Gasping for breath
View(s):The above words were exactly how ‘Nana’ Mohideen, the jolly trader from Moneragala, described the plight of Sri Lankans today.
He had arrived in Colombo and gave me a call to catch up on what he may have been missing these past few months. “Sri Lankans are having a hard time, noh!” he said. “Very difficult times,” I replied, after welcoming his call.
“The new taxes will now result in higher prices and more problems for us,” he said, adding: “Why did they have to increase taxes when people are struggling?”
This was a reasonable query. Sri Lankans are gasping for breath these days, having to manage their inflation-affected incomes with high prices of goods, which have doubled or even trebled in recent weeks. Fuel prices for example are being jacked up like a taxi meter and it’s difficult to keep track of the number of times prices have gone up. By the way there was a tweet this week that fuel prices had further increased but this was not followed by a formal announcement.
“The government is running short of cash, so it has no option other than increasing taxes. What would trigger another round of high inflation is printing money with the Prime Minister recently saying that they would have to print in the region of Rs. 1 trillion,” I said.
“I saw a news item which said shipping lines might stop calling at our ports as they are owed US$70 million in freight charges. This would affect imports and exports,” he said.
Having continued the conversation on ‘Gotagogama’ and other issues affecting the country, we promised to meet at some point in the coming weeks, as my mind wandered to the crippling tax hikes announced this week.
Faced with a dire shortage of revenue after the multitude of tax relief in late 2019, the government has largely reintroduced the tax regime that was in place in 2019. While personal relief on individual taxes has been reduced to Rs. 1.8 million from Rs. 3 million, there was some confusion as the Prime Minister’s statement on the new taxes gave the first taxable slab as Rs. 1.2 million (instead of Rs. 1.8 million) at a tax rate of 4 per cent. Was there some error in the announcement? These taxes are effective from October 2022.
It said, however, that relief on interest income of Rs. 1.5 million per annum for senior citizens will be continued. The withholding tax (WHT) was introduced, while corporate income tax (CIT) has been increased to 15 per cent from 14 per cent while the standard CIT rate of 24 per cent will be increased to 30 per cent.
Tax holidays have been removed with certain exemptions, the VAT rate increased to 12 per cent from 8 per cent with immediate effect and the telecommunication levy increased to 15 per cent from 11.25 per cent with immediate effect. The betting and gaming annual levy has been increased to Rs. 500 million from Rs. 200 million.
At this week’s Cabinet news conference, spokesman Bandula Gunawardene said the government’s income has fallen to a ‘historic’ low and the budget deficit was impossible to manage as spending, particularly for essential goods and services, was challenging.
Gunawardene should ‘tell that to the marines’ as he conveniently forgets about the suffering of the masses as fuel and food prices rose astronomically – before the tax hikes – and now the new taxes would further burden the people. This minister is well known for his infamous statement in March 2012 when he said a family of three could live a comfortable life with an income of Rs. 7,500 per month, which is not even enough to pay rent. He was ridiculed over this statement and I wonder what he would say today about a family income with some estimates saying Rs. 40,000-Rs. 60,000 is needed for a family of four! Someone should have asked him that, at the Cabinet briefing!
Inflation is rising (Gunawardene please note). Food inflation in Colombo rose to 57.4 per cent last month (this is the official rate, while the unofficial rate must be 70 per cent and over) from 46.6 per cent in April with the rapid increase in food prices.
Colombo’s headline inflation (which calculates the cost to purchase a fixed basket of goods to determine how much inflation is occurring in the broad economy) rose to 39.1 per cent in May.
If the budget deficit is impossible to bear, what about the sufferings of the ordinary masses – some of whom are starving – who apart from having to pay astronomical prices for the basics – food and fuel – have to stay in queues and are still not be able to get the required quantity?
The government says it plans to present a relief budget in the coming weeks – in the usual rich-pays-the-poor scheme – providing some relief to marginalised communities but is yet to announce the date of the forthcoming mini-budget. Whether this would help the masses, particularly the poor living in cities, remains to be seen.
Taking a breather, I went to the kitchen but my favourite ‘maalu paan’ or ‘kimbula bunis’ was missing. Either Aldoris, the choon-paan karaya didn’t come down the lane or Kussi Amma Sera had taken it upon herself to cut the household food budget!
Nevertheless, their conversation under the margosa tree sounded interesting.
“Aldoris ada ave ne. Mama hithanne, eya kiwwa gas polimata yanawa kiyala (Aldoris didn’t come today. I think he said he wanted to stand in the gas queue),” said Serapina.
“Ekthara pramanayakata, ape gam wala inna kattiya, api moona dena thathvayata moona denne ne. Egollanta palathuru saha elavalu waththen ganna puluvan ne (To some extent, those in our villages are not facing the same situation as us, as they have fruits and vegetables from the land),” noted Kussi Amma Sera.
“Eka hari. Nagarikawa jeevathwana duppath kattiya thama duk vindinne egollanta idam nethi nisa kaema tikak wawa ganna. Okkoma mudal walata ganna oney ne (That’s right. Only the poor in urban areas are struggling as they don’t have land to grow food and everything has to be purchased),” said Mabel Rasthiyadu.
As I took a breather after completing my column, having collected a mug of tea from the kitchen, I reflected on the challenging times Sri Lankans would be facing in the coming weeks and months with ‘no good news’ from the authorities as to when this crisis would end.
Hitad.lk has you covered with quality used or brand new cars for sale that are budget friendly yet reliable! Now is the time to sell your old ride for something more attractive to today's modern automotive market demands. Browse through our selection of affordable options now on Hitad.lk before deciding on what will work best for you!