ECONOMYNEXT – Sri Lanka’s state worker cadre rose to a new high of 1.58 million in 2020 amid a Coronavirus pandemic, while working and retired employees took 86 cents out of every tax rupee home, official data show.
Sri Lanka tax revenues which were 1,050 billion rupees in 2014 were boosted sharply 1,335 billion in 2015 but large salary increases were given to state workers as part of an election promise.
In 2020 state workers and pensioners took 52.3 cents of every tax rupee collected. In 2017 the share was brought down to 46 cents with more tax hikes and salary hikes held in check.
In 2018, the share was brought down to 47 cents of every tax rupee collected.
But under ‘revenue based fiscal consolidation’ an unusual strategy of throwing aside spending restraint and raising the tax to revenue to some arbitrary number closer to developed nations, a series of new taxes including withholding taxes were imposed and personal income tax rates hiked.
At the end of 2019 a new administration slashed income taxes and also value added taxes, creating uncertainty over the budget and triggering downgrades.
The public sector workforce continued to expand unabated.
In 2020 amid a Coronavirus pandemic the public sector workforce grew to 1.58 million from 1.46 million in 2019 and 1.27 million in 2015.
In 2019 state workers and pensioners took home 52 cents out of every tax rupee collected.
As revenues collapsed to 1,216 billion rupees from 1,734 billion a year earlier after tax cuts and Covid-19 lockdowns, state workers and pensioners took home 86 cents out of every tax rupee collected.
Sri Lanka elected ruling class has shown a tendency to favour state workers over private sector workers, who critics say are treated as second class citizens.
Sri Lanka at one time freed state workers from all income tax, which was restored by current Prime Minister Mahinda Rajapaksa in a previous administration.
State workers get tax slashed cars while private sector workers pay rates of over 200 percent.
The elected ruling class gets tax free cars and also a pension after 5 years. The 5-year pension is also available to several personal staff. Many hire wives and offspring as personal staff to make them eligible for pensions.
State workers and the elected ruling class do not have a contributed pension, though state enterprises have provided funds. (Colombo/May13/2021)