Vasudeva calls for tax hikes

The Rajapaksa administration is presently struggling with no revenue says Minister of National Languages and Social Integration Vasudeva Nanayakkara, suggesting that the quickest way to find money is to impose more taxes.

Nanayakkara emphasises that “those who can pay should be asked to pay more taxes”. The Minister also stresses on the importance of taxing black money in order to find immediate funds to ease the present financial crisis of the Government.

Despite being known as a strong trade union activist, Nanayakkara asserts he is now compelled to play a more balanced role due to his responsibilities as a Cabinet Minister.

Following are the excerpts from an interview:

Q: You have been raising a voice against privatisation. What is your latest move?

A: The privatisation series has been firstly damaging the Government’s revenue and has stripped the Government of its assets for considerations which are far below the actual value and price. This was clearly proved in two important cases; the Insurance Corporation case and Lanka Marine Services case. There are another large number of such privatisation cases which need to be examined and corrected. But it has to be done by filing action in courts as the transactions have been closed; but being out of time in law, it has become difficult to raise the issues regarding them in courts. Therefore, a commission should be appointed, in my view, in order to ascertain whether such privatisations have been adverse to the public interest and the Government’s revenue.

Let me give you one instance; a cabinet subcommittee was appointed under the chairmanship of Minister D.E.W. Gunasekera to examine the plantations privatisation and how they are doing now. The chairperson observed that at a minimum valuation, the lease or rent should earned by the Government at the end of the year was Rs. 1,300 million. Unfortunately, the Government at present receives only Rs. 487 million, even this has from time to time gone into arrears. This is despite the rubber prices and tea prices having been reasonably good during the last 10 years at least, and with the devaluation, the prices have been stabilised.

South Asian Gateway Terminals (SAGT) is a questionable transaction. I recently sent a letter to the Secretary of the Treasury requesting certain information about SAGT. In the letter I requested the Treasury Secretary to provide me with the extent of revenues to the State prior to the privatisation. Revenues earned by the mentioned project after the privatisation and the revenues earned by the Government from the said project after the privatisation, and as to whether any tax holidays and other concessions had been granted to the project, and if so, the cost to the State of such concessions, were also among the requests stated in my letter.

In the letter I have also requested to indicate the terms and conditions upon which and price at which the said part of the Colombo Port was privatised, and the investments made by the private sector in this project in foreign exchange and local currency.

Another important matter I have highlighted in my letter to the Treasury Secretary is to indicate whether any of the State’s controlled finances were borrowed for the development of this part of the Colombo Port, and if so how much and over what period had they been repaid and with what interest.

Q: What was the response of the Treasury Secretary?

A: I have still not received any feedback from him. Anyway there is time for him to send me a reply. I am waiting for that.

Q: Do you believe that your move will have any impact?

A: I don’t know. I always peruse irrespective of the results that I ultimately achieve. These are matters that should not be allowed to lie without been raised as they affect the public interest directly.

Q: What made you highlight this issue now? Why suddenly?

A: It comes within the questions within the revenue of the Government. The Government is now struggling with no revenue to be able to spend more on the people and on the country’s development. Where should the Government go to find the money? That’s how it comes to my attention immediately and right now.

Q: By engaging in this type of acts, are you trying to divert attention from the bigger problems that are there in the country?

A: I would like to be a participant in any problem of any magnitude, small or big, with a view to help the public interest. That is what I am elected for.

Q: But you did not support the FUTA strike action although you are known as a strong trade union activist.

A: One should never forget that I am Cabinet Minister. I have to play two roles as a Minister and also as a trade unionist. I am not less interested in other issues. Therefore any complaints about my efforts being diversionary tactics will not hold water in view of what I have brought to your attention.

I have always supported an increase in the Government’s expenditure on education. The amount allocated for education at present is barely sufficient. On the other hand, the university teachers should receive an adequate payment for their services. I have clearly stated that a senior lecturer should be paid at least Rs. 100,000 and a junior lecturer Rs. 80,000. A professor needs a minimum payment of Rs. 150,000. This is my stand on this issue.

Q: Apart from the SAGT, what are the other irregular privatisation deals that you are looking forward to highlight?

A: There are 80 such cases. I don’t have the list with me right now. I believe all those must be reviewed where they appeared to be questionable prima facie.

Q: You said the Government is struggling with its revenue. What measures need be taken by the Government to overcome this situation?

A: Those who can pay should be asked to pay more by way of taxes. France is the best example for this. We must reintroduce the debit tax. We must charge a small tax from the capital gains, including the stock exchange. We need to increase the taxes at the companies and the individuals and their net incomes.

Q: People in this country are suffering enough; why are you suggesting more taxes?

A: The taxes I suggested are on the big businessmen who are making bigger money.

Q: But ultimately all such taxes will be transferred to the people?

A: Ultimately anything will be transferred to the people. Ultimately the burden on the rich will be the burden on the poor. In any society there are two layers that exist; one under the other. Therefore, the operation of a tax will be of no lesser consequence, but will immediately give revenue to the Government. In immediate terms it would be pocketed out by the rich people. But in the long term all burdens will ultimately be on the people until and unless you start appropriating capital.

Q: Budget 2013 is around the corner. What are your hopes and expectations?

A: We need some urgent measures to address the high cost of living by way of wage increments and subsidised essential foods in a rationed system. There should not be any indirect taxes, except for luxury and super luxury items. If we can introduce a 0.01% levy on all financial transactions above a particular value, it should bring forth substantial revenue to the Government.

Forty per cent of the circulating money is supposed to be in the black economy. We need to quickly trace and tax this. This means nearly 40 per cent are not paying tax. I am not suggesting expropriating their money. Let them have their black money; but let us have our taxes. The problem is when you remain black you tend to not pay taxes and levies.

Q: Do you think it is possible to implement your recommendations in order to find quick money to ease the Government’s revenue crisis?

A: If I am the Government, I will implement each and every suggestion I made.

Q: You are part of the Government.

A: Yes I am part of the Government; therefore I urge they be implemented.

Q: Are you satisfied with the present situation in the country?

A: Expenditure on public welfare requires substantial increase. To give you an example, the Sabaragamuwa Province needs Rs. 1,200 million to carry out the essential capital development in the schools. Unfortunately the Government was only able to give Rs. 387 million. Even if came in the last two months, you couldn’t spend it. There is a huge gap between the actual needs and what is given. Therefore an increase in the public welfare, especially education and health, is substantially required.

Increasing wages is the other important factor. The Census and Statistics Department says a family of four members which includes two adults and two children needs Rs. 45,000 per month for the essential expenditure such as food, clothing, etc. If that is the case, we have to increase the real income of the people to be able to meet this.

How we can do this is by adding whatever that has been increased over the last two to three years to the basic salary of the Government servants and giving the cost of living index, which is presently frozen at a particular point.

Then in the private sector it is necessary to increase the basic minimum wage at a point to the cost of living index, from which point onwards the workers could negotiate with the employers about the cost of living index payment.

Address the issues regarding the wages of the private and public sector workers in real terms; there is a reduction in wages in real terms with the cost of living going up. This is a gruesome experience for the working people; a grossly unjust treatment of the people who make the world go round. The rulers should understand that workers are the most important segment of society. Unfortunately they are the least well-treated people in this country at present. The informal sector is about 60% in the economy, but they are hardly looked after. They don’t even have a category in the economic matrix. The Central Bank does not even have a category for the informal sector and how much they contribute to GDP.