Beyond our means

It was short and sweet – that is President Mahinda Rajapaksa’s budget presentation. In a way, that’s going to be a reality – short and sweet relief until the truth hits you till it hurts.

The Sunday Times FT tried an unconventional approach to standard budget reporting by the media – we set up our own panel of discussants and asked them for a rationale look at the budget. The two main questions – what are the positive effects (if any) or the negative effects (if any).

The panelists comprising an industrialist, a chamber president, an economist and a fund manager – in a nutshell – said the budget was a short term response to long term problems, expressed concern about the bloated public sector and its burgeoning costs to the taxpayer.

At the end of the day or by the end of April (when most of the tax proposals start getting activated), Sri Lankans would still be short of paying their monthly bills as incomes continue to be insufficient to meet basic costs. Rajapaksa reduced the VAT on petrol and everyone assumes this will bring down prices. Wrong again – it would only cut the losses of the Ceylon Petroleum Corp. Short term, indeed!

Goods and services via taxes would cost the people dearly and any savings from handouts in the budget would be nullified by rising indirect taxes. A galloping defence budget is inevitable in a war situation and citizens wouldn’t grudge as long as there is reasonable transparency and accountability in spending – not the kind of secretive purchases that is currently evident and the corruption that happily follows. But when the media begins to probe these purchases, they are harassed – like the continuing saga of our Defence Correspondent – in the name of ‘security issues’. The end result is no one really knows where and how the huge defence budget is spent – a right of every citizen in this country, including those in the war-torn north and east.

Sri Lanka continues to be dependent on our women working abroad, who are slaving, while some or most of the money is ‘monkeyed’ by the politicians ‘for the sake of the nation’.

Tax revenue has increased, so the government says, but how? There are scare stories of tax sleuths hounding businessmen, raiding offices, asking neighbours to act as spies. Even Gold card tax holders – an elite group of corporate taxpayers held in high esteem by the the IRD – find tax officers walking in and checking files. This is tax by intimidation and not in line with the ‘nice PR’ campaign launched by the department to nurture a genuine, tax-paying society.

Who wants to pay taxes anyway when all you see are broken roads, poorly-maintained bridges in the rural countryside, garbage left uncollected, arrogance of public servants at key institutions, and so on – as the fruits of your taxes? In fact, don’t be surprised if most of the officers at the revenue earning institutions of the state are amongst the highest paid (or earned) public officials – legitimately (through rewards) or unofficial commissions. And they want us to pay our taxes while they are tax-free citizens!

This is not a discourse on budgets because budget-making, ever since the late N.M. Perera, as finance minister in the 1970 government of Sirima Bandaranaike, introduced the ‘gazette budget (taxes outside the budget through gazettes),’ has become a joke. It’s a ritual looked forward to by the people merely as an entertainment tool and some cause for hope. Often it’s short term with temporary gains and long term pain.

In fact our panelists said the budget had the usual nice proposals but asked whether it would be implemented to the letter? Nice on paper, good on regionalising business but with a bloated public sector, too many layers of administration, and a few more new white elephants, the budget will cost the country dearly and its people.

Businesses and individuals are being asked to cough out a Rs. 20 tax for ‘spoiling’ the environment. Who is the biggest culprit anyway these days? It’s the state and its regional organs by simply not finding a solution to garbage disposal which rots and stinks and creates all kinds of environmental pollution and health hazards. The business community and the people are asked to pay for others’ sins, and penalised too. Why don’t we have a tax or penalty on the government and its representatives for not fulfilling the duties they are expected to fulfill? Why don’t we change the rules and make those in government pay instead of the people?

We don’t want to sound like the prophets of doom … but if anyone thinks this budget will boost entrepreneurship, bring down the cost of living or result in a productive workforce: tell it to the marines!