisted projects. These include the Sampur solar power plant, the 5,000 mt temperature and humidity controlled cold storage facility in Dambulla and the installation of 5,000 solar panels across 5,000 religious sites here. Sri Lanka cannot forget the massive assistance provided by India in 2022 when this country faced the worst economic crisis in its contemporary history. At that time India provided multi-pronged assistance, including a $4 billion financing package through multiple credit lines and currency support, to help this country sustain essential imports and avoid defaulting on its debts.

Sri Lanka is undoubtedly benefiting from great power rivalry between India and China in the Indian Ocean where India seeks advantages through its Neighbourhood First policy while China seeks leverage through its Belt and Road initiative. The fact that the new Sri Lanka president chose to make his first state visit to India and thereafter follow with a visit to China may be an indication of priorities in Colombo. There is no escaping the reality that all countries must, where foreign relations are concerned, place their own national interest above all other considerations. This is so be it for Sri Lanka, India, China or any other country. Thus while not looking gift horses in the mouth, we must always be conscious that there is no such thing as a free lunch and be protective of our own interests.

Relations between Sri Lanka and India saw both high and low points during this century. The low was during the civil war Sri Lanka waged against the Liberation Tigers of Tamil Eelam (LTTE) in the earlier stages of which India allowed the insurgents to train and base on Indian territory. India, in fact, provided them with weapons and military training and other assistance through its RAW (Research and Analysis Wing). state intelligence agency. It may be argued that the communal disharmony between the Sinhalese and the Tamils that escalated into civil war was a problem of Sri Lanka’s own making and sub-regional sentiment in Tamil Nadu greatly influenced New Delhi’s hand in intervening.

Relations thereby plummeted and were restored to a point by the signing the Indo- Sri Lanka Peace Accord between President J.R. Jayewardene and Prime Minister Rajiv Gandhi in July 1987. With two insurrections raging in the north and south of the country, Jayewardene had no option but seek Indian assistance on India’s terms. What followed including Rajiv Gandhi’s assassination, as he campaigned for re-election as India’s prime minister is contemporary history that requires no elaboration. But since then, in the post 2022 situation when Sri Lanka faced an unprecedented economic crisis and was forced to declare bankruptcy, India came to our rescue with massive assistance and relations between the two countries have never been better.

At this point of time when Sri Lanka is headed in a new political direction under new leadership, will it be possible for the greatest irritant in present Indo-Lanka relations – bottom trawling by Indian fishermen poaching in Sri Lanka waters and destroying the marine environment – to be conclusively resolved? India has always adopted the position that this issue must be resolved in what she calls a “humanitarian manner.” It is undoubtedly a livelihood issue for fishermen – on both sides. Indian fishermen enjoyed free rein on the Sri Lanka side of the International Maritime Boundary during the war when Lankan fishermen were prohibited from going into deep sea. The Indians claim fishing in our waters to be their “traditional right.”

Prime Minister Modi’s party attempted to win votes in Tamil Nadu during the last election by accusing the Congress of “ceding” Kachchativu to Sri Lanka. The right on this issue is on our side while the might is on India’s. In the midst of honeyed words that will be much of the picture during until Sunday when the visit ends, result in might conceding to right? Even at least as far as stopping bottom trawling, illegal on our side though not in India’s goes?

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