Yahapalanaya was well aware of this revenue declining situation
I continued to oppose this taxation system
Finance Minister, Mangala Samaraweera, perhaps having apprehended the reality, attempts to make some corrections.
We must find a lasting solution to our problems by ourselves
Let us not create conditions for western powers to intervene or exploit our lapses
we must adhere to an equidistant policy towards India and China
India’s economy, despite its fast growth in the context of the current globalization process, will have to enter a multi-lateral framework with China
Senior veteran politician former Minister and General Secretary of the Communist Party of Sri Lanka D.E.W Gunasekara discussed the current domestic, economic and political situation in the island and the new tax regime introduced from April 1st in an interview with the Dailymirror.
Q You have been in the forefront among tax experts, politicians and economists who campaigned for a new tax regime with far reaching amendments to the tax law. The Government has introduced a new Inland Revenue Act effective from April 1. How do you evaluate the new tax system?
I was totally opposed to the taxation system from the very beginning. I showed opposition when Ronnie De Mel as Finance Minister originally moved this new tax regime. This was the starting point of the decline in Government revenue from 24% of the GDP in 1978 to the present level of 12% of the GDP. It continued under all regimes and a 30 year period further escalated our debts while government revenue continued to drop sharply. Finally we had to resort to more debts in order to repay our debts. So,we are now in a debt trap. Yahapalanaya was well aware of this revenue declining situation. On the very 50th day of theYahapalanaya Government, the then Central Bank Governor Arjun Mahendran allegedly engineered an attempt to increase debts over and above the dictates of the General Treasury. The rest of the story is in the Presidential Commission inquiry report.
During the past three years, they failed to identify their national priorities. They were well aware that the country has got into a debt trap. How did they behave? On the very 50th day of the 100 day programme, the alleged Central Bank Bond Scam took place.
I continued to oppose this taxation system which tax exemption, tax relief, tax amnesties and lowering of tax rates were the order of the day under all administrations based on neo liberal policy prescriptions. In the absence of foreign capital inflows, national savings, accumulation of domestic capital and low Government revenue, the debt was the only way out. This is the crux of the matter which Yahapalanaya totally ignored from the very beginning. The new Finance Minister, Mangala Samaraweera, perhaps having apprehended the reality, attempts to make some corrections. Former Finance Minister Ravi Karunanayaka made the situation chaotic, through his pro-capitalist class stance. My speeches in Parliament between 2004 – 2005 provide evidence in support of my stand on this issue.
Q The total state revenue was hovering between Rs. 1,700 – 1,800 billion during the last couple of years. The new tax system expects to increase Government revenue by 100% by 2020. Is this a reachable target?
It is a too ambitious a target. I wonder whether the tax administration is well-geared for this gigantic task. The overall performance of the public service, from the perspective of efficiency and delivery is weak. Corruption too has set in. In this context, I am a little pessimistic of these targets being achieved. I wish Mangala all success.
Q How will the ongoing trade war between economic giants in the likes of US and China affect smaller countries like Sri Lanka?
Fears of a trade war are mounting after US President Donald Trump slapped up tariffs on imports from China. Already, there are signs of retaliation by China. Japan has warned that even bilateral free trade with us could be affected. They recommend a multi-lateral framework. In a multi polar world order, protectionism or unit literalism, simply would not work and is prone to be a flop. If Trump’s target is China, he will be sadly mistaken. He refuses to see the reality of the on-going change across the world. Before that, he may face impediment. In desperation, he is now resorting to missile wars in instead of trade wars.
Q The so called western friends (EU Countries) of Sri Lanka like UK, Canada and US have made it a habit to push Sri Lanka to a corner and insisting on the global stage to put into effect the recommendations of the highly controversial resolution passed in 2015 at the UNHRC sessions in Geneva. The resolution includes a so called ‘Credible Domestic Inquiry’ with the participation of foreign judges. Can Sri Lanka do this without violating the Basic Law in the country?
I take a completely different view regarding this whole issue. I was the Acting Minister of Foreign Affairs during the last few days at the end of the conflict in May, 2009. It was I who saw the then Secretary General of UN Ban Ki–moon off at the BIA at midnight on May 23. I was quite aware of what all our western friends were up to. This behaviour at the UNHRC was nothing surprising to me. If we had sincerely implemented the LLRC report effectively and expeditiously, we would have been on the offensive now. We failed there and provided an opportunity for our western friends to exploit our weaknesses or failings.
We must act in keeping with the law of our country. We must find a lasting solution to our problems by ourselves. The world opinion would have been in our favour. India, Russia and China and even a large number of EU countries would have been with us if we took the right path in this exercise. Let us not create conditions for western powers to intervene or exploit our lapses in favour of the global strategists and geo political interests.
Q Though there are many positive features in the newly introduced Local Government Electoral System, it is in a total mess and on many instances the formation of Local Government (LG) bodies on the result of the February 10 LG polls has failed to fulfill the expectations of people. Do you agree?
It is necessary to return to its origin. I was a member of the parliamentary Select Committee of 1986 which conceived the new Local Government Electoral System. I along with Dinesh Gunawardana, submitted a dissenting report on certain discriminatory provisions, namely bonus seats and the cut-off point as high as 12 1/2%. We called for a mixed system and to do away with preferential voting system. It took 34 long years for the much needed amendments to be made. In fact, it was the Dinesh Gunawardana Select Committee and under my Ministry of Constitutional Reforms and National Integration that those amendments were recommended. Tampering with these clear cut amendments, the Yahapalana Government doubled the membership of the local bodies to over 8,000. This blunder has created a host of new problems. As in the case of the 19thAmendment, here too was a hasty legislation that has contributed to this mess, confusion and turmoil
Q The country’s economy is in very bad shape. How and when can we come out of this extremely negative state of affairs?
We are living during a time of uncertainty and complexities as far as the global economy is concerned. Bearing that in mind, we must realize the realities of the world order and the world’s balance of power. Our island economy of US$ 80 billion simply cannot ignore the realities of a fast growing Asian economy.
Despite geo-political concerns, we must adhere to an equidistant policy towards India and China. We won’t have a future if we pursue anti-Indian or anti-Chinese policy stand. We should not get caught to the intrigues and mechanization of western powers. Let us maintain our traditional friendship with all countries.
Domestically, there won’t be any salvation if we do not rely on our natural and human resources. However, our natural resources are limited. In the age of digital revolution, we must equip our human resources with knowledge, vocational training and technology. In the next decade, the Asian economy would be far ahead of all other economies. Here, the decisive factor is the fast growing Chinese economy. India’s economy, despite its fast growth in the context of the current globalization process, will have to enter in to a multi-lateral framework with China for its sustainability. Sri Lanka should dialectically think in those terms with a vision, strategy, and applicable policies.
Q A new Cabinet has been sworn in with a continuously squabbling bunch of politicians of the divide. Do you think the forward march of the so called ‘Yahapalana Government’ would be a happy go lucky one?
No one knows when the new Cabinet would be sworn in. Even that appears to be in a state of crisis. However, I am pessimistic of their optimism to expect a ‘Happy Go Lucky’ Yahapalana in the next one and half to two years. It is an opportunity lost for the Government as there were contradictions and confusion. It was also neither a national nor Unity Government. Only Ranil knew its vision, prerogatives, strategy and policies. It was the country’s first experiment of a UNP–SLFP led Government. The two major parties in the country are today incapable of administering a Government of its own or through a collective effort.
During the past three years, they failed to identify their national priorities. They were well aware that the country has got into a debt trap. How did they behave? On the very 50th day of the 100 day programme, the alleged Central Bank Bond Scam took place. For three long years, after that, the Prime Minister was stringing his every nerve to safeguard the culprits. Despite two Parliamentary COPE reports and a Presidential Commission inquiry report he continues to hush it up. The spirit of Yahapalana spirited away on the very 50th day of the Government. Even on the No Confidence Motion, which arose as a result of this scam, the Prime Minister preferred to be silent. In retrospect, I now feel that had there been no 19th Amendment to the Constitution, President Maithripala Sirisena would have performed better, his way, using executive powers.
Q There is no doubt that the ultimate sufferers of this uncertainty in governance are the people of the country who have enough and more problems. Your comments?
Yes, I totally agree. The people are at the receiving end. We witnessed this in the lives of the people and now confirmed by the Government’s own statistics. Firstly, the lowest segment of the Sri Lanka society accounts for only 4% of the national income while the highest segment accounts for 53%. The income disparity shows the level of poverty and inequality.
Secondly, 60% of our people come from the informal economy, whose Purchasing Power is very weak with mounting needs and wants created by consumerism. Thirdly, the sharp decline in the Government revenue from 24% of the GDP in 1978 to 12% in 2017 has affected the economic growth in an extremely bad way. It is of course a continuous drop of state revenue under all administrations. The trend was quite discernible for long. Foreign Reserves have dried up. The level is sustained by further debts and not by capital inflows. The plight of the people was evidenced by the results of the LG Polls in February. Of course the nature too was unkind to us by way of drought and floods. They also contributed towards the negative results. But the fact remains that the Yahapalanaya Governement has failed miserably in terms of economic management. In this regard a greater share of responsibility has to be borne by the Prime Minister and the UNP who were the mainstays of the Yahapalana Government.
Q The policies of the UNP and the SLFP are totally different and confrontational in almost all aspects. Do you think the two parties in the Unity Government could co-exist at least till 2020?
Already, three years have lapsed. They have failed badly in economic management. Nothing miraculous could happen within the next one and half years under the existing crisis situation. In short and quite bluntly, I would say that their failure was more due to subjective factors than to objective conditions.
Q The SLFP has been further divided. What would be the future of the party that was formed by late Prime Minister S.W.R.D.Bandaranaike with the objective to bring prosperity, happiness and the social upliftment of the common man?
It is unfortunate that the SLFP is in an utter mess with splits and continued inner squabbling. The SLFP has played a historical role in the anti-imperialist democratic struggle. We of the Communist Party dialectically saw the emergence of the SLFP as far back as 1950 and the need for a broader front of progressive and democratic forces to complete and strengthen the anti-imperialist struggle.
We are today facing the new challenges both globally and nationally. Much water has flown under the bridge. The SLFP has not comprehended its present role and its current tasks. I believe that the present political culture brought about by neo-liberalism is the contributory factor towards its present impasse.