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SHOULD WE BE INFORMANTS TO BOOST TAX REVENUE?

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By Sanjeewa Jayaweera

The headline on page one of the Sunday Island of 07 January 2024 read, “CBSL Governor urges public to become informants to boost tax revenue.” The article was based on an interview with Governor Nandala Weerasinghe (NW) hosted by the President’s Media Centre. NW is quoted to have said, “If the public wants to reduce taxes, in the future, what I see is, while they pay their taxes, they should encourage others to pay taxes or inform the authorities on those who are not paying taxes.” He urges the public to become informants to broaden the tax net, which should reduce direct and indirect taxes. His is a clarion call for the citizens of Sri Lanka to discharge their civic responsibility, which is to pay their taxes and help the authorities to catch those who don’t. His logic can not be faulted, as tax evasion and avoidance is rampant in our country.

Despite a significant degree of displeasure with the government over tax hikes that have resulted in a great deal of hardship for most, there remains a question, at least in my mind, as to how many of the citizens will heed the Governor’s advice.

The question is, what would motivate a person to be an “informant.” While there are numerous reasons for a person to be an informant, in the case of reporting those evading paying taxes, the motive can only be good conscience due to civic duty and the belief that widening the tax net would, as NW states, hopefully, reduce the burden on those who pay their taxes. As far as I am aware, the Inland Revenue Department (IRD) does not offer a financial reward to an informant, although IRD officers receive financial rewards for such collections. Maybe the government should announce a reward scheme for informants.

The two main barriers that, in all probability, will not see too many of us becoming informants would be the significant erosion of civic responsibility among most of our citizens. The concept of doing the right thing by the country is missing in our DNA. Over several decades, our politicians have gotten us used to a regime of low taxes, subsidies, free education and health. There is a general belief that the state must be a provider without much thought regarding how the state can generate the needed funds.

Secondly, many do not see the need to pay taxes because they believe those who govern the country are corrupt. The fact that those responsible for corruption are not investigated and prosecuted for their ill-gotten gains further justifies the decision not to pay taxes. I think this segment of people is not opposed to the concept of paying taxes but refrains from doing so because they do not want to contribute to the fattening of the pockets of politicians.

The Significant Impact of Gotabaya Rajapaksas (GR) Tax Policy

Whilst there is a general belief and acceptance that the hare-brained tax policies of the government of GR contributed significantly to the country’s economic downfall, there is still not much appreciation or understanding of the devastating impact it has had on tax compliance by individuals and businesses.

I have reproduced below the statistics pertaining to the number of taxpayers registered with the IRD from the IRD Performance Reports of 2019 and 2022. The figures as of 31.12.2023 are based on a press conference of the Commissioner of IRD from the Presidential Media Centre as reported in the Sunday Island on 31 December 2023.

As can be seen, a significant number of registered taxpayers left the tax net after 31 December 2019. In my view, even the number of registered taxpayers as of 31 December 2019 was significantly less than it should be, with many not paying their taxes. To have legislation enabling most to leave the tax net is astonishingly negligent and foolish. Trying to re-induct those who exited from the tax net will take a lot of effort.

Value Added Tax (VAT)

The Increase in VAT to 18% from 15% and the imposition of VAT on several items previously exempted from VAT, like fuel, gas, and books, has caused a justifiable degree of anger among the public. In all probability, in terms of President Ranil Wickremesinghes’ chances of getting reelected, it might be the straw that broke the camel’s back.

In 2002, when VAT was first enacted, there were two VAT rates, with certain products and services at 10% and some at 20%. Over the years, the rates increased and decreased, but until the recent change, several essentials were exempt from VAT. The extent of exemptions was such that when I retired from employment about six years ago, nearly 40% of the turnover of supermarkets was from the sale of VAT-exempt items. It is a reflection of the array of products that were purchased by the customers deemed to be essentials that were in the exempt category.

In his interview, the Goveror also warned that some businesses may be engaging in VAT fraud. In countries where VAT works well, all businesses have to issue a VAT Invoice to customers, whether they are tax-paying businesses or members of the public. He stated, “In some places when you buy goods, they ask if you want the invoice without the VAT. If I agree to pay less (for the invoice without taxes), my tax burden will never ease.”

Unfortunately, in our country, the IRD regulates that VAT is not reflected in an invoice issued to members of the public. Most consumers do not even know how much VAT they pay when purchasing an item or service. The supermarket bill or the hospital bill does not show the amount of VAT that was paid.

In 2002, the IRD sent a circular to all companies instructing that VAT charges should not be shown in an invoice/bill issued to a member of the public. When I enquired about the logic of this from the IRD, they replied, “We do not want the consumers to see the amount of VAT they pay as this will make them angry!” This lack of transparency is undoubtedly unfair to the public who are bearing the tax and also contributes to fraud by unscrupulous businesses.

How Many of Us Will Be Informants?

Nandalal Weerasinghe is a public servant whom I admire. He has undoubtedly played a significant role in bringing professionalism to the CBSL Governor’s post and has contributed to somewhat stabilizing the economy. However, I believe his call for taxpayers to be informants will not be heeded, and I believe the government has many other tools to improve tax compliance and increase the collection of tax revenues without having to depend on informants.

The revenue collecting agencies like Customs, Excise, and the IRD are considered to be inefficient and corrupt. The public needs to be told what action is being taken to rectify and eliminate these. As I understand, only when a new bank account is opened will a Tax Identification Number (TIN) be requested. Why can’t the government regulate that all existing bank account holders must submit a TIN certificate to the Bank?

I have read a proposal by Verite Research recommending that the withholding tax (WHT) be increased to 10% from the current 5% on bank interest and that such a measure would boost tax revenue by Rs. 100 billion. It makes perfect sense as WHT is not an additional tax but a mechanism for collecting it in advance. The logic in the proposal is that many who receive bank interest are out of of the tax net.

A few eminently sensible proposals that I came across recently that could assist the tax authorities in monitoring tax compliance and arriving at an estimate of an individual’s income are to reintroduce the QR code system to purchase fuel so that the monthly spend can be monitored and also obtain from Uber and PickMe a list of top customers by spend. Similarly, airport departure cards submitted by Sri Lankans, along with their TIN number (disclosure of which should now be made mandatory), would also be a valuable source of information for tax authorities.

Whilst all these may sound like an invasion of individual freedom, they are all tools that the authorities can use to ensure greater tax compliance by individuals as opposed to depending on informants. The question is whether the government is serious about widening the tax net or is content with seeking more and more taxes from the same group of people who pay their taxes diligently and in full and increasing the contribution from indirect tax.

There needs to be greater debate and criticism on reducing unnecessary state expenditures and how taxpayer money should be spent. The expenditure incurred to maintain over 60 overseas missions, which, incidentally is double what Singapore maintains, is a case in point. Astonishingly, the government is considering incurring Rs 250 million to send a naval ship to the Red Sea to combat the threat to merchant vessel lines by Houthi rebels, joining the big boys to protect the key waterway for global trade.

This task is best left to countries that can afford such expenditure and not to a bankrupt nation like ours where critical life-saving drugs are not available at state hospitals. The logic justifying the expenditure will be as flawed as that given for spending Rs 200 million to celebrate Independence Day.

(The views expressed in the article are solely those of the author and do not necessarily reflect the opinions and views of any organization he may be associated with.)



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Misinterpreting President Dissanayake on National Reconciliation

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President Dissanayake

President Anura Kumara Dissanayake has been investing his political capital in going to the public to explain some of the most politically sensitive and controversial issues. At a time when easier political choices are available, the president is choosing the harder path of confronting ethnic suspicion and communal fears. There are three issues in particular on which the president’s words have generated strong reactions. These are first with regard to Buddhist pilgrims going to the north of the country with nationalist motivations. Second is the controversy relating to the expansion of the Tissa Raja Maha Viharaya, a recently constructed Buddhist temple in Kankesanturai which has become a flashpoint between local Tamil residents and Sinhala nationalist groups. Third is the decision not to give the war victory a central place in the Independence Day celebrations.

Even in the opposition, when his party held only three seats in parliament, Anura Kumara Dissanayake took his role as a public educator seriously. He used to deliver lengthy, well researched and easily digestible speeches in parliament. He continues this practice as president. It can be seen that his statements are primarily meant to elevate the thinking of the people and not to win votes the easy way. The easy way to win votes whether in Sri Lanka or elsewhere in the world is to rouse nationalist and racist sentiments and ride that wave. Sri Lanka’s post independence political history shows that narrow ethnic mobilisation has often produced short term electoral gains but long term national damage.

Sections of the opposition and segments of the general public have been critical of the president for taking these positions. They have claimed that the president is taking these positions in order to obtain more Tamil votes or to appease minority communities. The same may be said in reverse of those others who take contrary positions that they seek the Sinhala votes. These political actors who thrive on nationalist mobilisation have attempted to portray the president’s statements as an abandonment of the majority community. The president’s actions need to be understood within the larger framework of national reconciliation and long term national stability.

Reconciler’s Duty

When the president referred to Buddhist pilgrims from the south going to the north, he was not speaking about pilgrims visiting long established Buddhist heritage sites such as Nagadeepa or Kandarodai. His remarks were directed at a specific and highly contentious development, the recently built Buddhist temple in Kankesanturai and those built elsewhere in the recent past in the north and east. The temple in Kankesanturai did not emerge from the religious needs of a local Buddhist community as there is none in that area. It has been constructed on land that was formerly owned and used by Tamil civilians and which came under military occupation as a high security zone. What has made the issue of the temple particularly controversial is that it was established with the support of the security forces.

The controversy has deepened because the temple authorities have sought to expand the site from approximately one acre to nearly fourteen acres on the basis that there was a historic Buddhist temple in that area up to the colonial period. However, the Tamil residents of the area fear that expansion would further displace surrounding residents and consolidate a permanent Buddhist religious presence in the present period in an area where the local population is overwhelmingly Hindu. For many Tamils in Kankesanturai, the issue is not Buddhism as a religion but the use of religion as a vehicle for territorial assertion and demographic changes in a region that bore the brunt of the war. Likewise, there are other parts of the north and east where other temples or places of worship have been established by the military personnel in their camps during their war-time occupation and questions arise regarding the future when these camps are finally closed.

There are those who have actively organised large scale pilgrimages from the south to make the Tissa temple another important religious site. These pilgrimages are framed publicly as acts of devotion but are widely perceived locally as demonstrations of dominance. Each such visit heightens tension, provokes protest by Tamil residents, and risks confrontation. For communities that experienced mass displacement, military occupation and land loss, the symbolism of a state backed religious structure on contested land with the backing of the security forces is impossible to separate from memories of war and destruction. A president committed to reconciliation cannot remain silent in the face of such provocations, however uncomfortable it may be to challenge sections of the majority community.

High-minded leadership

The controversy regarding the president’s Independence Day speech has also generated strong debate. In that speech the president did not refer to the military victory over the LTTE and also did not use the term “war heroes” to describe soldiers. For many Sinhala nationalist groups, the absence of these references was seen as an attempt to diminish the sacrifices of the armed forces. The reality is that Independence Day means very different things to different communities. In the north and east the same day is marked by protest events and mourning and as a “Black Day”, symbolising the consolidation of a state they continue to experience as excluding them and not empathizing with the full extent of their losses.

By way of contrast, the president’s objective was to ensure that Independence Day could be observed as a day that belonged to all communities in the country. It is not correct to assume that the president takes these positions in order to appease minorities or secure electoral advantage. The president is only one year into his term and does not need to take politically risky positions for short term electoral gains. Indeed, the positions he has taken involve confronting powerful nationalist political forces that can mobilise significant opposition. He risks losing majority support for his statements. This itself indicates that the motivation is not electoral calculation.

President Dissanayake has recognized that Sri Lanka’s long term political stability and economic recovery depend on building trust among communities that once peacefully coexisted and then lived through decades of war. Political leadership is ultimately tested by the willingness to say what is necessary rather than what is politically expedient. The president’s recent interventions demonstrate rare national leadership and constitute an attempt to shift public discourse away from ethnic triumphalism and toward a more inclusive conception of nationhood. Reconciliation cannot take root if national ceremonies reinforce the perception of victory for one community and defeat for another especially in an internal conflict.

BY Jehan Perera

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Recovery of LTTE weapons

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Sri Lanka Navy in action

I have read a newspaper report that the Special Task Force of Sri Lanka Police, with help of Military Intelligence, recovered three buried yet well-preserved 84mm Carl Gustaf recoilless rocket launchers used by the LTTE, in the Kudumbimalai area, Batticaloa.

These deadly weapons were used by the LTTE SEA TIGER WING to attack the Sri Lanka Navy ships and craft in 1990s. The first incident was in February 1997, off Iranativu island, in the Gulf of Mannar.

Admiral Cecil Tissera took over as Commander of the Navy on 27 January, 1997, from Admiral Mohan Samarasekara.

The fight against the LTTE was intensified from 1996 and the SLN was using her Vanguard of the Navy, Fast Attack Craft Squadron, to destroy the LTTE’s littoral fighting capabilities. Frequent confrontations against the LTTE Sea Tiger boats were reported off Mullaitivu, Point Pedro and Velvetiturai areas, where SLN units became victorious in most of these sea battles, except in a few incidents where the SLN lost Fast Attack Craft.

Carl Gustaf recoilless rocket launchers

The intelligence reports confirmed that the LTTE Sea Tigers was using new recoilless rocket launchers against aluminium-hull FACs, and they were deadly at close quarter sea battles, but the exact type of this weapon was not disclosed.

The following incident, which occurred in February 1997, helped confirm the weapon was Carl Gustaf 84 mm Recoilless gun!

DATE: 09TH FEBRUARY, 1997, morning 0600 hrs.

LOCATION: OFF IRANATHIVE.

FACs: P 460 ISRAEL BUILT, COMMANDED BY CDR MANOJ JAYESOORIYA

P 452 CDL BUILT, COMMANDED BY LCDR PM WICKRAMASINGHE (ON TEMPORARY COMMAND. PROPER OIC LCDR N HEENATIGALA)

OPERATED FROM KKS.

CONFRONTED WITH LTTE ATTACK CRAFT POWERED WITH FOUR 250 HP OUT BOARD MOTORS.

TARGET WAS DESTROYED AND ONE LTTE MEMBER WAS CAPTURED.

LEADING MARINE ENGINEERING MECHANIC OF THE FAC CAME UP TO THE BRIDGE CARRYING A PROJECTILE WHICH WAS FIRED BY THE LTTE BOAT, DURING CONFRONTATION, WHICH PENETRATED THROUGH THE FAC’s HULL, AND ENTERED THE OICs CABIN (BETWEEN THE TWO BUNKS) AND HIT THE AUXILIARY ENGINE ROOM DOOR AND HAD FALLEN DOWN WITHOUT EXPLODING. THE ENGINE ROOM DOOR WAS HEAVILY DAMAGED LOOSING THE WATER TIGHT INTEGRITY OF THE FAC.

THE PROJECTILE WAS LATER HANDED OVER TO THE NAVAL WEAPONS EXPERTS WHEN THE FACs RETURNED TO KKS. INVESTIGATIONS REVEALED THE WEAPON USED BY THE ENEMY WAS 84 mm CARL GUSTAF SHOULDER-FIRED RECOILLESS GUN AND THIS PROJECTILE WAS AN ILLUMINATER BOMB OF ONE MILLION CANDLE POWER. BUT THE ATTACKERS HAS FAILED TO REMOVE THE SAFETY PIN, THEREFORE THE BOMB WAS NOT ACTIVATED.

Sea Tigers

Carl Gustaf 84 mm recoilless gun was named after Carl Gustaf Stads Gevärsfaktori, which, initially, produced it. Sweden later developed the 84mm shoulder-fired recoilless gun by the Royal Swedish Army Materiel Administration during the second half of 1940s as a crew served man- portable infantry support gun for close range multi-role anti-armour, anti-personnel, battle field illumination, smoke screening and marking fire.

It is confirmed in Wikipedia that Carl Gustaf Recoilless shoulder-fired guns were used by the only non-state actor in the world – the LTTE – during the final Eelam War.

It is extremely important to check the batch numbers of the recently recovered three launchers to find out where they were produced and other details like how they ended up in Batticaloa, Sri Lanka?

By Admiral Ravindra C. Wijegunaratne
WV, RWP and Bar, RSP, VSV, USP, NI (M) (Pakistan), ndc, psn, Bsc (Hons) (War Studies) (Karachi) MPhil (Madras)
Former Navy Commander and Former Chief of Defence Staff
Former Chairman, Trincomalee Petroleum Terminals Ltd
Former Managing Director Ceylon Petroleum Corporation
Former High Commissioner to Pakistan

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Yellow Beatz … a style similar to K-pop!

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Yes, get ready to vibe with Yellow Beatz, Sri Lanka’s awesome girl group, keen to take Sri Lankan music to the world with a style similar to K-pop!

With high-energy beats and infectious hooks, these talented ladies are here to shake up the music scene.

Think bold moves, catchy hooks, and, of course, spicy versions of old Sinhala hits, and Yellow Beatz is the package you won’t want to miss!

According to a spokesman for the group, Yellow Beatz became a reality during the Covid period … when everyone was stuck at home, in lockdown.

“First we interviewed girls, online, and selected a team that blended well, as four voices, and then started rehearsals. One of the cover songs we recorded, during those early rehearsals, unexpectedly went viral on Facebook. From that moment onward, we continued doing cover songs, and we received a huge response. Through that, we were able to bring back some beautiful Sri Lankan musical creations that were being forgotten, and introduce them to the new generation.”

The team members, I am told, have strong musical skills and with proper training their goal is to become a vocal group recognised around the world.

Believe me, their goal, they say, is not only to take Sri Lanka’s name forward, in the music scene, but to bring home a Grammy Award, as well.

“We truly believe we can achieve this with the love and support of everyone in Sri Lanka.”

The year 2026 is very special for Yellow Beatz as they have received an exceptional opportunity to represent Sri Lanka at the World Championships of Performing Arts in the USA.

Under the guidance of Chris Raththara, the Director for Sri Lanka, and with the blessings of all Sri Lankans, the girls have a great hope that they can win this milestone.

“We believe this will be a moment of great value for us as Yellow Beatz, and also for all Sri Lankans, and it will be an important inspiration for the future of our country.”

Along with all the preparation for the event in the USA, they went on to say they also need to manage their performances, original song recordings, and everything related.

The year 2026 is very special for Yellow Beatz

“We have strong confidence in ourselves and in our sincere intentions, because we are a team that studies music deeply, researches within the field, and works to take the uniqueness of Sri Lankan identity to the world.”

At present, they gather at the Voices Lab Academy, twice a week, for new creations and concert rehearsals.

This project was created by Buddhika Dayarathne who is currently working as a Pop Vocal lecturer at SLTC Campus. Voice Lab Academy is also his own private music academy and Yellow Beatz was formed through that platform.

Buddhika is keen to take Sri Lankan music to the world with a style similar to K-Pop and Yellow Beatz began as a result of that vision. With that same aim, we all work together as one team.

“Although it was a little challenging for the four of us girls to work together at first, we have united for our goal and continue to work very flexibly and with dedication. Our parents and families also give their continuous blessings and support for this project,” Rameesha, Dinushi, Newansa and Risuri said.

Last year, Yellow Beatz released their first original song, ‘Ihirila’ , and with everything happening this year, they are also preparing for their first album.

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