Features
Unexplored options to raise revenue
by Neville Ladduwahetty
What Sri Lanka has achieved since it declared itself insolvent is hailed by some with much optimism. The “relative stability” currently experienced is presented by the Governor of the Central Bank “as the outcome of a united effort from the outset” (The Island, December 26, 2023). The focus of that collaborative effort was on monetary policy as stated by the Governor who went on to add, “Now the Central Bank has independence that insulates monetary policy from political interference and thus the institution has been strengthened. The other side of the coin is the government’s fiscal policy. People elect their representative to make fiscal policy to direct the economy…” (Ibid). This separation of responsibilities holds the government and the Parliament collectively responsible for the impact of its fiscal policies on the livelihood of the People through the choices reflected in the 2024 Budget as it has been with previous Budgets.
For instance, the choices made were that expenditure should be Rs.6.98 Trillion and the projected Revenue should be Rs.4.107 Trillion resulting in a deficit of Rs.2.88 Trillion. This in a nutshell was the decision of the Government and that of the majority in Parliament when they passed the Budget. The bulk of the projected Revenue of Rs. 4.107 Trillion reflects an increase of the 2023 Budget by 1.27 Trillion (45%). The taxes that are of relevance to the comments addressed below to meet this increase are those collected from VAT amounting to 720 Billion and only Rs. 50 Billion from personal taxes (Public Finance Data and Analysis).
While the attention and preoccupation of the Central bank and the Government over the last two years was on monetary and fiscal policies, the social impact of the crisis on the People appear to have received less attention, judging from the priorities selected to raise revenues.
SOCIAL IMPACT of CRISIS
The Ceylon Today of December 27, covers a few key features from a report released by the Department of Census and Statistics (DCS) on December 22. The DCS report stated that ” survey findings indicate that currently 54.9 per cent of households in Sri Lanka are currently indebted,…The highest proportion of indebtedness is from mortgage matters (31 per cent) followed by banks (21.9 per cent) and the money lenders (9.7 per cent) … 91 percent of the households experienced an increase in their total average monthly expenditure, 22 percent of households have got indebted due to the economic crisis, the schooling of 54.9 percent of individuals (aged 3 – 21) was also affected by the economic crisis and 7 per cent of total population changed their health treatment procedures… Among households that reported an increase in their average monthly expenditure, the most commonly reported reason, accounting for 99.1 percent, was the increase in food expenses”.
Continuing the DCS report states: “The primary strategy adopted by the majority (53.2) percent of guardians/parents of school going children affected by the economic crisis was to either reduce their expenditure on new stationery or to completely stop such purchases…as new uniforms…. Additionally, reducing the frequency of attending tuition classes” (Ibid).
RAISING PROJECTED REVENUE
The social background presented above is the context in which projected revenue is to be raised. In addition, “Nearly half of the labour force receives less than Rs. 30,000 monthly salary while 3.91 million families out of 5.8 million families are seeking state assistance to continue their livelihoods” (Daily Morning, December 28, 2023). In short, IF 2/3 of the families are receiving state assistance, they are not in a position to contribute to the projected increase in revenue of Rs. 720 Billion from VAT.
On the other hand, the personal taxes of only Rs. 50 Billion are collected from those who, at a minimum are assured of food security while additional VAT taxes amounting to Rs. 720 Billion, which is 14.4 times personal taxes, have to be collected from a much broader swath of the population, the majority of whom are victims of food security.
This reflects the imbalance in the choices opted for when formulating fiscal policy. Whether this imbalance, particularly in regard to VAT, is the result of preferences of the IMF as a ready means of raising revenue or from sections of society with influence, is not known. Whatever the case may be, IF the economic situation in the country as reflected in the surveys conducted by the Department of Census and Statistics is taken into account with the seriousness it deserves, imposing the burden of the increased VAT on an already beleaguered populace could lead not only to political instability but also the inability to raise the projected contributions from VAT. Furthermore, if the preoccupation of a large section of the population is on survival and other priorities, a drop in demand due to increased hardships is bound to have an impact on inflation.
The potential of these collective consequences could very well outweigh the expectations of improved stability hoped for. On the other hand, it would be prudent to explore options that have not been explored before to raise revenues at a minimum cost to the vulnerable.
EXPLORING OPTIONS to RAISE REVENUES
One area that has not been explored, except for passing reference, is taxes relating to property. The reluctance to do so may be because property taxes impact those who own property. On the other hand, advanced economies use property taxes as the source to fund primary and secondary education and other community-based services. Since such practices do not exist in Sri Lanka, it is imperative that current practices adopted to assess property values are reviewed and drastically revised.
For instance, within the Municipality of Colombo there are properties with a market value of over Rs. 100 Million, yet their annual property taxes are in the range of Rs. 2500 to 3000; not enough to cover the cost of garbage collection. In more exclusive neighborhoods the property taxes are in the range of 0.05 % of their market values even for new high-rise units.
The Colombo Municipality is reported to collect Rs. 5.7 Billion in property taxes. There are 13 other Municipalities in the rest of Sri Lanka. Taking into account that they are not as affluent as Colombo, they could perhaps contribute about Rs. 3.0 Billion each by way of increased property taxes. Thus, if property taxes are significantly increased collectively, the total contribution could be in the range of about Rs. 40 to 45 Billion, which incidentally is close to the Rs. 50 Billion by way of personal income tax figured as contributing to meet the increase in Revenue needed by the 2024 Budget. If increased property taxes at the rate of 1 Billion each from the 37 Urban Councils are added, they too could contribute an additional Rs. 30 to 40 Billion, thus making the total contributions from property taxes significant enough not to be scoffed at.
Over the last two years, Sri Lanka has been actively engaged with the IMF on issues relating to Debt Restructuring. One of the primary issues raised by the IMF is the need to increase Revenues with a view to reducing Budget deficits. Over these two years, the Inland Revenue Department should have been aware that it would be called upon to play a major role in this exercise.
Despite this awareness, the number of files relating to Personal Income Tax increased from 204,467 to 500,196 ONLY “by end November 2023” as admitted by the Commissioner of the IRD at a Presidential Media briefing. The Commissioner had also stated that “it was possible to raise (taxes) to 1,500 billion by widening the tax base and by changing tax rates,” (ECONOMYNEXT, December 29, 2023).
Since this represents a 50% increase over the 2019 tax Revenue, the awareness of such a possibility would have convinced the Government that the policy of raising Revenues from VAT to the extent reflected in the 2024 Budget would amount to an overkill with serious social implications.
The two hundred thousand plus files that had existed throughout 2023 represent ONLY ONE per cent of the population, which according to the UNDP Country Economist, Dr. Gunasekara “owns 31% of the total personal wealth in the country, while the bottom 50% owns less than 4% of the overall wealth in the country” (Daily FT, December 21, 2023).
Had the IRD exercised due diligence over the past years and in particular during the last two years, the country could have secured a significant amount of funds to mitigate not only past Budget deficits, but also the 2024 Budget to the point of reducing the funds needed through VAT, thereby easing the burdens on the “bottom 50%”, most of whom are already victims of poverty.
Another serious omission is the reluctance of the Government and the Central Bank to repeal the existing Exchange Control Act with a view to exercising greater control and jurisdiction over Dollar funds that are involved in foreign transactions. Such a measure has the potential to improve reserves without having to resort to the temptation of more loans that someday have to be restructured and paid back.
CONCLUSION
The primary aim of the Central Bank and the Government appears to have been to please the IMF in order to secure the long-awaited second tranche of the 2.9 Billion loan. The compulsion for this is because continued funding from the IMF would be viewed favourably by the international community to seek further loans.
The hard reality is that all the government can hope for is to explore fresh sources of raising revenues with the view of mitigating the burdens imposed not only on those that contribute to employment but also the vulnerable sectors of society. For instance, manufacturing and other sectors that provide employment have already expressed their deep concerns about the negative impact of raising additional revenue from increased VAT. Furthermore, the situation of the bottom 50% especially regarding food would be more acute than it currently is; a fact that would have a direct bearing on the ability to raise the projected revenues. How their frustrations are going to manifest, particularly in an election year, is not known. What is known to them, however, is the awareness that they ultimately are the victims who end up paying the price for the misguided policies of failed governments and interest groups.
A report in The Daily Morning titled, “South Asia’s food crisis is alarming” states: “Misguided priorities combined with short-term political thinking have made South Asia the epicenter of the world’s food insecure – hunger zone… According to the FAO’s latest report… many struggle to manage two square meals for their family. Clearly, government policies on food accessibility and distribution are not working on the ground. The underlying problem runs deep as 74.1 percent of Indians, 82.8 percent of Pakistanis, 76.4 per cent of Nepalis, 66.1 percent of Bangladeshis and 55.5 percent of Sri Lankans face serious difficulties in managing a healthy meal for their family” (December 29, 2023).
Although Parliament approved the 2024 Budget, it is too early for the populace to experience the full impact of its provisions. Therefore, instead of waiting for the bottom 50% to experience its full impact and face its consequences, it would be more prudent for the Government to explore hitherto unexplored options on lines similar to those presented herein, and take steps to mitigate the severity of the measures and policies in the 2024 Budget so that, they could breathe easier in these grim times and sustain the “relative stability” currently experienced.
Features
Ranking public services with AI — A roadmap to reviving institutions like SriLankan Airlines
Efficacy measures an organisation’s capacity to achieve its mission and intended outcomes under planned or optimal conditions. It differs from efficiency, which focuses on achieving objectives with minimal resources, and effectiveness, which evaluates results in real-world conditions. Today, modern AI tools, using publicly available data, enable objective assessment of the efficacy of Sri Lanka’s government institutions.
Among key public bodies, the Supreme Court of Sri Lanka emerges as the most efficacious, outperforming the Department of Inland Revenue, Sri Lanka Customs, the Election Commission, and Parliament. In the financial and regulatory sector, the Central Bank of Sri Lanka (CBSL) ranks highest, ahead of the Securities and Exchange Commission, the Public Utilities Commission, the Telecommunications Regulatory Commission, the Insurance Regulatory Commission, and the Sri Lanka Standards Institution.
Among state-owned enterprises, the Sri Lanka Ports Authority (SLPA) leads in efficacy, followed by Bank of Ceylon and People’s Bank. Other institutions assessed included the State Pharmaceuticals Corporation, the National Water Supply and Drainage Board, the Ceylon Electricity Board, the Ceylon Petroleum Corporation, and the Sri Lanka Transport Board. At the lower end of the spectrum were Lanka Sathosa and Sri Lankan Airlines, highlighting a critical challenge for the national economy.
Sri Lankan Airlines, consistently ranked at the bottom, has long been a financial drain. Despite successive governments’ reform attempts, sustainable solutions remain elusive.
Globally, the most profitable airlines operate as highly integrated, technology-enabled ecosystems rather than as fragmented departments. Operations, finance, fleet management, route planning, engineering, marketing, and customer service are closely coordinated, sharing real-time data to maximise efficiency, safety, and profitability.
The challenge for Sri Lankan Airlines is structural. Its operations are fragmented, overly hierarchical, and poorly aligned. Simply replacing the CEO or senior leadership will not address these deep-seated weaknesses. What the airline needs is a cohesive, integrated organisational ecosystem that leverages technology for cross-functional planning and real-time decision-making.
The government must urgently consider restructuring Sri Lankan Airlines to encourage:
=Joint planning across operational divisions
=Data-driven, evidence-based decision-making
=Continuous cross-functional consultation
=Collaborative strategic decisions on route rationalisation, fleet renewal, partnerships, and cost management, rather than exclusive top-down mandates
Sustainable reform requires systemic change. Without modernised organisational structures, stronger accountability, and aligned incentives across divisions, financial recovery will remain out of reach. An integrated, performance-oriented model offers the most realistic path to operational efficiency and long-term viability.
Reforming loss-making institutions like Sri Lankan Airlines is not merely a matter of leadership change — it is a structural overhaul essential to ensuring these entities contribute productively to the national economy rather than remain perpetual burdens.
By Chula Goonasekera – Citizen Analyst
Features
Why Pi Day?
International Day of Mathematics falls tomorrow
The approximate value of Pi (π) is 3.14 in mathematics. Therefore, the day 14 March is celebrated as the Pi Day. In 2019, UNESCO proclaimed 14 March as the International Day of Mathematics.
Ancient Babylonians and Egyptians figured out that the circumference of a circle is slightly more than three times its diameter. But they could not come up with an exact value for this ratio although they knew that it is a constant. This constant was later named as π which is a letter in the Greek alphabet.
It was the Greek mathematician Archimedes (250 BC) who was able to find an upper bound and a lower bound for this constant. He drew a circle of diameter one unit and drew hexagons inside and outside the circle such that the sides of each hexagon touch the sides of the circle. In mathematics the circle passing through all vertices of a polygon is called a ‘circumcircle’ and the largest circle that fits inside a polygon tangent to all its sides is called an ‘incircle’. The total length of the smaller hexagon then becomes the lower bound of π and the length of the hexagon outside the circle is the upper bound. He realised that by increasing the number of sides of the polygon can make the bounds get closer to the value of Pi and increased the number of sides to 12,24,48 and 60. He argued that by increasing the number of sides will ultimately result in obtaining the original circle, thereby laying the foundation for the theory of limits. He ended up with the lower bound as 22/7 and the upper bound 223/71. He could not continue his research as his hometown Syracuse was invaded by Romans and was killed by one of the soldiers. His last words were ‘do not disturb my circles’, perhaps a reference to his continuing efforts to find the value of π to a greater accuracy.
Archimedes can be considered as the father of geometry. His contributions revolutionised geometry and his methods anticipated integral calculus. He invented the pulley and the hydraulic screw for drawing water from a well. He also discovered the law of hydrostatics. He formulated the law of levers which states that a smaller weight placed farther from a pivot can balance a much heavier weight closer to it. He famously said “Give me a lever long enough and a place to stand and I will move the earth”.
Mathematicians have found many expressions for π as a sum of infinite series that converge to its value. One such famous series is the Leibniz Series found in 1674 by the German mathematician Gottfried Leibniz, which is given below.
π = 4 ( 1 – 1/3 + 1/5 – 1/7 + 1/9 – ………….)
The Indian mathematical genius Ramanujan came up with a magnificent formula in 1910. The short form of the formula is as follows.
π = 9801/(1103 √8)
For practical applications an approximation is sufficient. Even NASA uses only the approximation 3.141592653589793 for its interplanetary navigation calculations.
It is not just an interesting and curious number. It is used for calculations in navigation, encryption, space exploration, video game development and even in medicine. As π is fundamental to spherical geometry, it is at the heart of positioning systems in GPS navigations. It also contributes significantly to cybersecurity. As it is an irrational number it is an excellent foundation for generating randomness required in encryption and securing communications. In the medical field, it helps to calculate blood flow rates and pressure differentials. In diagnostic tools such as CT scans and MRI, pi is an important component in mathematical algorithms and signal processing techniques.
This elegant, never-ending number demonstrates how mathematics transforms into practical applications that shape our world. The possibilities of what it can do are infinite as the number itself. It has become a symbol of beauty and complexity in mathematics. “It matters little who first arrives at an idea, rather what is significant is how far that idea can go.” said Sophie Germain.
Mathematics fans are intrigued by this irrational number and attempt to calculate it as far as they can. In March 2022, Emma Haruka Iwao of Japan calculated it to 100 trillion decimal places in Google Cloud. It had taken 157 days. The Guinness World Record for reciting the number from memory is held by Rajveer Meena of India for 70000 decimal places over 10 hours.
Happy Pi Day!
The author is a senior examiner of the International Baccalaureate in the UK and an educational consultant at the Overseas School of Colombo.
by R N A de Silva
Features
Sheer rise of Realpolitik making the world see the brink
The recent humanly costly torpedoing of an Iranian naval vessel in Sri Lanka’s Exclusive Economic Zone by a US submarine has raised a number of issues of great importance to international political discourse and law that call for elucidation. It is best that enlightened commentary is brought to bear in such discussions because at present misleading and uninformed speculation on questions arising from the incident are being aired by particularly jingoistic politicians of Sri Lanka’s South which could prove deleterious.
As matters stand, there seems to be no credible evidence that the Indian state was aware of the impending torpedoing of the Iranian vessel but these acerbic-tongued politicians of Sri Lanka’s South would have the local public believe that the tragedy was triggered with India’s connivance. Likewise, India is accused of ‘embroiling’ Sri Lanka in the incident on account of seemingly having prior knowledge of it and not warning Sri Lanka about the impending disaster.
It is plain that a process is once again afoot to raise anti-India hysteria in Sri Lanka. An obligation is cast on the Sri Lankan government to ensure that incendiary speculation of the above kind is defeated and India-Sri Lanka relations are prevented from being in any way harmed. Proactive measures are needed by the Sri Lankan government and well meaning quarters to ensure that public discourse in such matters have a factual and rational basis. ‘Knowledge gaps’ could prove hazardous.
Meanwhile, there could be no doubt that Sri Lanka’s sovereignty was violated by the US because the sinking of the Iranian vessel took place in Sri Lanka’s Exclusive Economic Zone. While there is no international decrying of the incident, and this is to be regretted, Sri Lanka’s helplessness and small player status would enable the US to ‘get away with it’.
Could anything be done by the international community to hold the US to account over the act of lawlessness in question? None is the answer at present. This is because in the current ‘Global Disorder’ major powers could commit the gravest international irregularities with impunity. As the threadbare cliché declares, ‘Might is Right’….. or so it seems.
Unfortunately, the UN could only merely verbally denounce any violations of International Law by the world’s foremost powers. It cannot use countervailing force against violators of the law, for example, on account of the divided nature of the UN Security Council, whose permanent members have shown incapability of seeing eye-to-eye on grave matters relating to International Law and order over the decades.
The foregoing considerations could force the conclusion on uncritical sections that Political Realism or Realpolitik has won out in the end. A basic premise of the school of thought known as Political Realism is that power or force wielded by states and international actors determine the shape, direction and substance of international relations. This school stands in marked contrast to political idealists who essentially proclaim that moral norms and values determine the nature of local and international politics.
While, British political scientist Thomas Hobbes, for instance, was a proponent of Political Realism, political idealism has its roots in the teachings of Socrates, Plato and latterly Friedrich Hegel of Germany, to name just few such notables.
On the face of it, therefore, there is no getting way from the conclusion that coercive force is the deciding factor in international politics. If this were not so, US President Donald Trump in collaboration with Israeli Rightist Premier Benjamin Natanyahu could not have wielded the ‘big stick’, so to speak, on Iran, killed its Supreme Head of State, terrorized the Iranian public and gone ‘scot-free’. That is, currently, the US’ impunity seems to be limitless.
Moreover, the evidence is that the Western bloc is reuniting in the face of Iran’s threats to stymie the flow of oil from West Asia to the rest of the world. The recent G7 summit witnessed a coming together of the foremost powers of the global North to ensure that the West does not suffer grave negative consequences from any future blocking of western oil supplies.
Meanwhile, Israel is having a ‘free run’ of the Middle East, so to speak, picking out perceived adversarial powers, such as Lebanon, and militarily neutralizing them; once again with impunity. On the other hand, Iran has been bringing under assault, with no questions asked, Gulf states that are seen as allying with the US and Israel. West Asia is facing a compounded crisis and International Law seems to be helplessly silent.
Wittingly or unwittingly, matters at the heart of International Law and peace are being obfuscated by some pro-Trump administration commentators meanwhile. For example, retired US Navy Captain Brent Sadler has cited Article 51 of the UN Charter, which provides for the right to self or collective self-defence of UN member states in the face of armed attacks, as justifying the US sinking of the Iranian vessel (See page 2 of The Island of March 10, 2026). But the Article makes it clear that such measures could be resorted to by UN members only ‘ if an armed attack occurs’ against them and under no other circumstances. But no such thing happened in the incident in question and the US acted under a sheer threat perception.
Clearly, the US has violated the Article through its action and has once again demonstrated its tendency to arbitrarily use military might. The general drift of Sadler’s thinking is that in the face of pressing national priorities, obligations of a state under International Law could be side-stepped. This is a sure recipe for international anarchy because in such a policy environment states could pursue their national interests, irrespective of their merits, disregarding in the process their obligations towards the international community.
Moreover, Article 51 repeatedly reiterates the authority of the UN Security Council and the obligation of those states that act in self-defence to report to the Council and be guided by it. Sadler, therefore, could be said to have cited the Article very selectively, whereas, right along member states’ commitments to the UNSC are stressed.
However, it is beyond doubt that international anarchy has strengthened its grip over the world. While the US set destabilizing precedents after the crumbling of the Cold War that paved the way for the current anarchic situation, Russia further aggravated these degenerative trends through its invasion of Ukraine. Stepping back from anarchy has thus emerged as the prime challenge for the world community.
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