Ceylon Today Editorial

Budget 2017

11 November 2016

 

Finance Minister Ravi Karunanayake informed Parliament yesterday that the capital gains tax will be introduced from April. The Minister presenting Budget 2017 said that imports would be digitalized from next year. He further said that personal income up to Rs 100,000 per mensem will be tax free.

Karunanayake said that every (bank) transaction above Rs 10,000 will be taxed at Rs five per transaction. A telecommunications levy of 25% will also be charged. Additionally a telecommunications spectrum levy of 25% will be on the tax books. A carbon tax on vehicles will be levied. The Minister further said that withholding tax will be increased to 5%, encompassing savings account holders as well, at a minimum threshold of Rs 60,000.

He also said that the income tax band will comprise four thresholds of 14%, 28% (applicable to the banking and financial sector), 40% (tobacco and liquor industry) while the tax on instruments such as Treasury Bonds will be increased from 10% to 14%. The Minister who spoke for three hours, of which 1½ hours were devoted to the agriculture, health and education sectors, said that the Government of Sri Lanka's (GoSL's) plan is to reduce indirect taxes from the current 80% to 60% and uplift direct taxes from 20% to 40%.

He said that GoSL plans to engage the private sector on electricity transmission, but made no mention whether they would also be a participant in its distribution services as well. Though the private sector is allowed to engage in electricity generation activities, such generated power may only be sold to the State owned Ceylon Electricity Board. Probably, the same may be applicable to transmission services as well, in the event electricity distribution is not privatized.

Another budget highlight was the announcement of the proposed merger of the State Mortgage and Investment Bank and HDFC Bank, which together with the National Savings Bank will promote loans to the housing sector at a 4% interest rate. Karunanayake said that of the country's 1.4 million public servants, 94% were non-executives. They would be subjected to regular training. The Minister said, that a debt office would be created, to manage the country's Rupees nine trillion debt. He said that GoSL's debt servicing commitment next year is estimated at Rs 127 billion. If the interest cost is reduced by 1.5%, GoSL's liability will come down to Rs 90 billion, he said.

The Minister also said that if an investment related inquiry is not answered within 10 days, even by a Provincial Council, it would be considered as having had been approved. This will improve the country's 'ease of doing business' climate, said Karunanayake. He further said that unskilled migrant workers would have to be paid a minimum salary of US$ 350 per mensem and unskilled workers, $ 400. He requested Ceylon Tobacco plc, to make a Rs 500 million donation to the health sector.

GoSL has embarked on a 500,000 housing programme, of which 100,000 are targeted at the middle class at Rs five million per unit and 250,000 to lower income families at Rs one million a unit. He wanted the private sector to embark on this venture. A further 25,000 housing units will be built, targeting the estate sector.

Karunanayake said that his plan was to have 25 new listings on the Colombo Stock Exchange next year. The 10% single ownership on banks and the maximum of nine year service for a bank director will be reviewed in the context of the proposed bank consolidation process.

Two hundred licences will be issued to money changers to encourage tourism. Rs three billion will be paid to Golden Key depositors next year. A consumer financial sector authority will be established. The use of the island's 5,200 telecommunications towers is proposed to be pooled.

Desalination plants will be established in Jaffna and Puttalam whilst the expansion of pipe borne water services will be encouraged with the participation of the private sector. The 1.3 million three-wheeler owners will be encouraged to trade-off their vehicles to electrically operated four wheelers for which a Rs 200 million subsidy will be made available, to bring in 1,000 of the latter vehicles on to the roads.

Similarly, 'school van owners' will be encouraged to invest in 32-seater buses. Railways and the Sri Lanka Transport Board are expected to operate bereft of Treasury subsidies from 2018. State owned institutions such as Hyatt and Grand Oriental will be listed. Such listings are expected to bring in to GoSL's coffers Rs one billion next year. Capital allowances ranging from 100% to 200% will be provided to companies investing in depressed provinces such as the Uva and the North and East. Mechanized agriculture will be encouraged.

Maximum acreage to a regional plantation company will be limited to 5,000 acres. Sri Lanka State Plantations Corporation and the Janatha Estates Development Board which together command 23,400 acres will be restructured next year, with private sector assistance, resulting in a Rs 29 billion saving.

Daily News Editorial

Pot calling the kettle black

11 November 2016

The public these days are treated to the spectacle where the MPs of the Joint Opposition are seen trouping to the Bribery Commission to lodge complaints against some Government Ministers. One has only to a look at these worthies to come to a conclusion what their game plan is. Many of them have already seeing the inside of the state lodge for large scale corruption and misuse of public funds, including the leader of the pack whose rags to riches story is now in the public domain.

There is another, currently under probe, for possessing two passports, not just for himself, but his better half as well, and whose rags to riches tale too is now being unraveled with all its sordid details. Then there is another, always donned in white, giving press conferences and in the media spotlight on a daily basis who is currently being probed for fraud in a share transaction. It is a classic case of the pot calling the kettle black.

These personages parading themselves as paragons of virtue should be thankful for Yahapalanaya that at least their complaints are being entertained by the Bribery Commission. Already, at least two Government Ministers had been summoned by the Commission and their statements recorded. One cannot recall a Minister of the Rajapaksa regime ever being summoned although complaints were lodged against many of them by members of the then Opposition. The only instance that comes to mind is the case where a former Minister close to the Rajapaksas, who could not account for Rs 400 million in his possession. But when summoned by the Bribery Commission that worthy proffered the excuse of being stung by a polonga for his no show before the Commission. There was no summons or pursuance of the case after that until it was reopened by the present government. This JO MP too is among those today stridently canvassing the issue of corruption in government and ironically was seen joining the rest of his colleagues to make complaints against Ministers of the present government at the very Bribery Commission which summoned him, to no avail.

The JO is today like a drowning man clutching onto a straw for survival. It is now hanging onto the COPE report and Arjuna Mahendran has fallen like manna from heaven to the JO to be used as a whipping boy, after having exhausted all other issues such as Wigneswaran, the ranavirivo, rata pava deeme vedasatahana and what not. In the melee it has also dragged in Prime Minister Ranil Wickremesinghe into its campaign of vilification.

According to the JO, among the names submitted to the Bribery Commission is that of the Prime Minister whom they accuse of having benefited from the Central Bank bond scam even though no mention whatsoever is made of the PM in the COPE report which was signed by all its members including those from the JO. Even his worse critic during his 40 year political career has not called into question the honesty and integrity of the Prime Minister. That he is above board on financial matters was vouched for even by former President Chandrika Bandaranaike Kumaratunga during the bitterly fought Presidential Election campaign of 1999.

Hence, it is clear that a well thought out strategy is currently being played out by the Joint Opposition to target the Prime Minister who has been a thorn in the flesh of JO members in parliament, felling them with his wit and eloquence. The plan is to besmirch the image of the PM who has acquired the sobriquet Mr. Clean over the years so that they could effectively counter the corruption charges against former President Mahinda Rajapaksa with the argument “he is not the only one.”

The move also comes in the wake of fresh initiatives in the pipeline to probe the overseas bank accounts of the former first family where it is claimed that billions have been stashed. It also clearly a ruse to deflect from the charges against the JO members now making a bee line to the Bribery Commission at every turn. This way they assume they can throw dust in the eyes of the public and cover up their own larcenies.

The government should therefore be alive to these machinations and show up these wolves in sheep’s clothing for who they really are. Investigations against them should be expedited, lest they get more emboldened and take their game to further lengths creating a situation where the hunters become the hunted, in the public eye.

This is by no means to suggest that Government Ministers involved in corrupt deals should go unpunished. Like the President practically said the other day, he was not elected to replace one set of rogues with another lot. He was elected he said to clean up the Augean stables and not permit a repetition of the past. Besides elimination of corruption from the body politic formed the main plank of the Yahapalanaya platform. Thus, naming and shaming the guilty should assume top priority, if the pledge made to the people is to be upheld.

The Island Editorial

Modi’s crackdown on black money

11 November 2016

 

There is nothing intrinsically wrong with power, but it does corrupt, as a truism goes, because greedy politicians wielding it are in league with unscrupulous moneybags. This evil nexus between shallow minds and deep pockets is the bane of democracy. Crooks, rolling in black money, bankroll key political figures and the latter become putty in the hands of the former after being elected. There is nothing called a free lunch and financiers’ interests thus take precedence over those of voiceless electors in whom sovereignty is said to reside.

Regulating campaign funds has been a long-felt need in this country and much has been spoken about it. With the introduction of the proportional representation system which requires campaigning in an electoral district instead of a single constituency, the situation took a turn for the worse. The proposed electoral reforms are being flaunted as a solution to the problem, but there is no guarantee that candidates, backed by moneybags, will cut down on their campaign spending. There have been calls for new laws to make politicians and their parties account for campaign expenditure, but they have gone unheeded for obvious reasons.

Massive undeclared cash donations from slush funds to politicians and political parties have become the order of the day because financiers including those involved in illegal activities have heaps of black money at their disposal. Wealthy politicians also use part of their ill-gotten money to shower bribes on voters and get elected. If politics is to be cleansed and democracy strengthened the problem of undeclared funding has to be tackled at source.

The Indian government has recently demonetised high denomination banknotes as part of its campaign against corruption. About 90 percent of the existing notes are to be withdrawn, we are told. This is being described as a bold move by Prime Minister Narendra Modi to prevent black money from being used to fund election campaigns. The Indian public has been greatly inconvenienced as a result, but their country will benefit from the government action if everything goes as planned. However, it is doubtful whether the super rich will queue up near banks etc carrying bags full of old currency notes.

A former Government Agent, in a letter published on the opposite page, today, reminisces of Sri Lanka’s experiment with demonetisation under the United Front government (1970-77) to ‘squeeze black money out of bloated capitalists’. He says he did not see any bloated capitalist among the people who queued up near state banks etc to obtain new banknotes. He describes what he witnessed in a southern township and what it was like in Colombo is not known. Our guess, however, is that the wealthy may have used some other channels to swap truckloads of demonetised notes for crisp ones. They are too big to be caught!

The success of India’s demonetisation project hinges on the Modi government’s ability to make the super rich fall in line. That is a gargantuan task. The Sirisena-Wickremesinghe government, too, has expressed concern about ever increasing campaign expenditure. Since it considers Modi a role model, it should seriously consider adopting his modus operandi to deal with the issue of black money finding its way into the war chests of politicians and political parties. Here is an Indian model worth adopting!

But, the question is whether demonetisation will work in a country where the Central Bank is ‘robbed’ in broad daylight and the robbers are protected by the government top guns openly. For the moneybags who sponsor political leaders having the demonetised banknotes exchanged for new ones without the knowledge of the authorities concerned will be child’s play. Thanks to their political connections, they are even capable of securing the release of undervalued super luxury vehicles through the Customs and helping themselves to workers’ savings in the Employees’ Provident Fund (EPF).