* Tax revenue can be increased without raising VAT
* Budget not realistic
* Alleviating burdens on public essential
In an interview with the Sunday Observer, the United Republican Front (UPF) Leader and Member of Parliament, Patali Champika Ranawaka, provides a thorough analysis of the current Budget and economic landscape in Sri Lanka.
Q: As a representative of an independent party, how do you assess the current Budget?
A: This budget lacks realism. The projected income appears unattainable and falls short of covering expenses. Doubts also arise regarding the anticipated foreign funds.
For instance, the budget depicts an income of Rs.3,902 billion, with Rs.3,800 billion attributed to tax income. Last year’s tax revenue was projected at Rs.3,200 billion, but only Rs.2,600 billion were collected.
Notably, immediate income tax, personal income tax, commercial, and VAT taxes show conspicuous gaps. The Inland Revenue Department (IRD) failed to collect Rs.1 trillion in income tax, indicating a significant deficit. The Customs Department also faced challenges, as did the Excise Department. The Ministry of Finance’s passive approach to addressing these issues compounds the problem. Activating these institutions could potentially bridge the income gap without resorting to additional taxes like VAT.
The feasibility of covering capital expenditure through foreign aid in the current context is dubious. The closure of 40 hospitals, impending closures of 100 more, and the absence of 600,000 schoolchildren from classrooms underscore the misalignment of priorities.
While salary increases for Government employees provide some relief, the budget’s shortcomings are evident in the inadequate resolution of appeals for Aswesuma funds, reaching only 200,000 out of one million applications.
Despite the President’s proposal in the last budget to initiate tax files for individuals above 18 years, only a fraction of the intended 1,000 files were opened, revealing administrative gaps.
Q: There are claims that this year’s budget document is a replica of last year’s, although State Minister of Finance Ranjith Siyambalapitiya said that 80 percent of the budget was completed previously. Can you shed light on this discrepancy?
A: Last year, there were 125 budget proposals, and interestingly, the same number persists this year. Despite our request to Parliament for a comprehensive budget report, it remains elusive. The accuracy of Minister Siyambalapitiya’s claim that 80 percent of the budget was completed last time can only be validated through an accessible budget report.
However, according to Verite Research, an independent agency, only 39 out of the 125 budget proposals were implemented last year, bringing into question the efficacy of the budgetary process.
Q: Did the Government succeed in implementing the budget proposals from the previous year, and if not, what were the reasons for this shortfall?
A: The Government’s track record on implementing last year’s budget proposals raises concerns. Take, for instance, the proposal to open tax files for everyone above 18; it serves as a glaring example of unfulfilled promises. Similarly, there was a proposal to establish new universities, yet the challenge lies not in creating more institutions but in retaining professors in the existing ones.
Protecting and fortifying our universities should take precedence over expanding the network. These instances underscore the need for a critical examination of the Government’s ability to translate budget proposals into tangible actions.
Q: In the upcoming year, a law has been proposed in the budget requiring tax files to be linked to vehicle registration, land registration, and so on. Can this measure increase tax revenue without necessitating a tax rate hike?
A: Indeed, these proposals hold significant potential for enhancing tax revenue without resorting to tax rate increments. However, the primary challenge lies in the Government’s execution of these ideas.
To illustrate, without the intervention of the Ways and Means Committee, the Government would have lacked a mechanism to collect taxes from liquor manufacturers. This underscores a crucial need for effective implementation.
A substantial increase in tax revenue, up to 50 percent, is achievable within six months through the establishment of a unified data platform utilising block chain technology. This approach does not necessitate any increment in VAT. Regrettably, there is no well-defined plan within the Government to implement this transformative initiative.
Q: The Government asserts that the country has returned to normality. Do you share this belief, or do you see a different reality?
A: The prevailing narrative suggests a return to normality. However, the true narrative unfolds differently for Sri Lanka. The crisis at hand demands more than just a patchwork solution. There should be a comprehensive restructuring of the public sector. Delays in addressing critical issues raise questions about the efficacy of the Government.
Q: Can a political solution address the economic bankruptcy facing the country?
A: Both political and economic solutions exist, with the onus on the Government to set an example. The current state of unrest among the populace must be resolved. People eagerly await an opportunity to express their sentiments through the ballot. The vote holds the promise of revealing the collective understanding of the current situation.
Q: The Government asserts that regardless of the ruling party, the country cannot access the international market until 2027. How do you interpret this situation?
A: Gaining access to the international market requires extricating the country from its current state of bankruptcy and subsequently earning the trust of the global financial entities.
Practical measures, including transforming the nation into a self-sufficient entity capable of meeting its financial obligations, are achievable within a three-year timeframe.
Essential plans were proposed in the preceding year and reiterated this year. As a party, we anticipate presenting a comprehensive plan in February to address these challenges and facilitate the country’s return to international financial standing.
Q: Can the contribution of the International Monetary Fund (IMF) address the current economic challenges facing the country?
A: The approach to tackling our economic challenges does not align with the directives of the IMF. Despite their recommendations, we have not implemented crucial measures, such as appointing professional-level directors to 52 Government agencies. Additionally, the IMF has not insisted on the sale of SLT, SLIC, or the CEB. Instead of adhering to their counsel, there seems to be a divergence in the actions taken, raising questions about the effectiveness of our economic strategies.
Q: The Electricity Board and oil companies contend that the current forecasts suggesting excessive profits are inaccurate. Despite this, there are accusations of not providing relief to the public through reduced electricity and fuel prices. What do you propose to address this issue?
A: In 2015, we successfully reduced the price of electricity from Rs 16.6 to Rs 15 per unit. Similarly, we lowered the price of petrol from Rs.154 to Rs.117 and diesel from Rs.134 to Rs.95, ensuring affordability for the public. But now, with the imposition of VAT from January 1, an additional Rs.40 per litre will be added.
The CEB’s recent unjust 18 percent increase in electricity tariffs has led to substantial profits. However, households are burdened, some resorting to mortgages to pay their electricity bills. Industrial sectors are collapsing, with only Hong Kong and Singapore surpassing our electricity bills in Asia. Many garment industries have already shuttered, contributing to the relocation of our industries overseas.
It is imperative to alleviate the burden on households, cutting electricity bills for 100,000 households. The solution lies not in increasing electricity bills but in efficient management. We prioritised meeting the expenses of the CEB and the CPC without resorting to price hikes. It is crucial to revisit those strategies to prevent both industries and the public from bearing the brunt.
Q: How is your party preparing for the upcoming elections?
A: Having learned from past experiences, particularly the Aragalaya, we are committed to break away from traditional party structures.
The focus is on channelling the talents of our nation to the younger generation, emphasising a departure from the notion of individuals declaring their candidacy for the Presidential Election. Instead, our approach involves ushering in the next generation of leaders, transcending individual ambitions for the collective progress of our country.
(Translated by Dinuli Francisco)
