Friday Nov 15, 2024
Friday Nov 15, 2024
Wednesday, 11 February 2015 00:00 - - {{hitsCtrl.values.hits}}
I have advocated during the last few decades of my engagement in the corporate sector in Sri Lanka and in some of the Asian countries of the Corporate Commercial Responsibility (CCR), the need and the strategic importance of responsible and sustainable revenue generation.
When the private sector forgets that they are operating in a larger economic and social land mass and tries to outperform the country’s social and economic performance in leaps and bounds, then you eventually end up having to face economic Sura Saradials and economic Robin Hoods.
Unfair tax policies create inequalities and increase poverty in the country
At the recently-concluded World Economic Forum, Winnie Byanyima, the Executive Director of Oxfam International who also co- chaired this year’s Davos event, placed before the global leaders some startling revelations on global poverty and inequality.
One percent of the rich will own more assets than the remaining 99% by 2016. Accordingly, 1% rich of the world will own 50% of the global wealth by 2016. Eighty rich people (80 billionaires) on the planet will have the same wealth as of the poorest 50%, that is 3.5 billion people. Of the world’s wealth, nearly $ 223 trillion is in the hands of 1% rich of the world.
Byanyima attributes this among many reasons to the staggering inequality of the rich having it all and wanting more. She also attributes tax policies and procedures adopted globally as one of key contributors to this inequality. She advocates firstly to clamp down tax dodging by corporations and rich individuals; secondly to share the tax burden fairly, shifting taxation from labour and consumption towards capital and wealth.
Labour and consumption-oriented tax regime heralded downfall of last regime
Byanyima’s contention and advocacy is greatly relevant to Sri Lanka, as the two issues she has highlighted are part of the problem in Sri Lanka too, paving the way for the emergence of economic Robin Hoods at some point in time.
It is clear that inequality rises when tax rules are unfair and unprecedented labour and consumption-oriented tax mechanisms are the order of the day. One of the reasons of the downfall of the Rajapaksa regime was the unfair tax burden placed on the common man by continuous increasing of consumption tax.
One of the key reasons Byanyima advocates increasing corporate tax as part of the solution to reduce inequality is, when corporates pay less tax, their profits increase, and these profits ends up clearly in the pockets of the top 10% and 1% of richest people. At the same time she contends when corporates pay less tax or no tax, it is left to the common man to fill the gap by consumption tax and this was the order of the day in the last nine years in Sri Lanka where the Dr. P.B. Jayasundera and Ajith Nivard Cabraal duo excelled in presenting their so-called miracle budgets every year until the bubble burst on 8 January.
Greater accountability to all stake holders and responsible revenue generation is the way to prevent emergence of economic Robin Hoods
The corporate sector in Sri Lanka should come to terms with the emergence of the greater stakeholder responsibility and deliver returns to all stakeholders, which can impact their economic transformation. Gone are the days you maximise profits purely to benefit shareholders, essentially the capital investors. For greater sustainability and responsible revenue generation, all the stakeholders, shareholders, employees, customers and greater society at large play equally strong engagement towards the success of any business entity.
In my over 30 years of direct engagement in the Sri Lankan corporate sector and some of the leading Asian banks and financial institutions, I have advocated to the corporate sector the importance of economic inclusion and reasonable value transfer to all key stakeholders for the business continuity and sustainability.
This year’s World Economic Forum in Davos had indicated the emergence of possible economic Robin Hoods at the global stage, if the corporate sector continues business as usual; no wonder Oxfam International headed by Byanima has called for The World Tax Summit to be held in July alongside the UN Financing for Development conference in Ethiopia in July 2015 expected to be attended by global leaders.
Economic progress to people and planet through sustainable profits
While I am not going to comment on the negative and positive sides of the Interim Budget presented by the new Government at this stage, I strongly believe that with the corporate sector being labelled as super gainers, they themselves should take the blame.
It is important as a national priority after the 100-day program is over, under the new Government and after the imminent Parliamentary election, the Ministry of Finance and the Inland Revenue Department should strategically evolve the best tax mechanism that fairly suits Sri Lanka.
On the other hand, the private sector instead of trying lobby and counter-lobbying to get things changed, should best look inwardly and look at greater stakeholder responsibility and accountability. The private corporate sector should now take this opportunity as first mover advantage by demonstrating commitment to go beyond the triple bottom line, not just People, Planet and Profit, but how the profit could trigger progress to all stakeholders towards economic transformation.
[The writer is Chairman of Asia’s largest microfinance network, the Singapore-based Banking With The Poor Network (BWTP). He is also the Chairman of CSR Sri Lanka, the national apex body for corporate responsibility. He serves on boards of number of Sri Lankan and international financial institutions and is an innovator, advocate and practitioner of financial inclusion in Asia. He can be contacted via [email protected].]
