How the tax overhaul that caused a loss of revenue of Rs 500-600 billion triggered the collapse… – The Island


Dr. Godahewa discussed the anatomy of the developing crisis

By Shamindra Ferdinando

SLPP lawmaker Dr Nalaka Godahewa alleged that those who managed the economy during Gotabaya Rajapaksa’s tenure as president failed to take corrective action, although alleged misconduct was pointed out.

Dr Godahewa, a key member of the splinter group that voted against the emergency, said then-president Gotabaya Rajapaksa could have avoided dire consequences if corrective action had been taken. However, the decision-makers remained committed to the decisions taken earlier, regardless of the consequences, a former Viyathmaga activist claimed.

Speaking to a group of supporters in Gampaha recently, Dr Godahewa cited the much-contested tax restructuring that was introduced shortly after Gotabaya Rajapaksa’s landslide victory in the 2019 presidential election. Pointing out that the tax revisions deprived the government of Rs 500 to 600 billion per year, the deputy of the district of Gampaha questioned the inability of the decision makers to take corrective measures. Action could have been taken in 2020 or 2021, but the powers that be chose to ignore criticism over tax overhauls, Dr Godahewa said.

The government abolished a series of taxes, including PAYE (Pay As You Earn), NBT (Nation Building Tax), withholding tax, capital gains tax imposed on the Colombo Stock Exchange, bank debit tax and reduction unprecedented VAT (value added tax) . In addition to these revisions, the 15% VAT and 2% NBT which amounted to 17% imposed on all goods and services have been unified and reduced to 8%, effective December 1, 2019. A controversial move in this regard was taken at the first cabinet meeting of the Gotabaya Rajapaksa government held on November 27, 2019.

Total revenue fell to Rs 1373 in 2020, although total revenue for 2018 and 2019 was Rs 1950 billion and Rs 1900 billion respectively.

Shouldn’t these policy makers be held responsible for a much larger budget deficit and the continued printing of money to fill a shortfall of Rs 2 trillion per year? He asked.

Although the Easter attacks, the pandemic and the blow to the vital tourism sector and the sharp drop in remittances from migrant workers have worsened the situation, the first incumbent in Parliament mainly blamed President Gotabaya Rajapaksa for the current crisis. Dr Godahewa said that after repeatedly assuring the electorate that he would not allow family rule, President Rajapaksa placed the economy in the hands of those who mismanaged the economy during of the last decades. Dr. Godahewa pointed out that following the August 2020 general elections, those who were rejected in 2015 were given ministerial portfolios. Following the country’s declaration of bankruptcy, those who were overwhelmingly rejected in 2019 were given a chance to regain power.

The former media minister was referring to the UNP leader securing parliamentary approval to complete the remainder of Gotabaya Rajapaksa’s term.

Dr Godahewa asked if the long standing issues could be resolved by the two aforementioned groups swapping political power from time to time and in some cases working together. The outspoken politician quoted Fitch Ratings as recently saying that far-reaching changes could not be expected under President Ranil Wickremesinghe’e because those who had been rejected by the people were behind him.

Dr Godahewa was referring to the victory of SLPP Engineering Wickremesinghe in the July 20 presidential contest. Dr Godahewa backed Dullas Alahapperuma, who got 82 votes while Wickremesinghe polled 134. The group that voted for Wickremesinghe overwhelmingly supported the imposition of emergency with 120 votes in favor and 63 against out of the 225 members of the parliament.

MP Godahewa said the country could overcome the daunting economic challenges. The MP said he was not sure whether the outgoing Cabinet of Ministers had the capacity and the commitment to implement what had been agreed during the consultations between the political parties in the run-up to the election of Wickremesinghe to the presidency. Whatever developments, now that Wickremesinghe has been installed as president, the new administration should have the time and space to work things out, he said.

Lawmaker Godahewa heavily censured the electorate for usually electing the same corrupt lot although he always demanded what he called system change. The MP warned the electorate that there was absolutely no point in demanding ‘a system change’ if he exercised his right to vote for those who ruined the country.

Stating that there could be new protests similar to the massive July 9 public eruption in Colombo, Dr Godahewa urged the electorate to correctly identify those responsible.

Former Finance Minister Ali Sabry, PC, appearing on Swarnavahini in early June named the then President’s Economic Advisor (Dr PBJ), Central Bank Governors (Prof. WD Lakshman and Ajith Nivard Cabraal) and the Treasury Secretary (SR Attygalle) as the culprits.

Dr Godahewa said the government needed $5-6 billion a year to settle loans amounting to $24.7 billion taken out between 2004 and 2019. The MP stressed the urgent need to review the use of these funds, in particular the unproductive investments made over the years. The former senior private sector executive wondered if some of the foreign loans obtained at exorbitant rates had not been stolen.

Lawmakers today said the public had forgotten about the treasury bill scams that were perpetrated in February 2015 and March 2016, the finalization of the 99-year lease of Hambantota Port to China in 2017 on fully disadvantageous for Sri Lanka, the sharp decline in economic conditions. development from 5.5% to 2.1% and depreciation of the rupee by 40% during the yahapalana administration. At the time Gotabaya Rajapaksa won the presidency in late November 2019, the country had $7.6 billion in reserves sufficient to meet the import bill for a few months, Dr Godahewa said.

Referring to a recent controversial public statement made by Public Administration Secretary Priyantha Mayadunne, Dr Godahewa said those who had recklessly expanded the public sector at the expense of global financial stability should also accept responsibility for the current crisis. .

The MP pointed out that there were around 500,000 public sector employees in 2004 but over the years the total has increased to a staggering 1,402,000. Dr Godahewa cited the 2021 figures to highlight crisis. Of the 1,238 billion rupees in tax revenue, 1,115 billion rupees, or 90% of the total, was spent on public sector salaries and pensions.

Highlighting the extreme difficulty of raising the $500 million needed for fuel imports, especially for power generation, Dr Godahewa alleged that those who deliberately delayed power generation projects should also accept the blame for the current difficult situation in Sri Lanka.

Dr Godahewa asked how the sudden introduction of compulsory use of carbonic fertilizers without proper study had ruined the agricultural sector. Those who decided agricultural policy as well as the supporters of this decision should also be held responsible for the overwhelming crisis.

The much-vaunted plans to send qualified personnel abroad and to expand the information technology sector could not achieve the desired results because those entrusted with these tasks failed, the official said. ‘former minister.

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