I recently got a letter from our Company Secretary stating that we owe the government Rs. 60,000. For existing – just for having a registered company. The government has also introduced a Capital Gains tax (tax on profits for sale of shares or property) and they’re increasing VAT and income tax. Basically, taxes are rising, in a way that affects all of us directly.
The government is broke. With the global economy slowing down and over 9.5 trillion rupees in debt from previous governments, things are a bit tight. However, what this government does not talk about is the fiscal problems they have contributed to:
- Bribing State Employees: Ranil et al gave state sector employees a Rs. 10,000 raise. Given that we have over a million such peeps, that’s over 10 billion in added costs – every year. This was basically a bribe to win their votes, but one that we’ll have to keep paying forever.
- Giving In To Anyone That Protests: The budget had stuff about reducing car permits for MPs and Doctors and other special interests. However, anyone that protested got them back. Thanks GMOA, always looking out for yourself!
- Dodgy Bond Market: The dubious Central Bank Governor’s indubitably dubious son-in-law made a killing on one bond deal that caused a scandal but that company Perpetual is still involved and is now sponsoring a CB roadshow in Singapore. There is weird stuff going on in the bond market that hurts the country.
What’s wrong is not necessarily the taxation. Our revenue base is low and that needs to get fixed, IMF demands or not. What is wrong is that all of this stuff should have been in the budget. Instead that bum-wipe of a document was torn apart until only commas and spaces were left.
What drives investment and business is a good policy environment yes, but above all a predictable one. Sri Lanka now has an environment where policy changes dramatically on the daily and where even retroactive taxes can be imposed. Not even the past is predictable. This is fucked.
What To Do
Honestly, I think that if a Finance Minister can’t pass a coherent budget you should get a new Finance Minister. If a Central Bank Governor is involved in scandals that cause a loss of confidence, you should replace them.
I also think that the government has to stand up to vested interests in the money-losing part of the economy (ie the state sector), even if they protest. And the government really needs to look at itself.
Reform State-Owned Enterprises
State owned enterprises like SriLankan Airlines and the Petroleum Corporation lose BILLIONS every year. Petroleum at least delivers something useful, but why have we lost $90 billion over the last five years on an airline? That’s effectively a subsidy going from the poor to the rich people and foreigners that fly. I mean, why? Sell it or don’t have a national airline.
Reform The Public Sector
We also have a public sector where we pay for people to be educated (badly), then pay for them to work in the government sector, then pay them pensions. It’s unsustainable and terrible for the economy. There’s an entire class of people (politicians, government doctors, state employees) that don’t pay taxes and can buy cars and who will protest vehemently if they’re indulgences are given away. Not to mention fertilizer subsidies for unproductive farmers.
This government is still spending on car permits for MPs (and PCs and government employees), they’re still spending millions refurbishing their own residences, and there’s still too goddamn many of them. We have 83 Ministers of some sort, they have God knows how many cars, etc. I recently heard of someone in the civil service involved with these financial problems who’s getting 6 bathrooms redone in their public residence. I mean, fuck off. If the whole country is going to share the burden it should start with these guys.
Instead of addressing these major (and admittedly government toppling) issues, the government is instead taxing the productive part of the economy.
Seriously, they should sell off or close money-burning state-owned businesses, cut unproductive government jobs, sell off government properties and land and get their own house in order. As it is they’re randomly imposing taxes on the private sector and completely spooking investors.