Sri Lanka tax bills delayed over opposition brinkmanship: Finance Minister

COLOMBO (EconomyNext) – Tax hikes proposed in a budget for 2014 were delayed over opposition brinkmanship, though he was personally in favour of calling their bluff, Finance Minister Ravi Karunanayake said.

"The opposition does not help us get the revenue," Karunanayake told foreign correspondents in Colombo.

"No point blaming us. We are a minority government. We know it. We cannot dare the system beyond a certain point."

He was responding to charges by former foreign minister G L Pieris, who told foreign correspondents that the current administration was not serious about giving legal effect to budget proposals.

Though the tax bills have been listed on the order paper several times including last week, they have not been put to a vote yet.

Sri Lanka’s main opposition Sri Lanka Freedom Party has generally assured support for a 100-day plan of the new administration, a but motion to expand the outstanding Treasury bills was defeated following a surprise vote on April 07, sending shockwaves through the administration.

""If we go and try to dare them and say we are putting in, we are quite sure we will win, but what if you know 15 people do not come in and we have a vote and lose like last time," Karunanayake said.

"Then negative sentiments come in."

The defeat of a finance bill usually leads to a fall of a government in a West Minister system.

Pieris sidestepped a question by reporters whether he would personally vote for the new taxes including a retrospective income tax which many opposition legislators and economists had warned would undermine Sri Lanka as a safe investment destination with predictable laws.

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"That is a matter for our group to consider. I cannot answer that without consulting members of our group, but the point is that legislation has not even been brought," Pieris said.

Karunanayake said the opposition would not be able face the people after defeating the taxes, which was aimed at giving ‘relief’ to people and he was quite willing to put them to the test, though others in the hierarchy of the administration wanted to bring round the opposition.

Economists had analysts had also sharply criticized a proposal for telecom firms to absorb a turnover based taxes. Opposition members described some taxes as ‘vengeance’ levies.

Large one of taxes which are likely to bankrupt some of the firms on which they have been imposed violated fundamental principle of taxation observed South Asia from the time of the Gupta Empire and beyond, and have since also been adopted by the West.

"The Ruler should act like a bee which collects honey without causing pain to the plant," says the Mahabharata, a tax principle been articulated not only by Ved Vyas but also by Chanakya (Kautilya) in his work Arthashastra.

Retrospective taxes also violate rule of law.

While ignorance of the law is not an excuse, no man can be subject to a rule that did not exist for him to follow in the first place. Economist and philosopher F A Hayek explained this succinctly in his work Road to Serfdom:

"Stripped of all technicalities [the rule of law] means the government in all its actions is bound by rules fixed and announced beforehand—rules which make it possible to foresee with fair certainty how the authority will use its coercive powers in given circumstances, and to plan one’s affairs on the basis of this knowledge."

If passed there are fears that the retrospective taxes will set a precedent for other members of the elected ruling class who control the police and the jails to impose similar taxes on citizens in the future in addition to slapping large taxes on political opponents.

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