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Editorial

Welcome tax relief for elders

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The Finance State Minister is reported to have said that the Government of Sri Lanka (GOSL) has decided to refund the five per cent withholding tax levy (WHT) deducted on the interest income of senior citizens after September 10 in case the interest income is less than Rs. 100,000 per month. He said this decision was taken with the Finance Minister, who is also the President, after considering the situation of senior citizens and the many requests to refund the WHT.

The State Minister also said, “We negotiated with the Inland Revenue Department (IRD) to refund the five per cent deducted as WHT for senior citizens, and accordingly, they agreed to refund the amount deducted from September 10.”

The decision by GOSL will undoubtedly bring some cheer to those who stand to receive the refund. By enforcing a five percent WHT at source, the GOSL collected taxes even from those not liable to income tax, assuming their total income for the year was less than Rs. 1.2 million.

We need further details on how the refund will be operationalized because getting any refund of taxes overpaid from the IRD has been historically nearly impossible. It is possible that the GOSL may ask the Banks who initially deducted the WHT to effect the refund to the senior citizens. In return, the banks will be either refunded this amount or allowed to set it off from future WHT to be remitted.

However, the State Minister or IRD must clarify an important question. How will the IRD or the Banks ascertain whether a senior citizen who claims a refund has multiple fixed deposits across banks where the monthly interest will exceed the threshold of Rs. 100,000 per month? It will be recalled that the President recently stated there are nearly 55 million fixed deposits amongst the population of 22 million.

Given that many within the 22 million don’t hold any fixed deposits, the probability of a person having multiple fixed deposits across more than one bank is relatively high.

Another problem that will be encountered is where interest is paid on FD’s maturity and where the tenor might be three, six months or twelve months. Who will monitor whether the cumulative interest for the year will be less than Rs 1.2 million and whether WHT should be refunded or not deducted? The State Minister did not say whether a senior citizen claiming a WHT refund should have a tax file opened at the IRD. If such a requirement exists, most senior citizens hoping for a quick refund will be disappointed.

An alternative would be to obtain a signed declaration from the deposit holder that his monthly income is less than Rs 100,000 or that his annual income is less than Rs. 1.2 million. This was the methodology used when the GOSL requested the Banks to pay an interest of 15% to senior citizens on a single deposit of Rs. 1.5 million. Whether there was widespread abuse, with senior citizens submitting multiple declarations to several banks and earning the enhanced interest rate, is unknown. However, many banks have complained that they are yet to receive the amount due to them from the GOSL.

The GOSL annual estimate for the collection of Income Tax was Rs 100 billion, of which Rs. 70 billion has been collected in the first six months. Therefore, it is reasonable to assume that the annual target will be well exceeded. As such, the GOSL can afford to extend some concessions to the senior citizens and those in the middle class with only salaried income who have been most affected by the new tax rates and reduced thresholds.

The Member of Parliament and Chairman of the Sectorial Oversight Committee has, over the last year, on several occasions disclosed some abysmal figures in terms of the number of tax files opened by individuals, the paltry amount paid by them as taxes and that of the 105,000 companies in the books only 15,000 pay any taxes.

He has also alluded that certain Inland Revenue, Customs and Excise Department officers are under performing in collecting taxes, and GOSL must restructure all three to achieve the goals in terms of tax collection. It will be interesting to know how many MPs have a tax file and how many file their annual returns and pay taxes.

Undoubtedly, the lack of digitization in the country is a severe drawback in many aspects, including collecting taxes and refunds due to taxpayers being processed. In most developed and developing countries, citizens need a tax file number when dealing with financial institutions. In Australia, when an individual fills out their electronic tax return, the box where bank interest income needs to be disclosed is already filled with the interest income earned from various banks. This is possible because the banks have submitted the relevant information to the tax authorities based on the tax file number of the deposit holder.

The importance of the country’s digitization can not be overemphasized, and the recent initiative by the GOSL to commence this with assistance from India is a step in the right direction. However, once again, a statement made by the Minister of Public Security that he will not allow a foreign company to have access to the blood group of our citizens indicates that there will be unnecessary delays based on unfounded concerns.



Editorial

JVP, Dudley factor and rice issue

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Tuesday 25th March, 2025

The JVP/NPP government is still upbeat about the passage of its maiden budget with an unprecedented majority of 159 votes. That was no mean achievement, but everybody knew that the ayes would have it. Euphoria invariably gives way to the sobering reality in politics. A serious problem is already looming on the horizon.

The harvesting of Maha season paddy is drawing to a close. It was forecast that the country would be able to produce about 2.9 million MT of paddy during the 2024/2025 Maha season, but the harvest has dropped to about 2.4 million MT, according to Minister of Trade Wasantha Samarasinghe, who told Parliament the other day that the government would not hesitate to import rice, if necessary.

The sharp drop in the Maha paddy harvest is mainly due to floods in rice-growing areas. The government pledged that the Paddy Marketing Board would purchase about 300,000 MT of paddy to build a buffer stock to make market interventions, if necessary, but it could buy only 60 MT of paddy, according to media reports. Paddy farmers’ associations and agricultural experts are warning that rice prices are likely to increase further during the upcoming festive season, and the country will experience a rice shortage towards August 2025. When the government failed to make large-scale millers release adequate rice stocks to the market, last year, it opted for imports, but its leaders thundered in Parliament that they would never import rice again after the 2024/2025 Maha paddy harvest!

Rice, which is also a cultural staple in this part of the world, plays a significant role in Sri Lankan politics, as is public knowledge. The possibility of a rice shortage must therefore be a disconcerting proposition for the JVP/NPP government, with about six weeks to go before the local government elections. All signs are that the much-delayed Provincial Council elections, too, will have to be held either towards the end of this year or in early 2026. The government will have to ensure that rice is freely available at affordable prices.

Having come into being in the mid-1960s, the JVP rose to national prominence circa 1970 by taking on Dudley Senanayake’s government, which it condemned as a US puppet. Claiming that the CIA was planning to keep that administration in power regardless of the outcome of the general election to be held in 1970, the JVP closed ranks with the SLFP-led United Front led by Sirimavo Bandaranaike and urged the public to give that alliance a supermajority to defeat what it called a CIA conspiracy. The UF won a two-thirds majority. One of the main reasons for the fall of that UNP government was a reduction in the rice subsidy. (The following year, the JVP took up arms against the UF government!)

Five and a half decades on, the JVP is in power with a two-thirds majority in Parliament. It is now eating out of Uncle Sam’s hand! Dudley Senanayake is long dead, but the JVP has another Dudley to contend with, and rice has become an election issue again.

Several farmers’ associations which threw their weight behind the JVP/NPP, helping make last year’s regime change possible, are now on the warpath. They are of the view that the government, in spite of its rhetoric, will continue to be at the mercy of the rice millers’ cartel led by Dudley Sirisena, who, they say, is running a kind of parallel government together with other powerful millers capable of making political leaders bend to their will.

Unlike in 1970, when the JVP went all out to defeat Dudley of Mirigama to help install a government led by the SLFP, today, it has had to tame Dudley of Polonnaruwa for its own sake; it has its work cut out, for the rice Mafia has prevailed over successive governments and humbled even those who take pride in having defeated the LTTE.

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Editorial

When tractors become cars!

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Monday 24th March, 2025

Anything is possible in Sri Lanka. In the popular sci-fi movie, Transformers, we have alien robots disguising themselves as cars, etc. That is Hollywood fantasy, but in this land like no other, there has been a real-world instance where tractors became cars, as it were!

Sri Lanka, blessed with fecund land, is described as a country where seeds thrown anywhere sprout and mature in record time. Sadly, it has also become a fertile ground for corruption, which has eaten into its vitals. Politicians are usually blamed for this sorry state of affairs. They no doubt deserve all the flak they are receiving, but others, especially the critics of the political authority, public officials, and business leaders, are no better.

A mega racket involving vehicle imports has come to light. The COPA (Committee on Public Accounts) and the Auditor General’s Department have blown the lid off a racket, where some unscrupulous elements imported luxury vehicles by declaring them as tractors. They have disclosed several instances where hundreds of vehicles were imported fraudulently, and the Customs documents were falsified to cover up those rackets at the expense of the state coffers. Those revelations were made when the bigwigs of the Department of Motor Traffic (DMT) were summoned before the COPA the other day. The falsification of vehicle registration documents by some corrupt officials in the DMT has also caused huge losses to the state. The COPA members and the Auditor General were right in laying into the DMT top brass, who could not provide satisfactory answers to the questions posed to them.

The COPA has promised tough action against corrupt elements in the Customs and the DMT. If corruption in vital state institutions can be eliminated, or at least minimised, the government will be able to increase its revenue significantly without burdening the public with tax and tariff increases.

The COPA and the Auditor General’s Department deserve praise for their revelations, but there is reason to believe that they are only scratching the surface of the problem of corruption in the Customs, the DMT, etc. Urgent action should be taken to ensure that freight containers that pass through the Customs undergo stringent tests, and nothing is left to chance. Worryingly, checks on shipping containers are characterised by a chronic laxity, which leaves room for corruption.

One may recall that in January 2025, as many as 324 red-flagged freight containers were released via the so-called green channel without being scanned. The reason given for green-chanelling them was that such extraordinary measures were essential to clear a backlog of containers caused by delays on the part of the Customs! The government also claimed that it had acted on a recommendation made by a three-member committee. Relying on the opinion of the officials of an institution notorious for corruption on such sensitive matters is like seeking the advice of a female clairvoyant to catch a thief who happens to be her own son, as a popular local saying goes.

Many containers had been released in a similar manner under the previous administration as well, the government said. But it was to discontinue such corrupt practices that the people ousted the last regime and voted the JVP-led NPP into office. We pointed out in a previous editorial comment that in 2013, a freight container that a businessman tried to have green-channelled by producing a letter from the Office of the then Prime Minister D. M. Jayaratne, was found to have a haul of heroin weighing as many as 131 kilos.

By opening that container and conducting a thorough check, which yielded the narcotics concealed in cans of grease, the Customs proved that they were not without honest, intrepid officers; such personnel should be recognised and rewarded. A large stock of cocaine weighing 218 kilos was detected among sacks of sugar in a freight container delivered to the Economic Centre, Ratmalana in 2017. This is why no cargo containers should be released via the green channel. They can carry anything––undeclared vehicles, lethal items, narcotics or hazardous waste.

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Editorial

Chase ends in surrender

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Deshabandu Tennekoon, the suspended Inspector General of Police, surrendered to the Matara Magistrate last Wednesday after leading the force he once headed on a merry chase for some 20 days, resulting in a lot of egg on the face of the police. He did so after unsuccessfully moving Court of Appeal earlier in the week seeking a writ order to prevent his arrest. This was obviously a last ditch attempt which failed. No doubt fearing that he could not hide for ever, Tennekoon turned up at the court house early on Wednesday morning, reportedly in a Benz car although there is no confirmation of that, staying in the court room until his case was taken up later in the day.

Although we believe the police could have arrested him when he turned up in court, as is known to have been done in the past, that did not happen. Tennekoon would have no doubt been prepared for such an eventuality. The prosecutor went on record that the fugitive should have been in a holding cell rather than seated in the open court room. At the end of the day he was remanded till April 3 and taken away to the Angunukolapelessa jail under special escort by the prison authorities who have been directed to ensure his safety in custody. This is an obvious precaution given the suspect’s notoriety and it was not long ago that a suspect was shot dead as he stood on a courtroom dock. Also, many grudges are known to have been settled in jail in the past.

Deshabandu Tennekoon is not the only high profile fugitive who has recently evaded the long arm of the law. Readers will no doubt remember that the woman accomplice, disguised as a lawyer, who smuggled in the firearm used in the recent court room killing in a hollowed out copy of the Criminal Procedure Code, is not yet in custody although an attractive reward for finding her has been offered. Notably no such inducement was offered by law enforcers for the arrest of their fugitive chief. But a lot else has been done in searching his home where some 795 bottles of foreign liquor and 214 bottles of wine had been found. These salacious details were presented to parliament last week by Public Security Minister Ananda Wijeypala who is the political authority responsible for the police. Since we are now into a New Year and Christmas was only recently past, Tennekoon probably received these as gifts which are customary in this season particularly to those holding high office and others who can do favours. The minister, no doubt, derived much satisfaction in revealing these details to parliament just as much as his cabinet colleagues have relished exposing misdoings of predecessor governments during the ongoing committee stage on the 2025 budget debate.

It is not unusual for police to take family members of wanted suspects as hostages until the quarry is either arrested or surrenders. This was not done in Tennekoon’s case although his family had been questioned about his whereabouts. Also there have been other past instances of high profile wanted suspects evading arrest for much longer periods than the suspended IGP. One such was Rear Admiral Royce de Mel, a former commander of the then Royal Ceylon Navy, who was wanted in connection with the abortive 1962 coup d’etat. De Mel successfully evaded arrest for several weeks before he was surrendered to the specially created trial-at-bar that tried the accused by his counsel, GG Ponnambalam Q.C. Many years after de Mel’s death, details of where he hid in a remote plantation bungalow were published in the media.

While Tennekoon was in hiding, there were threats of confiscation of his property and punishment to those who helped him were made although it was not clear whether such measures were enforceable or not. The public will now have to await the unraveling of the usually prolonged legal process before being able to see where this matter will eventually end. But it is patently clear that Deshabndu Tennekoon’s was a rank bad appointment to the position of IGP. He had been found guilty of torture by the supreme court in December, 2023 in what was described as a “historic judgment” where it was held that he was “personally responsible” for acts of torture against a suspect in custody. Before this judgment there were other allegations of his being complicit in attacking peaceful protests and making death threats to journalists and much more.

Former President Ranil Wickremesinghe resisted appointing Tennekoon as IGP extending the tenure of his predecessor, CD Wickremeratne for three month periods several times before he caved into demands by a Tennekoon patron before finally making the appointment. But this also necessitated some sleight of hand at the Constitutional Council (CC) which had to approve the appointment. Then Speaker Mahinda Yapa Abeywardene counted the votes of two absent members of the CC as noes (rather than absent) against Tennekoon declared a tie and then registered his own casting vote to record approval.

This demonstrated that even the checks and balances safety mechanism of the CC has been aborted for a clearly bad appointment to be made. It is to be hoped that such unfortunate situations will not be allowed to arise in the future.

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