Beer or jobs: which is more important?
View(s):Ever since the liberalisation of economic policies and transfer to an open-doors economy in 1977 from inward-looking policies, every successive regime has preached about the greatness of small and medium scale entrepreneurs, the need to nurture these orgnisations and make them grow.
These pronouncements however are, and has always been, just on paper. The plight of the SMEs remain as they were 30 years ago except for a few who rode against the tide and joined the league of the big, established companies.
Over the past three decades, governments have spoon-fed big business and capitalists – a few who are disguised as investors – seeking to grow the business, bring in foreign investment and create employment opportunities. With perks, benefits, tax breaks and what have you, foreign investment still continues to be a trickle and nowhere near the US$2 billion to $3 billion that a country with so much potential (even after the war) needs to attract.
Small businesses or SMEs as they are categorised are the backbone of any economy and account for 80 per cent or over of all businesses in Sri Lanka and across the world. SMEs have constantly complained of getting a raw deal from the authorities, and that’s true. In the name of attracting foreign or local investments, big business backed by powerful chambers are able to campaign for and get most of their demands.
Just like Sri Lankan migrant workers who sweat it out in the Gulf and West Asian countries earning big bucks to boost foreign reserves but don’t receive the same treatment given to other foreign exchange earning sectors like garments, tea or IT, SMEs are the engine of the economy while big business reaps the benefits.
A new breed of social entrepreneurs, which are not-for-profit organisations, also don’t get the same attention though promises and assurances are given (again on paper or verbally). Prime Minister Ranil Wickremesinghe was spot on when he disclosed that 80 per cent of the country’s taxes are paid by the poor – meaning poorer segments of the society including small businesses and small entrepreneurs. Addressing a World Bank event in Colombo this week, he suggested a tax on wealth to overcome serious revenue problems that the government is facing.
Considering this and for many other reasons, the Government must take serious note of a plea by a group of small businesses urging that budget proposals which are dangerously close to crashing their businesses should either be revoked or amended.
The group of around 50 SMEs wrote to President Maithripala Sirisena, with a copy to the media, urging that clauses in the 2016 budget which stipulates a fee to wind up a company and a new exorbitant licensing fee, be removed It said the new annual levy of Rs. 60,000 and the voluntary winding up fee of Rs. 50,000 are likely to not only discourage but even compel small firms to go out of business. “If these levies are enforced, people will have second thoughts as to forming of companies in the future and the viability of continuing their businesses, which may end up with severe blows to our Gross Domestic Production (GDP), imports and exports, and the national economy at large,” the letter said.
Apart from this, it is unfair to levy a tax (or fee) on small companies, some family-owned or with a few share holders, if they are compelled through circumstances (not devious means) to wind up. Risk-taking is part of entrepreneurship and small business startups and must be encouraged by the authorities not frowned on by, for example, winding-up clauses. There is a separate liquidation process that takes care of liabilities and creditors. Winding up or closure is for many reasons; being unable to compete with bigger organisations, being unviable, unable to pay off a loan or for the simple fact (as pleaded in the appeal by SMEs) that big business (involved in the same sector) get all the concessions and tax breaks which are not available to SMEs.
This often happens when conglomerates or large organisations get into small business normally undertaken by SMEs which then creates an uneven playing field. An example of this was when the former Ceylinco conglomerate spread its wings to running food outlets (‘kades’) several years back. How could a small entrepreneur (in today’s context the ‘Dimo” Batta type entrepreneur) survive against this kind of competition?
SMEs don’t even have a chamber to represent them, such is their plight even though they are heralded in parliament or political platforms as the economic saviours of the nation – just like the regular hosannas to migrant workers who get little from the authorities; talked about a lot with accolades flowing but hardly a mention in the news.
To add insult to injury, foreign-bound Sri Lankan domestic workers often face humiliation at the airport. At the entry to the airport lounge where passengers are checked in, special officers occasionally scrutinize passports of passengers who they believe are domestic workers to check for the compulsory insurance cover. Any passenger going abroad on work without insurance cover is sent back to the Sri Lanka Foreign Employment Bureau counter to complete that formality. Professionals going abroad on employment however are treated differently based on appearance, dress and being able to talk their way through any issue. The budget itself has seen many changes, alterations or amendments. Finance Minister Ravi Karunanayake has come under severe pressure over proposals like higher vehicle taxes, annual licensing fees, vehicle emission fees, reduced tax car permit for public servants, among others which were eventually changed.
If the government chose to reduce the tax on imported beer to Rs 160 per litre from the original proposal of Rs. 190 per litre, isn’t it only right then that the Government reconsider proposals that endanger small businesses and their dependents? Which is more important – a pint of beer or jobs? By using SMEs as a revenue tool, the Finance Ministry and the government is causing a grave injustice to a sector that has been touted for years as the backbone of the economy. It is imperative that the authorities not only seriously reconsider the pleas of small businesses to stop hitting them where it hurts most but ensure that economic policies and strategies provide tax breaks and concessions equally or even more than big business. As one of the biggest contributors to the economy and as socially-conscious taxpayers, they deserve a better deal from the authorities.