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Ten constituent parties of govt. urge President to lock down country



By Rathindra Kuruwita

Leaders of 10 constituent parties of the government yesterday asked the President to lockdown the country for three weeks and establish an all-party mechanism to tackle the pandemic, given that it is a national disaster.

They claimed that it would take another six months to see the results of vaccination and there was a possibility of Sri Lanka becoming a graveyard until most Sri Lankans were vaccinated. They have also presented the President with a number of proposals to tackle the pandemic.

Ven. Athuraliya Rathana Thera (Ape Jana Bala Party), Minister Vasudeva Nanayakkara (Democratic Left Front,) Prof. Tissa Vitharana (Lanka Sama Samaja Party), Minister Wimal Weerawansa (National Freedom Front), Minister Udaya Gammanpila (Pivithuru Hela Urumaya), A. L. M. Athaullah (National Congress), Tiran Alles (Mahajana Eksath Peramuna), Dr. G. Weerasinghe (Sri Lanka Communist Party), Asanka Nawaratne (Sri Lanka Mahajana Party) and Gevindu Kumaratunga (Yuthukama National Organization) are signatories to the letter.

“We need at least six weeks to inoculate those over 18. It will take another month to ensure that they get the second dose. Until we pass that vital threshold, there is a possibility of the country becoming a grave yard. This is obvious when we look at the WHO projections for the country if we continue as usual,” they said.

The political party leaders have said that they are sensitive to the economic challenges faced by the country and the impact a three-week lockdown can have on the economy.

“However, it is also obvious that the health system will collapse unless we lock down the country for at least three weeks. The people now live in fear and therefore although the country is officially open, a lot of economic activities have come to a standstill. Once we lock down the country and get things under control, people will be more willing to go out and engage in economic activity,” they said.

The SLPP constituents have said the pandemic is a national disaster and an all-party mechanism should be implemented to tackle the crisis. This committee must include health and economic experts.

“The people need to trust the government but as the media has revealed, and we have clarified this, there are serious discrepancies in COVID-19 data. It is silly to think that we can tackle a pandemic by manipulating the numbers. The government must punish everyone that is responsible for his data manipulation.”

The party leaders have also asked the President to call in retired doctors, and medical students to vaccinate people. Various grassroots clinics too can be used for inoculation, they said.

They also urged the President to establish grassroots committees, consisting religious leaders, elected officials and civil society leaders to monitor the progress of various activities that have been implemented.

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Personal income tax shock dims economic activities



ECONOMYNEXTSri Lanka’s personal income tax hikes have hit economic activity in the first quarter though despite currency stability helped businesses cut prices, Hemas Holdings, a top consumer goods group has said.As the currency stabilized, as central bank ended contradictory money and exchange policy conflicts, businesses had cut prices. Mainstream economists generally claim that price falls lead to delayed transactions and try to generate positive inflation through money printing, though businesses believe otherwise.

“The market witnessed price reductions and promotional trade schemes to stimulate consumption,” Hemas Holding told shareholders in the March quarterly statement.

“However, changes made to the personal income tax structure severely impacted modern trade sales volumes as consumers rationalised their purchases under reduced disposable income levels.”

Sri Lanka hiked personal income tax rates in 2023. Value added taxes were raised to 15 percent from 8 percent last year. Another 2.5 percent cascading tax was imposed on top of VAT, the effect of which was estimated to be around 4.5 or more through the cascading effect.

While value added tax allows the government to get tax revenues after citizens make transactions and getting the economy to work, based on best decisions needed to drive the economy to satisfy real needs, income tax kills economic decisions and transfers money to state actors, analysts say.

Net gains on income tax therefore comes at a cost of lost value added tax as well as killed real economic activities which would otherwise have been based on decisions of those who earned the money.

UK also almost doubled VAT in 1979, also to 15 percent, cut the base income tax rate and widened thresholds above inflation to give choice to individuals, amid criticism from Keynesian style or mainstream economists to recover the economy, after two back-to-back IMF programs failed to deliver concrete results, analysts point out.At Hemas Holdings, group revenues went up 52.6 percent to 32 billion rupees in the March 2023 quarter from year earlier amid price inflation as the rupee fell, and cost of sales went up 45.1 percent to 22.2 billion rupees, allowing the group to boost gross profits 72 percent to 9.8 billion rupees, interim accounts showed.

However, administration costs went up 54 percent, selling and distribution costs went up 36 percent, and finance costs went up to 1.3 billion rupees. Profit after tax was flat at 1.06 billion rupees.Sri Lanka’s central bank stabilized the rupee in the second half of 2022 after the rupee collapsed from 200 to 360 to from two years of money printing and also removed a surrender rule in March allowing the exchange rate appreciate.

The US Fed also tightened policy from March 2022 helping bring down global commodity prices after triggering inflation not seen for 40 years through Coronavirus linked money printing or accommodating a real shock through monetary expansion.

“While the modern trade channels witnessed a slow down due to the adverse impact of the tax reforms and high cost of credit on the middle-class urban population, the general trade channels experienced significant growth and increased foot fall,” Hemas told shareholders.

“The decline in global commodity prices in the second half of the year, enabled the business to make price reductions across the portfolio.

“However, the benefit of appreciation of the Sri Lankan Rupee in March 2023 was not seen during the quarter due to the lag effect but is expected to realise in the quarters to come, provided the current economic conditions prevail.”

Hemas is also has operations in Bangladesh where the central bank is also buying up government securities with tenors as long at 20 years to mis-target the interest rate, triggering forex shortages and depreciating the Taka, according to analysts who study the country.

Inflation had hit 9.3 percent in Bangladesh by March.

“In the face of numerous challenges including slowdown in the global economy, depreciation in Taka, heightened inflation and depleting foreign currency reserves, the country entered an IMF programme in January 2023,” the firm said.

“The value-added hair oil market witnessed a degrowth, as consumers curbed consumption in many non-essential items and switched to value-for-money alternatives.”

Mainstream economists mis-target rates to boost growth known as either monetary stimulus or bridging an output gap, though the effort result in instability and economic contractions.

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