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Ravi K bemoans Revenue Proposals challenged in court

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21 July 2016 12:02 am - 0     - {{hitsCtrl.values.hits}}

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Finance Minister Ravi Karunanayake, in an interview with the Dailymirror, says VAT increase was introduced with the aim of collecting Rs.100 billion in terms of revenue for the government. However, he said it was regrettable to note the revenue proposals being challenged in court. The excerpts:  

 

Q How do you analyse the present status of economy with reference to the financial situation of the government?
If you look at it from a broader aspect, it is a much safer, more financially disciplined economy we have created. That is compared with what we inherited. What was handed over to us had been unbelievably distorted. I would say it had gone to rack and ruins. It took time for us to put it on the right track. We are now on top of it.   

 


Q But, if you look at the last budget, it was presented and amended in a major way later on. What is the kind of impact it created on revenue targets originally outlined? 
Whatever the thing is, the Prime Minister’s statement last November and my budget were intended to project what the situation was. As usual in a democracy, there were distortions to that, and there was a bit of corrective action taken. With that, the main focus was to have revenue increases, but not at the expense of people to the extent that they get suffocated. It was to get revenue meaningfully from people who do not pay taxes. You could see that revenue was increased by 40 percent last year. Today, it is increased by 46 percent. It has also helped reduce cost. We feel that it is certainly moving towards the fiscal consolidation.   

 


Q How big is the revenue shortfall or the gap between the expected amount and the achievement?
That is a pessimistic approach the media seem to be painting. Despite the fact that we are unable to collect some of the things. To be very frank, there are 17 revenue proposals that we have brought in. Sixteen of them are in court. I do not know how you can run a country of this nature. Anything and everything, you get to court. It is a delaying process. I basically urge the Chief Justice and the Supreme Court to look at it. If you are running a government, you have to have revenue. The costs are immediately impacted. Revenue collection is being protracted. And there is a gap being created. You cannot run a government of this nature. These are historical elements, who basically got caught with corrupt activities during the Mahinda Rajapaksa regime, and now they are doing anything and everything to destabilise the economy. But, we will resist such things and ensure that people will get what they deserve to get.   

 


Q Now in reference to the Value Added Tax (Amendment Bill) challenged in court, how are you going to proceed with this legislation?
We will pass it in Parliament. That is all.   

 


QBut, we are told that the Bill will not be taken up for debate in Parliament on the scheduled day.
It is obviously because of court action taken. We are unlike former President Mahinda Rajapaksa. I, along with Ven. Theeniyawala Palitha Thera, went to court seeking a fuel price reduction. However, that government said it would not care and proceeded. We could have acted in the same fashion. But, we did not. The judiciary must also respect that it is a creation of the Constitution and Parliament. There should be a smooth flow of operation between the two. If 17 revenue proposals are brought in and 16 of them are in court, it shows the pathetic plight the country is in. Now, the salary increases, pensions, revenue reduction from petroleum, the reduction of cost of living are taken. Today, people believe in something for nothing. That concept must change. It must be ensured that the country is in a firmer financial footing.   

 


Q We learn that the Sri Lanka Freedom Party (SLFP) is going to propose amendments to the VAT Bill. How accommodative are you of them? 
Everybody brings suggestions up, no. We have to run a government which is of mutual consent. Those will be respected and taken forward. Anybody with political purpose keep grumbling and shouting about. At the end of day, the President and the Prime Minister will decide as to how to take it forward.   

 


QDoes that mean you are ready to accommodate the SLFP proposals on VAT?
That is only if they are not nonsensical.

 

  
QIn the event of possible impact on revenue targets due to the incorporation of SLFP amendments, what are the alternative measures you will take to fill the gap? 
We have no such paucity or hesitation in doing so. Even if there are certain things out of gear, our revenue targets are spot on. That is the difference in our approach. We are taking a holistic view.   

 


Q What is the expected revenue target by increasing VAT rates?
 Of course, we are looking at Rs.100 billion.   

 


QWhat are the other measures to increase the country’s foreign reserves?
You could see we had reserves of US $ 6 billion before the bond issue. Then, we got US $ 1.5 billion. We got a syndicated loan of US $ 300 million. There is a road show going on in Singapore, Qatar and Dubai. That will bring in US $ 300 million.   


The problem we have is that former President Mahinda Rajapaksa gave us an economy with a debt burden. The government’s revenue is not sufficient for debt servicing. That government was burrowing to pay loans. But, the President and the Prime Minister changed the situation. With all the election promised we gave, we were able to have expenditure met by revenue of that year. There was no burden in 2015.   

 


Q But, it is mentioned in the Auditor General’s report that the government borrowed in excess of the limit approved by Parliament. What is your view on it?
Now, Kelum, your paper has become a reckless, irresponsible paper. For 11 years from 2005, reportage has been in the manner specified by the Auditor General. He himself admitted it. You are harping on a matter which is already dead. He (Auditor General) basically said it had been departed from nett reporting to gross reporting. Are you failing to understand that aspect? I think it is nothing but mischievous. I think your paper has been ploughing this type of negativism. It is not taken well. You all should report and people should decide. 


From 2005, five Auditor Generals have shown the way the borrowings have been taken. All of them said it was net borrowing. But, this Auditor General did otherwise and said gross burrowing. At the same time, he qualified the 2014 situation. You all are not questioning it. We are not irresponsible. It is the capricious behaviour of some. I am also an accountant. We are much more prudent than many of them coming in. If the Auditor General’s Department is saying what is happening, then it should be able to say what the past sins are.   


Today, you see corruption that has taken place- the construction of the Sooriyawewa Stadium, Mihin Lanka, and the situation at SriLankan Airlines etc. Why isn’t that situation mentioned?   
Good governance does not mean that you have the freedom of a wild ass. Today, the world is lending to us. Japan, China, the United States, Europe, India, Singapore, Korea, all of them, are lending us. Where was this before January 8, 2015? All of them regarded us as the Banana Republic. A mischievous family rule was there.   

 


Q Minister, you went to China recently. What are the financial arrangements you made with them?
I went for the Annual General Meeting of Asian Infrastructure Investment Bank (AIIB). We are a founder member. We basically got approval for project loans.   

 


Q What is the amount agreed upon?
Up to about US $ 1 billion is coming in for various projects. It will be delivered this year.   

 


Q What are the other arrangements with ExIM Bank and China Development Bank?
Well, discussions are going on very successfully. I think it is a situation where healthy relationship exists with all the countries. Our foreign policy is ‘friends with all and enemy with none’.   
If you look at the highway project, there is a cost reduction of 21 per cent. Isn’t it good enough?  

 

 
Q Recently, you mentioned in Parliament about measures to raise funds from Japan. How is the progress now? 
When the Prime Minister went there last year and the President this year, the Japanese government gave us US $ 4.5 billion development policy lending loans, and US $ 1300 million will be in Samurai bonds. The Japanese government is assisting us to get things moving.  

 
With the US, there is assistance for capacity building. Investments are coming in. There is financial assistance.   

 


Q Against this backdrop, what is the focus of the next budget?
With all that is there, compared with Mr. Mahinda Rajapaksa’s course of a 11- year misrule, hasn’t things changed during our less than one year rule? Internationally, we are accepted. Today, we have democracy. Today, the judiciary gives judgments which are free and fair of any political pressure. You have media freedom which is misused to a great degree. With that, hasn’t things changed?   
What we say is to look at the country in proper perspective and see that we are able to ensure that promises are kept. The budget is only a directional method. The overall strategy remains that we continue to take the economy from a bad yesterday to a good tomorrow.   

 


QAre you formulating budgetary proposals at the moment?
It is recurring decimals no? You keep going on. We will come up with concerted efforts as to how best that can take place. With that we can get things moving. One thing we can proudly say is to develop the country. The multi-lateral agencies have given us a huge leeway. They all are helping us in one aspect. The problem is what was borrowed yesterday. This country must get rid of corrupt manipulative approaches.   


As for SriLankan Airlines, in 2009, it was handed over with Rs. 9.1 billion reserves. Today, we talk of a Rs 176 billion deficit. How has the Rajapaksa rule ruined it? You have contingency liabilities of another Rs.250 billion.   
Mihin Lanka has been run at a Rs 10 billion loss. Today, you have seen everybody being questioned on matters that have taken place. People are coming forward to give statements. Look at the misappropriation that has taken place!   


Today, where are the professionals? Why are they stony silent? They are only looking at what is populist, which basically goes against good governance. Today, good governance is for 99 per cent. Today, there are independent commissions. It has gone to such an extent that it has paralysed decision making.   


The next budget will be aimed at economic consolidation helping the country to head in the right direction. The Prime Minister will make a statement in Parliament outlining the way forward.   

 


Q How far have you progressed in the introduction of Capital Gain Tax?
We basically made no bones about it. The government invests in the economy. What comes as dividend or tax is well insufficient in reciprocity what the government puts in. It is the lower end that pays more. The upper end looks at tax holidays. There are some needs to be taxed. A Capital Gain Tax will be brought to rectify the anomaly.   


VAT is a subject matter that has been spoken of, and administered in 128 countries. When Mr. Rajapaksa put 20 per cent VAT, no noise was made. We increased it by four per cent. It is nothing to pay for Mr. Rajapaksa’s sins. Our attempt is to get the revenue and to reduce it as soon as possible. We are not interested in high rates that are there. We are the ones who reduce taxes. Before reducing that, people who did not pay taxes should be brought to the net. That is what we are calling for.   


It is a non-regressive tax. Some traders who do not pay taxes distort it.   


When we try to modernise Sri Lanka Customs, resistance comes from a handful of crooks. I regret to see some people of stature getting into this bandwagon without knowing anything. It is only a white paper in place, not an Act. It is an open discussion. It is pathetic to see people of high authority open matters before they see it.   


I sincerely believe these are corrective action that needs to be taken. As for Customs, it is an ordinance brought in 1894. That is an antiquated law unable to deal with real life situations today. We are trying to change. It is irritating some people. Some of the crooks are there. There is no undesirable, insidious approach. It is only to ensure that revenue is collected.   

 


Q It means you are determined to enact the legislation on Customs?
Why not? The antiquated laws need to be corrected. Wherever a wrong picture is given, we will correct it. What is not there should not be highlighted by the media.     

 

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