- No alternative to IMF at present
- Tax concessions still given to large-scale businesses
- Gradual improvement in economy
- No conflicts within SJB
In an interview with the Sunday Observer, Samagi Jana Balawegaya (SJB) MP Kabir Hashim outlines his views on the Government’s program with the International Monetary Fund (IMF), taxation policy and the SJB’s plans for the election year. MP Hashim says the Government is facing challenges in managing the economy and relying too much on indirect taxes to fill the coffers. He suggests that more mechanisms should be evolved to reduce the dependence on indirect taxes.
Q: Opposition MPs, particularly those from the SJB, which you are a part of, consistently criticise the Government’s economic policies. Could you please elaborate on your perspective regarding this matter?
A: The country’s economy experienced a rapid decline after 2020, posing significant threats. Efforts to strengthen the economy have been initiated through collaboration with the International Monetary Fund (IMF), coupled with certain stimulus measures. However, it is evident that the Government is facing challenges in effectively managing the economy.
Q: Even many Opposition Members have expressed the view that, given the current circumstances, resorting to the IMF is the only viable option. Your comment?
A: Indeed, currently, we find ourselves with no alternative but to turn to the IMF. However, the prolonged time taken by the Government to initiate this process, the country’s lagging State prior to joining, and the lack of preparedness with alternative measures have caused significant difficulties. For instance, our previous Finance Minister travelled to India and, regrettably, conceded our valuable oil tanks in Trincomalee for US$ 500 million. Eventually, we found ourselves compelled to approach the IMF, succumbing to their stipulations.
Q: Shouldn’t any Government adhere to the criteria set by the IMF?
A: Despite the presence and advice of numerous Government officials and Finance Ministry personnel, the Government has struggled to implement a coherent roadmap. Presently, there is still a lack of a well-defined system. The Government tends to implement recommendations from the IMF in a manner that suits its convenience rather than prioritising the well-being of the people.
The Government has faced challenges in effectively executing the recommendations of the IMF, particularly concerning the gross national product. As a consequence, low-income earners have been adversely affected.
Q: Irrespective of the Government in power, isn’t it inevitable to raise taxes to address the economic crisis?
A: The implementation of Value Added Tax (VAT) is deemed necessary, but it should be structured in a way that is proportional to the financial power of the people. The decline in tax collection can be attributed to corruption and questionable dealings within the high echelons of the Department of Inland Revenue (IRD). Large-scale entrepreneurs, who are obligated to pay taxes, often enjoy tax concessions, both officially and unofficially. This has led to substantial tax arrears.
Q: Are you suggesting that the Government is bypassing large-scale businessmen, opting for indirect taxes rather than direct taxes to increase tax revenue?
A: That is indeed true. The Government raised VAT from 15 percent to 18 percent, and suddenly imposed an 18 percent VAT rate on more than 90 non-VAT goods and services. Consequently, the prices of these goods and services surged by 18 percent or more. Individuals facing economic hardships find it challenging to bear this added burden. It appears that the Government is focusing on collecting indirect taxes, which can be gathered more easily than direct taxes.
Q: Do you believe it is fair to impose a 36 percent tax on large business concerns?
A: Taxing entrepreneurs and medium-scale businessmen at a rate of 36 percent not only affects them but also results in employees working under them paying taxes. A more equitable approach could involve imposing a tax of 24 percent and obtaining the remainder from those who are required to pay direct taxes. It appears that the Government is prioritising the collection of easily accessible taxes.
Q: Despite criticisms of the Government’s direction, are there no internal conflicts within the SJB?
A: There are no conflicts within our party. We have a strong leader, and we engage in thorough discussions on all matters, aligning our actions with the party’s policies. The party is also highly dynamic and actively involved.
Q: Given that this year is pivotal for elections, are there any preparations to collaborate actively with other political parties and leaders?
A: Our leader has explicitly stated that any politician can join the party as long as they respect our party’s opinions, principles, and act within that framework. However, our party does not accommodate the implementation of policies of others.
Q: As someone with knowledge about the economy, do you agree that the country’s economy is now at a good level?
A: Yes, the country’s economy is gradually improving. There is a positive trend in the arrival of foreign remittances, an increase in tourist arrivals, and a gradual growth in foreign reserves.
It is important to acknowledge these positive developments. However, it is notable that the Government lacks new policies to further enhance foreign income.
Q: What are the new policies you are referring to?
A: During the time when the United National Party (UNP) was in power, especially under Presidents J.R Jayewardene and Ranasinghe Premadasa, various methods were implemented to generate foreign exchange. However, the Governments that came into power afterwards did not introduce new strategies to earn foreign exchange. Consequently, our dollar deficit remains unchanged, and reliance on foreign loans persists.
Q: However, there has been an increase in the number of investors coming to our country. Your comment?
A: Contrary to your statement, if investors were in fact coming in the economy would not be on the verge of collapse. It indicates that there is no justification for imposing additional taxes. Moreover, the Board of Investment (BOI) lacks a comprehensive plan to boost investment. Investors are faced with lengthy queues for approval, which is discouraging. Under these circumstances, it becomes questionable whether investors would choose to invest in Sri Lanka.
Q: Despite your claims, the statistics from the BOI reveal that 30 investments have been signed this year. What is your perspective on this?
A: The concern lies in whether these investments will materialise. A notable example is Japan, which previously had numerous investments in China. However, due to the escalating production costs in China, these investments have been redirected to other countries. Unfortunately, Sri Lanka has not been a destination for these investors, who have opted for countries such as Bangladesh, Vietnam, Malaysia, and Thailand instead. In our country, high electricity bills and other elevated production costs contribute to the challenges faced by investors. Above all, this behaviour is driven by a lack of confidence in the Government.
