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Looking
afresh at fiscal amnesties The new-look bill has now gone through the Supreme Court once more, gained its acquiescence barring a few knots that need to be ironed out and next week, the UPFA Government will seek to withdraw the amnesty granted by the UNF Government. According to available statistics, the outstanding sum of uncollected income-tax monies amounted to Rs. 58 billion by 2002. GST was Rs. 10 billion. A little over 50,000 people have applied for this amnesty. Not all of them are new files, but they probably contain undisclosed incomes. Now they say - justifiably - that they have been duped by the Government. Should a Government give an escape-route to tax defaulters, smugglers and exchange racketeers? Only an attractive amnesty could have done this. Earlier amnesties, including those given by N.M Perera, Ronnie de Mel and President Chandrika Kumaratunga as finance ministers, had this in mind, but they were unattractive. K.N. Choksy went the whole distance giving a sweeping amnesty to each and every sector where these millions were stuck. The UNF argument, though not well articulated at the time, was that the 'Black Economy', notwithstanding the moral issues involved, was part of a developing country's economy, and should not be viewed in isolation, but as part of the financial discipline and structure of any country. That the money-hoarder had to be induced with an attractive package to bring his money out to the economy - this emergence first seen in upward property prices. The problem was that the UNF went too far, to an extreme. Has the UPFA gone to the other extreme with a complete reversal? In office, the UNF is viewed as capitalist-friendly. Indeed they rev up the economy, but by ignoring the socially unacceptable impact of their policies, the poor voted them out. Only to find the UPFA trying to push through outdated socialist policies, or bereft of any policies, running down the economy as they are doing now, making the people yearn for the UNF once again. This is the vicious circle the country has been in for quite some time, the people, very much a part of the exercise themselves. The tax collection system has always been fraught with bad laws, ineffective machinery and downright corruption. Parliament was told that the Customs, for instance, gave out as much as Rs. 600 million in 2001 as rewards, as an 'incentive' to its own men in a scheme that was riddled with foul play. One importer was fined Rs. 420 million but got away paying Rs. 29 million. Either he was overcharged, or he was let off. Such were the disparities. The Income Tax Department meanwhile, is known to lose important files. On the other hand, some Customs officials paid the supreme price for investigations. Others have fled the country. There is a private company that owes the Government more than Rs. 200 million in VAT collected from third parties. Should they be entitled to pocket that money through an amnesty? The two sides of the story has a third dimension. What about recognizing the honest tax-payer? While there is an emphasis on either encouraging the 'black economy-capitalist' (UNF), or hounding him (UPFA), both sides have ignored the honest tax-payer who has propped up the economy through good times and bad. The honest tax-payer makes no noise. He probably has no money left to fund these politicians or their parties with bundles of green notes in gunny bags. For him, there are no amnesties, no succour, only the old adage that nothing is permanent except death - and taxes. There have been several voices - in the wilderness - on the need for a proper tax regime in place for Sri Lanka. These range from persons who advocate a year's tax holiday for those who pay taxes so that the officials of the Inland Revenue Department pursue new tax files, to those who say that public servants being exempt from income tax is discriminatory of those in the private sector. There is no point apportioning blame at this stage - whether the UNF Government went too far with its amnesty, or whether the UPFA Government has now turned the amnesty on its head. The end result is that many people will not trust the Government of Sri Lanka to keep its word. To put it simply, in their book, the Government of Sri Lanka is untrustworthy. The country witnessed an element of bipartisanship in the Year 2000 when certain independent commissions received unanimous support. This spirit has now evaporated, especially in the thick of finding a solution to the national question -- North East insurgency. A National Tax Policy, considering the real-politic of the economic world, and the social world, needs to be pursued in a bi-partisan manner, not subjected to the vagaries of partisan politics. Otherwise we will only witness a nation going rapidly down the drain, as we are right now. |
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