The cynical but yet horrendous situation faced by Sri Lanka today can find a strange resemblance to a particular proverbial folklore that describes a man struggling to save his dear life from three imminent death threats forgets all his existential dangers and is enticed to enjoy a tasty honeycomb with blissful ignorance of the looming dangers in the immediate surroundings.
Sri Lankans and their partisan politicians are oblivious to harrowing social and economic track records the country went through a few moons ego that created a virtual social anarchy characterised by mile- long queues at filling stations, interruption of domestic gas supply, two power cuts, unruly street protests of wingnut political movements, scarcity of comestibles and despondency and uncertainty being the order of the day which led the citizens to believe that the country was sliding down a bottomless abyss without any hope of returning to normalcy in the near future.
However, those are the events of yore that have been obliterated from memory without a trace of retrievable capacity and the priorities are now shifted to the conduct of Local Government elections and annulment of new tax policies which provide ferocious propulsion power for trade unions and holier than thou political apparatchiks to instigate street agitations that unsettle the breathing space created in the past few months after economic mayhem that engulfed the entire country a few moons ego.
The current agitation campaign, driven by convenient political strategy of demagogy, appears to be showing the preferences and willingness of the vanguard organisers of such mass movements to sacrifice the necessity of gas, electricity, medicine and fuel in exchange for Local Government election and annulment of new income tax regulations at the cost of the hard-earned breathing space of economic recovery.
Political schizophrenia
It appears that no protesting political party or trade union is in the mood of engaging in a serious polemic discussion on the subject of how a regime change will facilitate the change of economic landscape of the country by way of easing out the high fuel prices, cost of living, burden of income tax and pressure on debt payments as the protesting campaigners have not presented a clear road map marked with milestone actions except engaging in loud mouthing of their age old gibberish which no one cares a tinker’s cuss.
Political leaders, irrespective of their different political hues, always profess that they possess all the necessary solutions to the burning economic woes at their fingertips while they are not on the saddle of political power, however, the realistic situation is such that they prove themselves to be nincompoops and clueless amateurs once they are placed on the saddle of government.
A prominent management thinker, Tom Peters, writes in one of his best-selling books that if a person offers a simple and cakewalk solution to a complex problem then such offers must be viewed with skepticism and treated with a pinch of salt. He said that people who act as messiah and offer solutions without giving reasons as to how or why their solutions work are charlatans, a quack doctor, prescribing medicine without being properly medically qualified and, therefore, whose advice must better be pooh-poohed at the outset since they have a covert agenda to be achieved by hoodwinking the public.
The current day naysayers purposely mislead the people by their public utterances that they are in the possession of a secret recipe or a magic wand that can unearth instant solutions to the current economic woes of the country, but such genius strategies, they further state, can be made active only if and when they are placed in the saddle of government. This line of arguments is akin to schizophrenia in which one fails to recognise the stark economic realities in their face value and engages in facetious treatment of grave economic issues that are existential to a nation.
Naysayers on taxation policy
As the old adage goes, only two things in life are certain: death and taxes both of which are preferred to be deferred as long as possible since they are abominable, repugnant and horrifying to the earthlings. Albeit taxes represents a financial burden and is disliked by almost all income earners, tax income is the main financial strength that provides wherewithal to the Government for undertaking programs for a country’s development.
One of the main policy measures that the professional community has a grinding grudge against is the taxation of professionals whose monthly earning exceeds Rs. 110,000 which they describe in all derogatory terms stating that new income tax levied on them is unjustifiable, intolerable and defies the saner economic logic of taxation.
It appears that what they advise by implication is the imposition of indirect taxes on goods and services to be borne indiscriminately both by the affluent and the penurious. Indirect taxes in the forms of excise duties, VAT and tariffs are the key contributors to the government tax revenue standing at 74 percent while direct taxes, including income tax, Pay as You Earn tax and economic service charges contributing to nine percent in the total government revenue structure.
On the expenditure side, the situation is that, albeit the Government gets an income of Rs. 145 billion every month, it has to eke out Rs. 93 billion to pay salaries, Rs. 27 billion for pension payments, Rs. 6 billion for Samurdhi allowances and another Rs. 17billion for social welfare, plus capital expenditure of Rs. 11 billion which add up to a total of Rs. 154 billion, which makes an expenditure gap of Rs 9 billion, according to the Finance Ministry Website in 2023.
Government revenue in 2021 stood at 41 percent of its expenditure, which was inadequate to cover even its recurrent expenditure. It falls short of the two largest recurrent expenditure components cumulatively - salaries and wages, and interest payments. In 2020, the total income tax collection stood at 1.8 percent of the entire Government revenue which, in contrast to the revenue structure of other countries, represents a lopsided and unhealthy situation.
If the whole problem is anatomised for the purpose of better comprehension of its magnitude, one may realise that the vast majority of state and semi-state sector employees is not liable to pay the current income tax since their emoluments are much below, not even closer to the, lowest income tax activation level.
Accordingly, more than eighty percent of protesters who thronged to Colombo or abstained from work recently to register their resentment against income tax have in fact no grudging grievance against the new tax system at all. However, the recent developments undoubtedly prove that demagogy is a powerful tool in the hand of unscrupulous apparatchiks of various political hues who are hell bent to instrumentalise the emotionally stimulated public as a battering ram that resembles to the blind obedience demonstrated by kamikaze.
Partisan politics and factoids can totally brainwash the gullible public at the behest of the megalomaniac political parties.
Direct and indirect taxes
The protesting trade unionists and professional groups conveniently forget that in countries such as the USA, there are two types of tax arrangement namely state taxes and federal taxes of which the latter includes seven federal income tax brackets, with 10, 12, 22, 24, 32, 35 and 37 percent. There is no national sales tax in the US and, therefore, no standard rate can be found. Sales or use tax rates vary by state, ranging from 2.9 to 7.25 percent at the state level. In addition to the state rate, local governments in 35 states impose an additional sales or use tax ranging from 1 to 5 percent.
It is common understanding that a Government of any country irrespective of its size or political philosophy should have access to financial revenue that can be amassed either by sale of goods and services or collecting taxes from people and enterprises or employing both avenues depending on the circumstances that prevail in a given country.
The option of collecting tax income hinges upon two alternatives namely direct taxes and indirect taxes both of which have their intrinsic limitations, advantages and disadvantages. The professional groups that clamour against the income tax levied on their generous income by the Sri Lankan norm have no qualms on the imposition of taxes on goods and services that are utilised by both the rich and the poor alike.
Albeit indirect taxes are equally levied on the entire population irrespective of income differences among households, the irony of the fact is that the poorer segments, being the overwhelming majority in numerical terms of the population, involuntarily bear the lion’s share of the tax burden and thereby become the main source of funding the country’s administrative machinery.
Another obvious anomaly associated with high indirect tax alternative is that the low income segments are compelled to pay higher percentage of their income as indirect tax due to their high consumption expenditure while people within the affluent income brackets are paying a lower percentage of their income as goods and service tax; nevertheless they simultaneously purchase comestibles at the same prices that are paid by the poorer households as well which, as a practice, goes against the natural justice of economics.
Another moot point that ought to be brought into the limelight is the question of who the bulk users are that enjoy the public goods such as transport, security, infrastructure, recreation facilities that are provided by the government, at no cost to the users, with the utilisation of tax revenue on a perpetual basis. Professional groups by implication believe that they belong to a privileged echelon of the society different from the hoi pollo and, therefore, entitled for exceptional treatment.
Albeit the absence of conclusive research data and evidence on who utilises public goods most, it may not be far from truth if one assumes that the professional and high-income groups are very often the heavy users, in terms of intensity and frequency, of public goods that provide them the essential wherewithal for earning higher income and thereby enabling them to position themselves over and above the low-income groups in society.
If the social media is considered as a mirror reflecting the image of public opinion, then one can peruse the social media and find out how the people expresses their utmost disapproval and loathing of the trade union actions initiated by university dons and GMOA against the new income tax arrangements.
Irrespective of the callous disregard demonstrated by the professional groups and their myopic approach towards the economics implications of taxation, a particular noteworthy spectrum of criticism that has been bought for social discourse by the naysayers is the question of irrational utilisation of tax revenue by the Government which as an argument bears a formidable truth in view of wasteful utilisation of tax revenue at the central, provincial and Local Government levels for various junkets and petty official shindigs in addition to the incidents of corruption.
Promises of Messiahs
The Messiahs who mobilise the public against the proposed tax structure and delay in the conduct of Local Government poles cannot obviously be oblivion to the pros and cons associated with their propaganda but, it appears, their comportment is totally governed by partisan politics that drives them away from saner or visionary oriented thinking.
The track record of the Messiahs who were in power not so many years ago, does not provide an iota of assurance or axiomatic evidence to the effect that their performance, if they eventually come into power, would be in line with what they preach to the people when they are not in power.
Partisan politicians, no matter where they exist, are perfect followers of Niccolò Machiavelli who states that the promise given was a necessity of the past: the word broken is a necessity of the present. If one carefully listens to the public blathering delivered by so called liberators , what can be gathered in general comprise the promises that are related to the abolition of income tax, reduction of fuel prices, reduction of cost of living and solving of foreign exchange shortages which represent, without doubt, a cockamamie proposition to anyone with logical cognitive ability.
Spencer Johnson in one of his best-selling books, “Who Moved My Cheese” mockingly compares the way humans and mice behave in organising their daily activities in the effort of finding cheese, a metaphor for food or benefits, in which human behavour is guided by stereotype thinking while mice use their instinct, sniffing ability, in locating the places where cheese is available.
When mice find that cheese is not available in a particular location, they immediately vacate the place and find a new location using their instinct because they are wise enough to understand that ransacking or vandalising the particular location ends up with only disappointment without discovering cheese.
Contrary to the conduct of mice, bipeds, when they are told that there is no more cheese at the usual place where they used to obtained cheese from start ransacking the place, dig into the foundation of the building and organise violent protests demanding cheese from the same organisation believing somehow or other cheese is hidden unknown to them in their familiar location. The question of whether humans are wiser than mice in relative terms is still undiscovered or murky area of epistemology.
Stakeholder behaviour
Political parties, trade unions, civil societies and professional bodies are obviously an integral part of the nation state as well as organisations that have been established to provide vital facilities to the public at their level best. Nevertheless, the demonstrated behaviour of political parties is most likely egocentric by nature and apocalyptic as far as the end results of their conduct are concerned.
If what they promise is deliverable, plausible and credible, then the people as a collective entity must facilitate the passage for them to reach the power in the legislature, but economic realities of such boondoggles immediately negate the practicality of fulfilling such Sisyphean and hypocritic promises.
Trade union office-bearers, albeit being the internal stakeholders of the organisations in which they work, are the vanguard forces that spearhead in attacking the employer at the drop of a hat if the employer’s views contradict that of the union’s or their political master’s agenda. Their language is so violent and shrouded with threats albeit they professed themselves to be professionals and very often they openly demonstrate their saber rattling with bellicose statements to the effect that the whole county would be shut down and the supply of services would be paralysed unless government take immediate action to obliterate programs that do not curry favour with their parochial goals.
In fact, one may be surprised to observe the degree of attention paid by the public media, going an extra mile, urgently drawing attention in their editorials, news telecasts and feature articles to propagate the virtues of conducting Local Government elections as the top most priority seemingly giving the public an impression that all the country’s economic woes will be vanquished next day after the local government elections are successfully accomplished.
Some national level newspapers are engaged, burning their midnight oil, in writing editorial comments daily, in their valuable print space on the immense virtues of conducting the polls and the looming disaster that befall on the nation if the local polls are not conducted as scheduled. It is often alleged that democracy and religion are the last resort of all scoundrels who have no whatsoever hesitation in instrumentalising anything to achieve their myopic goals at a larger cost to the country.
The writer is a former Senior Consultant, Sri Lanka Institute of Development Administration.