Columns

• VAT increase from tomorrow; extra tax on fuel also, while prices of several items will rise
• Treasury officials say port and airport taxes on many items will be removed to offer relief to people
• Party leaders begin soft launch of election campaign; Ranil seeks grand alliance to back him but ruling SLPP’s position uncertain 

By Our Political Editor

Sri Lankans are bracing themselves for much tougher months ahead as 2024 dawns tomorrow.

It is the inevitable consequence of former President Gotabaya Rajapaksa plunging the country into bankruptcy through mismanagement. In 2023, which ends today, the people were compelled to bear the brunt of the resultant economic crisis that forced them to pay unprecedentedly high prices. The cost of living reached new heights and triggered an exodus of human resources overseas. It continues. Imported consumer items began to disappear from the shelves of supermarkets and shops.

From tomorrow, the Value-Added Tax or VAT, which stood at 15%, will be increased to 18%, and a broad range of items will be brought under its umbrella. The catalogue includes even petrol and diesel, and this will skyrocket the prices of most other items. The common man’s drink, arrack, and a variety of consumer goods have also been affected. That a new regime of price increases will pervade consumers is no secret. On the other hand, the receipt of enhanced taxes has enabled the government to pay all those pensioners up to the end of December. Those who retired until December 18 also received their gratuities, according to senior officials. Ironically, one is not sure whether to laugh or cry that more price increases are coming in the backdrop of a tragi-comic situation. To make the VAT legally effective, members of the Sri Lanka Podujana Peramuna (SLPP), voted for the move in Parliament. Just days later, the party’s leadership took exception to the VAT in official statements and the imposition of other taxes as casting heavy burdens on the people. They called for a lower tax regime. Come election time, and that would give the SLPP the handle to claim it was opposed to tax increases, and it was not their baby. Thus, they would plead for votes.

That such a claim seeks to bury or ignore a bigger reality is noteworthy. After former President Gotabaya Rajapaksa fled Sri Lanka and later resigned, Parliament elected Ranil Wickremesinghe as President. He was mandated to serve the remaining term of Rajapaksa in July last year. This was the time there were countrywide protests (better known as aragalaya). Long winding queues were seen outside fuel stations. People carrying empty gas cylinders crowded the streets to seek refills. Smaller hotels and restaurants put up shutters. Some have folded up for good. Prices of meals and other food items shot up but have not come down since then.

On Thursday at a news conference, the Finance Ministry’s tax policy advisor, Thanuja Perera, argued that “there are claims that life will become challenging from January 1st, and families will face substantial expenses due to the tax revision. It is important to clarify that while there will be some additional expenses resulting from the tax reform, they may not be as severe as some are suggesting. Additionally, the government is actively taking measures to alleviate the burden on the people by eliminating other taxes imposed on goods and services subject to VAT and making appropriate tax adjustments. For instance, currently, port and airport taxes are levied on specific imported goods. To mitigate the impact of the VAT increase, positive measures are being implemented, including the removal of port and airport taxes on these goods, with only VAT being maintained.”

The JVP-led NPP, as part of its presidential campaign soft launch, held a rally in Matara focusing on women

According to a statement from the President’s Media Division, the President’s Office State Revenue Unit Director, K.K.I. Eranda, also at the same news conference, “highlighted the significance of the VAT as a primary revenue generation tool for the country. The initial expectation for VAT revenue in 2023 was over Rs. 600 billion, but only around Rs. 450 billion has been collected. Anticipating an income of about Rs. 1400 billion through VAT in 2024, the government has identified tax leakage factors, both external and internal, as well as tax exemptions, contributing to the revenue shortfall. Consequently, efforts are being made to increase the number of taxpayers and reduce tax exemptions.”

The statement also said, “By comparing inflation forecasts before and after the tax revision estimated by the Central Bank, it is projected that inflation will increase by 2-3% due to rising prices. However, Janaka Edirisinghe, Deputy Director, Economic Research, Central Bank, mentioned that the Ministry of Finance and the Inland Revenue Department are actively working to provide relief by removing other taxes on goods and services subject to value-added tax and making necessary tax adjustments. As a result, there is a possibility that the predicted rate of increase in inflation may decrease further.”

Only the coming weeks and months will show how many of these claims are truly realistic. Originally, government leaders claimed that the purpose of a VAT increase was to enhance government revenue. Now, the officials, in marked contrast, are trying to argue that efforts are being made to “mitigate’ the impact of the VAT. The question that begs answers is why an increase is being made if it is only to lessen state revenue elsewhere. Such claims only destroy the credibility of a government and raise doubts in the public mind. That too in an election year.

To telescope a long story, President Wickremesinghe took on the task of negotiating with the International Monetary Fund (IMF). It delivered a bailout package, and a second tranche is in the pipeline. Even if it sounds far too gratuitous, there is no gainsaying that these efforts saved an economically more catastrophic situation, though hardships exacerbated during the Gotabaya Rajapaksa regime as well as other residual shortcomings remain. One such case is the prolonged delay in dealing with bribery and corruption, which has shown increasing signs of rapid proliferation. One can only look to a newly appointed Commission to Investigate Allegations of Bribery or Corruption (CIABOC) to effect a radical change in status. Justice W.M.N.P. Iddawala has been appointed as the new Chairman of CIABOC. Other members are Chethiya Goonesekera (Additional Solicitor General in the Attorney General’s Department) and K. Bernard Rajapakse (a retired Deputy General Manager of the People’s Bank). The appointments will take effect tomorrow.

The main opposition SJB leader, Sajith Premadasa, has also intensified his party's political activities aimed at the presidential election

Sri Lankans will have the opportunity to elect a new President and vote for a new government during two national elections, according to President Wickremesinghe. The presidential elections are mandated by the Constitution. A general election could be held since the President is empowered to dissolve Parliament at any time now. Otherwise, such an election is due only five years after the first official sittings of Parliament after the parliamentary elections.

Now to the presidential election, which will come first. In terms of the Constitution, it must be held between September 18 and October 18, 2024. This is stipulated in Article 31(3) of the Constitution. It states, “The poll for the election of the President shall be taken not less than one month and not more than two months before the expiration of the term of office of the President in office.” The exact date for the poll will have to be determined by the Election Commission.

Gotabaya Rajapaksa assumed office on November 18, 2019, as the eighth President of Sri Lanka. He sent in his July 14, 2022-dated letter of resignation from Singapore. On July 20, 2022, Wickremesinghe was elected by Parliament, as stipulated in the Constitution, to serve the rest of the term not completed by Rajapaksa. This period, which is effectively President Wickremesinghe’s term, ends on November 18, 2024.

Months ahead of the scheduled presidential election date, there is considerable interest among would-be candidates. Some have virtually begun their campaign by conducting small meetings, while others are embarking on projects to open offices in different districts. One would-be candidate is known to be offering three million rupees to every district-level politician to open a campaign office on his behalf. A ruling party parliamentarian is the first to open such an office in the South.

This turns the focus on President Ranil Wickremesinghe, who, his close aides say, will be a candidate. According to them, he is seeking a grand alliance to back him. This raises an all-important question: whether the SLPP, which is now backtracking from Wickremesinghe’s economic policies and approach, would support his candidature. More so, when they have made millionaire businessman cum casino owner Dhammika Perera as their ‘most likely’ candidate and given him the green light to prepare even before a formal announcement. However, SLPP insiders concede that a sizeable number of ministers and state ministers were in support of Wickremesinghe.

Nevertheless, they point out that such support may not contribute to decision-making by the party hierarchy. An altogether different viewpoint that Wickremesinghe may not contest considering these developments has emerged. They argue that in the coming nine months it would not be possible for him to launch any major ‘hearts and minds’ exercise for a major turnaround of public support. On the contrary, they claim that though his public image stood much higher last year, he may face strong challenges. However, this is being dismissed by his close aides, who insist they could muster the required numbers for a grand alliance to back Wickremesinghe’s candidature.

It is relevant to mention the role of Gampaha district parliamentarian Nimal Lanza in this regard. Operating from an office in the Presidential Secretariat, he formed a New Alliance to wean away as many members as possible from other political parties. Months before, he was known to have the backing of 29 MPs, mostly from the SLPP. It is not immediately clear whether the same numbers remain or if newer developments have lessened the support base. Lanza’s task has been to build a strong support base in favour of President Wickremesinghe.

Onetime minister Anura Priyadarshana Yapa, the President of the New Alliance, said yesterday that they were talking to more parliamentarians to join them. He told the Sunday Times, “We are very open-minded and would welcome those who want to build a society on sound economic principles.” He said the task before the New Alliance in 2024 was to strengthen its membership. Already, the New Alliance has brought under its fold some trade unions which functioned under the SLPP earlier.

The Janatha Vimukthi Peramuna (JVP)-led National People’s Power (NPP) launched its presidential election campaign with a women’s rally in Matara yesterday. Its leader Anura Kumara Dissanayake told the Sunday Times, “We think it is important that we apprise the women of our country about the great hardships they will be forced to undergo due to the introduction of VAT on a broad range of items. Earlier, the government had left out 138 items on the grounds that imposing VAT on them would hurt the people due to price spirals. Now, 97 of those items have been re-introduced. That includes even petrol, diesel and a rise in telecommunication rates. This has been done without any concern for the welfare of the public and to purely enhance revenue. Raw materials for the industrial sector would go up in price. It will worsen the economic crisis and even lead to unemployment. With the launch of our campaign, we will educate the people of the pitfalls ahead and the heavy price they will have to pay.”

Samagi Jana Balawegaya and Opposition Leader Sajith Premadasa has also criticised the ‘newly imposed taxes’ during meetings he addressed in the Anuradhapura district. He said that 60 percent of household income had dropped because of enhanced taxes. This is whilst expenditure has shot up by 90%, he said. He added that the introduction of VAT at this juncture would only heap further burdens on the people. It is still not too late for the government to review the situation and thus save the hardships the people would face.

Another development that will leave a footprint in the political landscape in the new year is the break in the middle of the Freedom People’s Congress (FPC) led by Dullas Allahapperuma. The FPC, in turn, is a breakaway group from the SLPP. Allahapperuma was the candidate against Wickremesinghe for the election of a President when Parliament voted on it. This was after the resignation of Gotabaya Rajapaksa. Wickremesinghe won.

There were social media reports that a breakaway group led by G.L. Peiris, a former Foreign Minister under different governments, had signed a memorandum of understanding with SJB leader Premadasa.  This is after Peiris clinched a deal where the breakaway group was assured of positions after a parliamentary general election. Peiris himself was to be given a national list position as MP and a ministerial portfolio. The others: Nalaka Godahewa to be the leader in the Gampaha district. Dilan Perera leader in the Badulla District, and organiser for the Haliela electorate. Channa Jayasumana , Co-leader of Anuradhapura district and organiser for Kekirawa electorate. Wasantha Yapa, deputy leader of the Kandy district and organiser for Yatinuwara. K.P.S. Kumarasiri, these reports said, had sought three days’ time to confirm whether he would accept any offer. All have been assured of ministerial positions.

However, SJB leader Sajith Premadasa has denied the reports. He told a public rally in Anuradhapura “that in keeping with the decisions arrived at in successive meetings of the Working Committee, the process of building a broad coalition to resist the government policies that inflict the gravest hardship on the people, discussions have been started in earnest and are continuing productively. The effects of this timely process will become apparent to the people in due course.” He, however, did not elaborate.

Earlier, the FPC decided not to invite Peiris and his group to any of its meetings. This was after a heated debate at the Central Political Committee where Peiris proposed that the FPC group should join the SJB ‘unconditionally’ and support Sajith Premadasa. However, those backing Allahapperuma declared that they should seek assurances on a shift in the SJB economic policies, which they claimed were like those of the government. At present, those supporting Allahapperuma in the FPC are Charitha Herath, Gunapala Ratnasekera, Tilak Rajapaksa, Udena Kirindigoda and Lalith Ellawala. Premadasa does have a daunting task convincing some members of his party over enlisting at least two members. A group led by Harsha de Silva, the
party’s front-liner on economic affairs, has insisted that they should not be allowed to join.

Parliamentarian Patali Champika Ranawaka yesterday hit out at President Ranil Wickremesinghe and SLPP leaders for their policies and declared he had no plans to contest the upcoming presidential election under their label. He declared that the claims to that effect were false.

In a lengthy statement Ranawaka said, “As a politician, I was the first to declare that the country would go bankrupt due to the short-term high-interest loans we took as a result of the so-called magical development of Mahinda Rajapaksa in 2014. Not only did we speak out, but we also said that in writing. At that time, some people blamed us, but today, it has been proven before the people of this country, and by last year’s direct struggle of the people from April 12 and the Supreme Court’s decision that Mahinda, Gotabaya, and Basil Rajapaksa were among those who made this country bankrupt. So, we have no political connection with such a group. We strongly urge Mahinda Rajapaksa to retire from politics at least now and appoint a non-Rajapaksa leadership for the SLPP.

“Our first political problem with Ranil Wickremesinghe came at the last general elections. We were not prepared to go to the elections under his leadership. That was why we formed an alliance, made a memorandum of understanding, and ran for that election on the Samagi Jana Balavegaya ticket. Therefore, there is no political relationship between Ranil Wickremesinghe and us because he is spearheading the political agenda of the SLPP. From the people’s point of view, what he is carrying out in the name of this reform process, is to protect capitalists and heap burdens on the ordinary people. Also a few if any measures have been taken by him to check bribery and corruption.

“Even if we do not reject the traditional political parties, their organisational structures, and their members, our main goal is that we keep faith in the people who last year threw out a family from power without even throwing a stone although the ruling family was surrounded by more than 300,000 security personnel and the ruling family was thinking that they could act like kings or emperors as they had got a 6.9 million mandate from the people.

“Instead of coming to power by selling the fathers, uncles, and mothers of this country, our party is organised to empower the entire generation of talent in this country against familyism, family lust, and tribalism. Also, there are a handful of people who think that they can maintain political power in this country by generating wealth and buying the media with that wealth. We are of the opinion that the talented generation should gain power in this country……”

In the new year, as it has become clear now, activity for the presidential election will predominate. Even nine months ahead, would-be candidates have mostly got into their campaigns, setting up offices, holding smaller group meetings and canvassing support at the electoral level. One of the front runners, Sajith Premadasa, has launched his campaign with a string of meetings in the Anuradhapura district. Another, Anura Kumara Dissanayake, has begun his campaign with a women’s rally in Matara. More will join in during the coming weeks and months. Going by the interest the presidential election has drawn, it will no doubt have the largest number of candidates, both from within parliament and outside it. At least some part of the economic crunch is bound to be cushioned by the enthusiasm over polls.