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Economic Distress Faced by Govt is Due to Monthly Salary Hike of 10,000 For 1.3 Million Public Servants

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By

C. A. Chandraprema

Last Friday, for the first time since the present government assumed office, a special cabinet meeting was held to discuss the economic situation and a proposal to increase taxes. No official statement has yet been given out about the decisions made at that cabinet meeting or whether a final decision was arrived at all. However news that has leaked out to the press indicates that the government intends increasing the Value Added Tax from the present 11% to 15%. Furthermore, VAT exemptions for telecommunications, private health and private education will be removed. The Nation Building Tax is supposed to remain at the present levels. It is assumed that the present level referred to is the 2% that is still being charged even though the NBT was increased to 4% in the 2016 budget. In addition to this a new tax that will be introduced is the capital gains tax which had been abolished some time ago.

The capital gains tax was introduced along with the quasi-socialist reforms of the S.W.R.D.Bandaranaike government and abolished as the free market economic policy became the norm. Capital gains are the profits that an investor realizes when he sells the capital asset for a price that is higher than the purchase price and capital gains taxes are only triggered when an asset is realized, not while it is held by an investor. An investor can own shares that appreciate every year, but the investor does not incur a capital gains tax on the shares until they are sold. The government needs to demonstrate its ability to pay back the loans they expect to obtain from the IMF as well as on the open market – hence this increase in taxes. In the meantime the corporate income tax rate is also to be retained at the previous level of around 28% without being reduced to 15% as proposed in the Budget for 2016.

The large private business houses have been having a bad time since the present government came into power. Last year, all these conglomerates had to fork out amounts ranging from hundreds of millions to two or three billion rupees each depending on their profits for the past year – for no reason all except to keep the yahapalana government afloat. They had to pay this one off super gains tax over and above their usual tax commitments for that year. This amounts to the same kind of expropriation that was practiced by the 1970 SLFP led government of Mrs Sirima Bandaranaike. At that time whole businesses or estates were taken over by the government. The only difference this time is that the establishments themselves were not taken over, but huge amounts of money equivalent to the value of many smaller businesses have been taken by the government.

The business houses that were rattled by this unexpected expropriation would have been pacified somewhat when the corporate income tax rate was reduced to 15% in the 2015 budget (With a higher rate of 30% for the liquor, tobacco, gaming and banking industries). Now if this reduced rate is not implemented, the relief that the private sector expected would not be forthcoming. It is not clear whether the tax free threshold of 2.4 million a year for personal taxation will remain the same or will be retained at the 2015 level of Rs. 750,000. All these moves appear to have been taken in the backdrop of the Fitch ratings downgrade which now makes it more expensive for Sri Lanka to borrow on the open market and makes the bailout package from the IMF all the more important and the government now seems to be moving fast to implement certain recommendations that the IMF has been making since last year which had been highlighted in this column from time to time. Negotiations with the IMF are to commence after the second week of this month.


If one asks what all this economic distress is due to, the single most important factor is the salary hike of Rs. 10,000 a month for public servants who number around 1.3 million. Even if all those statistically categorized as public servants may not be eligible for this salary increase, still the government needs something like one billion USD every year just to pay that increase. Now the government has given the unions that supported them the undertaking that Rs.2,500 of this would be included in the basic salary of a public servant. When the salary of the lowest grade is increased by Rs. 2,500 the grades above them become entitled to multiples of two, three and four times that increase in the basic salary. In a situation where the lowest grades are in a minority in the public service, this new commitment may cost around 200 to 300 million USD per year to implement. These were insane commitments made to bribe voters. Another measure taken to bribe voters was to reduce taxes on fuel and certain other commodities. The government did manage to win votes as a result of these measures. But now the chickens are coming home to roost.

Website honeymoon on the rocks

Last week the government placed advertisements in the newspapers calling on websites to register with the media ministry by March 31 failing which the website would be considered ‘unlawful’ after that date. This advertisement was perused with interest by journalists in news rooms in Colombo. Owing to a caterwaul of protest by the websites, the government backtracked. The main reason why they backtracked was not because they thought their measure would be restrictive of the freedom of speech, but because there was no legal cover for their call to register websites. The EconomyNext website reported Deputy Media Minister Karunaratne Paranavitana as having said that the media ministry had taken a step backwards on the registration of websites only because they did not have legal cover for their call to make it mandatory for websites to register with the media ministry and that they are now in the process of bringing in legislation to make the registration of websites mandatory!

So this is just a temporary respite for the websites until the laws are in place. Back in May 2012, the Supreme Court refused leave to proceed in a fundamental rights case filed by Sunil Jayasekera and Udaya Kalupathirana of the Free Media Movement against the blocking of several websites for not registering with the media ministry. At that time, J. C. Weliamuna, a lawyer and NGO activist, had argued in courts that there is no law requiring the web owners to register. And further that if fundamental rights are to be restricted, that can only be done by way of a law and that there is no such law as at present. This is the same argument that has won the websites temporary respite from the present government until the laws are put into place.

At that time in 2012, Minister Lakshman Yapa Abeywardene then a prominent member of the dictatorial Rajapaksa regime and now a born again Yahapalanite, explained the need to register websites in terms of making it mandatory for websites to have contact details and the name and address of the editor/owner/operator of the website because in Sri Lanka all newspapers, magazines, television/radio stations etc have contact details. He further said that the ‘Right to reply’ is the democratic right of public which should be assured by the Sri Lankan government and that mass media, such as CNN, BBC etc have contact details and any person can contact those media institutions and present his version if those radio or television channels broadcast anything in connection with him.

Minister Abeywardene added that this call for registration was based on a code of ethics developed by journalists themselves and that nothing has been imposed by the Media Ministry on journalists or websites and that the Supreme Court’s decision not to give leave to proceed with the FR application made by the Free Media Movement made it clear that freedom of the wild ass cannot exist for websites and that this registration is being done in order to protect the democratic rights of citizens. Minister Abeywardena, said that if any website is unable to provide its contact details, it is obvious that something fishy is going on. The same arguments would undoubtedly stand the present government in good stead when they bring forth the draft legislation to register websites.

A few months into the new order in May 2015, Freedom House an advocacy group for the advancement of freedom on the net gushed:

“Internet freedom improved considerably in Sri Lanka following the defeat of Mahinda Rajapaksa in the January 2015 presidential election…Soon after swearing in as the 6th Executive President of Sri Lanka, Maithripala Sirisena formed an interim government with the United National Party (UNP) and appointed its leader, Ranil Wickremesinghe, as prime minister. A commitment to a fair and open society was clearly outlined at the inception of the interim government. Both President Maithripala Sirisena and Prime Minister Ranil Wickremesinghe promised to run a government that stays clear of blocking websites, intimidating journalists, and other draconian practices that characterized the previous government’s relationship with online and traditional media, including the curtailment of editorial freedom.”

“In line with these assurances, all websites earlier blocked by the previous government were accessible by May 2015, including the exile-run news website Tamil Net, blocked since 2007 for reporting on civilian casualties of the military campaign against the Liberation Tigers of Tamil Eelam (LTTE), which ended in May 2009. Digital activism through online news websites, blogs and citizen media initiatives continues to strengthen as more people use the internet to access news, opinion and engage with diverse sources of information.”

Threats and imprecations from every level of govt.

What would Freedom House have to say about present developments? The prime minister threatens the media frequently naming both media organizations as well as individual media persons. Derana TV, The Divaina, Daily Mirror and The Island have all been at the receiving end of his tirades. This mind you, is not in response to any personal criticism that the press directed at the PM but mostly for simply giving coverage to criticism of the government’s policies. In the meantime, President Maithripala Sirisena tells the BBC that the websites are ‘kelepaththara’ and that he does not look at these websites anymore. In saying so he was referring to the very websites that helped bring him into power. Soon after the new government came into power, former president Chandrika Kumaratunga even sent one of these websites Lanka News Web a thank you note for the work they had done to bring the present government into power.

That honeymoon has obviously ended pretty soon. Lanka e News refused to carry Maithripala Sirisena’s Independence Day speech because of that ‘kelepaththara’ comment. The government also set another precedent by arresting and imprisoning Sampath Athukorale the Chairman of the Southern Provincial Council for having posted allegedly defamatory posts about Maithripala Sirisena on facebook. This once again was criticized by Lanka e News which said that facebook was supposed to be a private web page which can only be accessed by friends and if a citizen cannot express his views about a politician among his friends, that is a clear restriction of the freedom of expression.

This arrest for a facebook post precedent will have interesting ramifications for the future. Depending on the wishes of the page owner, his facebook page can be restricted to a closed circle or more open to the public. It’s just a case of adjusting the settings on your page. If the owner of the page allows greater public interaction with his page, does that mean that he has released something onto the public domain? Or is he still communicating only with those who wish to interact with him personally? After all, those who enter his page will be individuals who deliberately seek access to that page and to no other. A facebook page does not purport to be a public website even if the public have open access to it. But then again, almost all news websites have a parallel facebook page which is open to the public. If something appears on such a facebook page it will indeed be a case of releasing something into the public domain.

So things will have to defined in the law as the social media grows and mutates. But the precedent that the government has set is that if you post anything on facebook to be seen even by those who want to interact with you personally on your page, you can be taken by your ears to the fourth floor and remanded by the courts. It was also announced by certain members of the government that those who post critical and abusive posts about the president on his facebook page will be hunted down and prosecuted. We have reported in this column that President Maithripala Sirisena’s facebook page was full of scathing criticisms and curses as comments. The intimidation seems to have worked – the number of comments on Sirisena’s facebook page have gone down precipitously as have the number of curses and criticisms. This government is setting interesting precedents all round.

Most people in the government seem to have a short fuse when it comes to the media. Last week a voice recording that did the rounds over the internet was that of Minister Lakshman Kiriella berating with a liberal sprinkling of choice expletives a journalist who phoned him wanting to check the authenticity of his letter requesting the University of Kelaniya to recruit one of his supporters as a temporary lecturer. What was funny was that it was not a sudden burst of anger followed by disconnecting the line. Minister Kiriella kept up the harangue even though the journalist obviously had had enough and wanted to cut short the conversation. It seemed as if Minister Kiriella had been waiting for a phone call from somebody in order to vent his spleen on the hapless caller. Everybody in the government seems to be in a bad mood these days.

On Friday, the people saw the unedifying sight of President Maithripala Sirisena berating the Sri Lanka Engineering Professional’s Association for having raised before him certain issues facing the profession such as the allowances not being paid and the engineers being deprived of the duty free vehicle permit they were entitled to at retirement. The president, stung by what was a thinly veiled critique of his government was to say that he thought he had come to the Annual General Meeting of the Association, but now he feels as if he had come for a trade union meeting. And he was to berate the engineers saying that in the Moragahakanda project that he is supervising directly, the biggest problem he faces is not finding the money or resources but solving the disputes between the engineers.

And as could be expected when berating a group of professionals, the president spoke at length about free education and how professionals who had risen as a result of the free education system, should be serving the country instead of going abroad looking for better opportunities. That was not all – lower down the line UNP parliamentarian Nalin Bandara who rose to prominence in the government by being the main speaker at a regular press conference styled ‘Helidarauwa’ at UNP headquarters, which made allegations against the Rajapaksa government came out with another ‘helidarauwa’ last Thursday claiming that the cultivation officers had been stealing a part of the fertilizer that was being distributed to the farmers and that these cultivation officers were behind the farmer demonstrations demanding the fertilizer subsidy back. This elicited a furious response from the Agricultural Research and Production Assistants Association of Sri Lanka condemning the remarks made by the UNP parliamentarian.

The prime minister is blackguarding the doctors, the president is blackguarding the engineers, Minister Kiriella is blackguarding print journalists and govt. MPs are blackguarding agrarian officers. So everybody at the top, middle and bottom of the government hierarchy seems to be engaged in antagonizing entire segments of society.

Minister Kiriella’s argument

Talking about Minister Kiriella, perhaps there was nothing technically wrong with a letter recommending that the University of Kelaniya recruit one of his supporters ‘after having examined his qualifications’ for the job. We have to be reasonable in our criticism. There is nothing to say that this method of recruitment with a letter from a politician is any better or worse than the incestuous method of recruiting the favourites of the professors and faculty heads. Some professors will promote those who have genuine talent. Others may favour those who suck up to them most. As the Vice Chancellor of the Kelaniya University Prof. Sunanda Madduma Bandara said, there is nothing unusual in getting letters from politicians recommending people for employment.

However one wonders whether Minister Kiriella was overdoing it when he claimed that the Universities Act No: 16 of 1978 empowers the Minister to make such recommendations. Sections 19 and 20 deal with the powers of the Minister under this Act and Section 19 broadly states that “The Minister shall be responsible for the general direction of university education and the administration of this Act.” The minister’s use of this broad provision to make recommendations for employment has perturbed the university teachers association FUTA because the invocation of this provision will enable the minister to intervene in any aspect of university administration. The minister does have a responsibility to implement government policy and therefore, technically there is nothing wrong in a minister claiming to have the right to direct matters in the university.

Universities should not be ‘liberated areas’ for various radicals and a no-go-zone for the government of the day. However, Section 20 of the Universities Act seems to lay down the specifics as to how the minister is supposed to direct university education. What this section says is that the minister may issue written directions to the Commission on matters such as finance, university places and medium of instruction. The Commission shall comply with such directions and the governing authority of every Higher Educational Institution shall do whatever is necessary to enable the Commission to comply with such directions. When the minister issues written directions to the UGC, the latter is bound to comply as is denoted by the word ‘shall’ that has been used. However neither Section 19 or 20 of the Universities Act seems to suggest that the minister would have the power to issue directions directly to any university. It would appear that he has to work through the UGC in all matters.

Courtesy:Sunday Island

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