Sri Lanka tax spenders take more than 60 cents of every tax-rupee home
ECONOMYNEXT – Sri Lanka’s bloated public service and the expanding elected ruling class is taking home more of the taxes collected from the people as salaries and pensions, data shows.
In 2013 salaries and pensions made up 516 billion rupees out of 1,005 billion rupees in total taxes or 51 cents out of every tax rupee collected from the people.
Over the latter stage of the Rajapaksa administration, fiscal policy improved with the overall budget deficit falling real spending cuts seen in some areas while revenue to gross domestic product also fell, an enviable achievement in any country where ordinary people valued fiscal restraint.
However in Sri Lanka there was a backlash on the spending cuts from statists and sadly also economists who also claimed that the revenue was also low from compared to gross domestic product.
They have now got their wish as spending ratcheted up, with most of it going to salaries as expected.
Tax spending state workers took home 54 cents out of every tax rupee as salaries and pensions in 2014, up from 51 cents and in the 2015 budget it was expected to go up further to 56 cents from every tax rupee.
Up to July 2015, 61 cents out of every tax rupee has been taken home as salaries and pensions.
Sri Lanka’s rulers have earlier run massive current account deficits in the budget with revenue to GDP topping 20 percent.
In Sri Lanka, while ordinary state workers have to work two decades or more to earn a pension, the elected ruling class and several of their personal staff give themselves a lifetime pension after just five years in a feudal style privilege that stands contrary to a modern democracy.
Family members including wives and children are usually appointed to the positions so that they can become lifetime tax spenders.
In Sri Lanka the spending agenda has been driven by state worker unions, unemployable graduates from tax-payer funded universities and some political parties such as the Janatha Vimukthi Peramuna, who have helped heaped burdens of tax, inflation and currency depreciation on helpless private sector workers in particular.
Private sector workers have also been content to be treate like tax objects in a serfdom, since independence from British rule. At one time all state workers were freed from income tax, but now only the President is free from income tax.
Sri Lanka has given a sweeping tax breaks for large companies which freedom advocates say should be eventually phased out as discriminatory taxation undermines rule of law and justice.
However there are questions about the tax to GDP ratio due to questions about the gross domestic product number.
Following the latest revision more sources of ‘growth’ including imputed numbers and work-in-progress which bring no taxes have been added to an GDP number which is already under fire for being bloated. (Colombo/Oct15/2015)