MP and former President Mahinda Rajapaksa in a statement yesterday warned that the Government was planning what he described as an “unreasonable” tax increases after the May Day and urged people to rise up against the move.

Rajapaksa, in an extensive statement, recalled that international commodity prices, especially of oil, dropped significantly in 2015 after the National Government came into power, paving the way for prices on essential goods to be decreased. However, he charged, that the Government continued to levy high prices rather than passing on the relief to the consumer. Under the latest move to increase VAT from 12% to 15%, the Government will unload another round of debt burden on the people, he claimed. 

“The international prices of virtually everything that we import declined after this Government came into power in January last year. In 2014 the average price of crude oil was $ 96 per barrel. Today it’s around $ 40.

 Wheat which cost $ 230 per ton towards the end of 2014 is now around $ 165. Milk powder which was over $ 5,000 per ton in 2013/14 is now around $ 2,000. Sugar which was $ 414 per ton in 2014 is now $ 334. Steel which was $ 300 per ton in 2014 is now around $ 90 or less. Urea fertiliser which cost $ 325 per ton in 2014 is around $ 200 today,” Rajapaksa said in the statement. 

He also went on to calculate fuel prices projecting that by current global prices, petrol should be less than Rs. 80 and diesel less than Rs. 50 per litre even after Government taxes.

“Though international sugar prices have declined since 2014, the Government has not passed the benefit on to the consumer. The import levy on sugar was reduced to Rs. 18 with much fanfare in January 2015, but in September 2015, it was increased to Rs. 30. The international price of milk powder has declined by as much as 60% since I was in office. The ‘Yahapalana’ Budget for 2016 fixed the price of a 400 gram packet of milk powder at Rs. 295, which means that the retail value of a ton of milk powder in Sri Lanka is Rs. 737,500 when the world market price is something like Rs. 290,000. Leaving aside a small amount for shipping and packing, the difference is what the Government takes as taxes and importers get as profits.

“During my tenure in office from 2006 to 2014, the international prices of all these commodities were much higher. Between 2011 and 2013 crude oil was consistently above $ 105 per barrel and went below $ 100 only after September 2014. The price of urea fertiliser reached $ 750 per ton in 2008 and remained above $ 500 throughout 2011-2013. Steel reached a high of $ 1,265 in 2008 and until 2013, was always over $ 500 per ton. Wheat went up to $ 440 per ton in 2008 and sugar reached a high of $ 655 per MT in 2011 and the prices of both commodities remained high throughout my tenure in office.”

The increase of VAT would hit many crucial areas of the economy including private education, healthcare and telecommunications, Rajapaksa pointed out, adding that while the Government has said essentials such as electricity and State-dispensed medication would not have VAT hikes imposed on them, they would nonetheless have an extra 2% NBT tax slapped on them. 

“While benefitting thus from lower global commodity prices, the Government is now trying to increase the VAT rate from 11% to 15% and widen its applicability to hitherto exempt sectors like telecommunications, health and education. This will cause a 4% increase in the prices of goods on which VAT is already being charged and a sudden 15% increase in the costs of telephone and internet services, medical specialist channelling services, medical tests, private hospital care, and private education from nursery school to tertiary level as well as private tuition classes. The applicability of the 2% Nation Building Tax has been extended to telecommunications and electricity as well. Telephone and internet services will see the highest price increases as it will be hit by the VAT as well as the NBT. The NBT on electricity will bring in huge revenues because it will be charged from all users of electricity.

“As resentment built up against the impending tax increases, the President tried to pacify the public by saying he would rather send the economic advisors of the Government home than have burdensome taxes imposed on the people. Two or three days later, a Yahapalana minister called a press conference and announced that VAT would not apply to essential items like water, electricity, pharmaceuticals, rice and vegetables, etc. These were items on which VAT had never been charged anyway. But the impression conveyed to the public was that these items had been exempted from VAT by the President to provide relief to the poor! That is the kind of cynical deception that the Yahapalana Government has been practicing on the people from the very beginning. Electricity may be exempt from VAT but not from NBT. There will be an all-round increase in the cost of living as both VAT and NBT will be charged even from retail businesses with a turnover of more than one million a month.”

Rajapaksa also criticised statements made by the Government intimating the public is able to absorb the VAT increase because salaries have been increased by the Sirisena-Wickremesinghe administration. However, the former President emphasised that public servants only make up 15% of Sri Lanka’s labour population but the tax increase would hit the vulnerable 85% more.

“The Government is going to increase taxes because there is no money to continue implementing the reckless pledges they made to the voting public to win power. They actually expected vast amounts of Western aid to flow in to sustain their Government. But no country gives aid to fulfil election pledges. The Yahapalana Government is now trying to find the money for their political survival through increased taxes on the very people they deceived in order to win power. This is another cynical trick on the part of a Government that won power through, and is sustained by, deception. This is why the people should rise up as one against the impending tax increases.” 

The statement also reiterated the claim made by the Joint Opposition that the Government was struggling because it made rosy election pledges that had to be honoured at high public expense. 

“This Government made irresponsible promises at the presidential election in order to win votes. After winning, they had to fulfil at least some of their election pledges if they were to win the Parliamentary election. For more than a year now the Government has been borrowing heavily in the foreign as well as domestic markets to pay for the salary increases and various hand-outs they gave to win elections. I have pointed out earlier that after January 2015, the Government has taken $7,436 million in foreign loans, nearly half of which ($3,298 million) has to be paid back before the end of this year. That is apart from the hundreds of billions of rupees the Government has been borrowing in the domestic market by issuing Treasury bills and bonds. Now the Government is trying to collect taxes from the people to repay these debts.”

Rajapaksa also questioned the Government policy on increasing import levies to promote import substitution, insisting that import substitution needed a program of action with targets to achieve and good publicity to obtain maximum public support, which in his view the present Government has not rolled out. Instead, Rajapaksa believes the levies are simply to increase revenue from taxes.

“No state can exist without taxes. A government needs revenue to carry out its functions and taxes are charged not only on the incomes of the rich but on goods and services used by the general population as well. Even essential items such as fuel, telecommunications, electricity and food are often targeted for taxation because such goods and services will be bought regardless of the price and therefore guarantees revenue. However, taxes have to be justifiable and reasonable. It is in that light that we should examine the tax increases that are to come into effect from 2 May.”

Ministry tells media to refrain from using “Joint Opposition” term

The Media Ministry yesterday called on the industry to refrain from giving publicity to the term “Joint Opposition,” insisting it was erroneous and undermined the standards journalists were expected to maintain.

Newly-appointed Secretary of the Media and Parliamentary Affairs Ministry Nimal Bopage issuing a statement insisted that the Government had, since last year, dedicated itself to promoting freedom of expression in Sri Lanka. As such it was “disappointing” to see the general acceptance of the phrase “Joint Opposition” despite the clear demarcation of the National Government and the main Opposition being outlined by Speaker Karu Jayasuriya in Parliament. 

“Since this Government came into power in January 2015, it has allowed the buds of free media to unfurl. However, it is clear that a group of people with vested interests are attempting to undermine these crucial steps taken by the Yahapalanaya Government to promote public rights,” the statement said. 

Analysts said the subtle threat to take legal action over the media's use of the term "joint opposition" amounted to censorship.

The statement went on to point out that during the last year Sri Lanka managed to climb an unprecedented 24 places in the Reporters without Borders rankings and the Government is dedicated to further expanding the freedom of media. However, Bopage insisted that the continued use of the term “Joint Opposition” weakened the professionalism of media industry professionals and damaged the efforts being made by the Government. 

Media Minister raps his Secy. for the move

Media Minister Gayantha Karunatilake claimed last night that the letter sent by the Ministry Secretary Nimal Bopage on the term “Joint-Opposition”, without his knowledge and will be corrected.