So VAT’s the trouble with y’palana economicsView(s):
At the risk of being labelled anti-nationalist snowed under worse epithets one is constrained to admit that the great British dramatist and poet Willie Shakespeare had anticipated Sri Lankan political life and times centuries earlier.
Had Mahinda Rajapaksa’s favoured astrologer read his Shakespeare he would have been far more accurate in his political forecasts than it turned out to be at the crucial hour and he had eventually to find excuses to cover up his inaccuracy.
Didn’t the soothsayer in Shakespeare’s Julius Caesar not warn the Roman statesman to beware of the Ides of March, a warning which Caesar ignored? Had he not, Caesar would not have been stabbed in the back, not to mention the front and other vulnerable parts of his anatomy.
The Rajapaksa clan and loyalists might well say what happened to Caesar happened to the Sri Lanka President with one vital difference. The Roman senator somewhat disdainfully dismissed the soothsayer’s prediction. Rajapaksa accepted his astrologer’s prognostication or maybe wanted somehow to believe in it.
Quite often the Bard’s lines and characters come to mind when one watches from the sidelines the happenings in Sri Lanka. One is often torn between contrary emotions – to cry or laugh at some of the goings on.
The other day I was reminded of the words of Dick the Butcher in Henry Vl (Part 2). Dick, an associate of Jack Cade a pretender who thinks he will one day be king, says “The first thing we do, let’s kill all the lawyers.”
Whether in truth or in jest it would be a terrible thing to do even to the worst of lawyers. One can understand the yearning to catch up with the black-coated gentry who have defrauded their clients or committed despicable crimes and fled the country one step ahead of arrest warrants.
But to actually carry out this threat would leave plenty of black coats hanging on pegs unutilized in empty offices. No, that is not a practice one would approve of. Let sleeping lawyers lie – as they often do – as the saying goes.
What brought back memories of Shakespearean drama was a threat uttered by President Sirisena at a public meeting in the provinces where he vowed not to heap new tax burdens on the public. He said that any economists who made such unacceptable proposals would be sent home.
At least it might be said in mitigation of Maithripala Sirisena that he did not propose such drastic action as Dick the Butcher. After all Sirisena the devout Buddhist is no butcher though he might chop and carve budget proposals, cut taxes to pieces and engage in economic hara kiri as any Harvard trained economist or a student of that famed economics tuition master Bandula Gunawardena might well aver.
This threat to deprive government advisers masquerading I suppose as economists with a head but no heart, of their jobs might be somewhat contrary to stated policy of finding employment for several million of our citizens in the coming years.
But perhaps President Sirisena felt that heartless economists as opposed to brainless politicians, do not deserve to be maintained at state expense though heaping more and more benefits on parliamentarians who are generally viewed by the populace as a breed that the country could well do without, appears to have some moral validity and is good for the Sri Lanka rupee.
The current bone of contention that is being tugged hither and thither is the Value Added Tax, known briefly as VAT. The government’s see-saw approach to economic policy would normally have had the public hooting with understandable derision were it not for the hurt this imposes on the household budget.
It seems as though government policy-makers are members of the Sri Lanka Magic Circle. I am not certain that it still exists but the Chairman of Lake House Ranapala Bodinagoda during my last years there, was once the president of it.
My comment one day that Bodinagoda was such a good magician that he could make editors disappear did not go down well with him. I wonder what he would have said if he saw that VAT on a host of goods and services proposed by stalwarts of the UNP, the party he supported and worked for, was made to disappear by Sirisena as quickly as Bodi did with editors.
The question before the country is whether populist policies at a time when what is called for is fiscal stringency is what is best for Sri Lanka and whether it will resuscitate an economy which is in dire trouble?
Sirisena can send all economists home including those who came out of the tuition classes of his one time colleague Bandula Gunawardena. But that is hardly going to turn the economy around.
My fellow columnist and former schoolmate, economist Nimal Sanderatne writing in this newspaper a few months ago warned, like Shakespeare’s soothsayer, that the economic problem facing the country will worsen in the coming months.
“The current economic and financial crisis has come about owing to the cumulative impact of successive fiscal deficits over many years. Containing the fiscal deficit to five per cent of GDP in 2016 and continuing to reduce it further in the next four years is vital for stabilization of the economy and economic growth.
Quite prophetically he said that “fiscal consolidation is difficult as the policies needed to increase revenue and reduce expenditure are politically unpopular. They evoke political dissent, protests and opposition.”
Most knowledgeable people know that reducing the fiscal deficit is vital. Without that the public debt would keep increasing. If Sirisena does not know that he must listen to those more learned in the subject than he is. If he does know but still continues on a path where public spending is not reduced but increased, the question that will be uppermost in the public mind is why is he doing so?
Sirisena is concerned about the people. He says his heart is with them and his goal is to save them from more burdens being piled on them. That is fine. Nobody can really object to people not having to bear additional financial burdens.
The question then is whether such an approach is in the overall national interest or are such policies intended to serve personal political interests?
It might be too much to suggest that he is faced with Hamletian doubts. It is not a question of to be or not to be. I doubt that he is called upon to weigh options. Rather the goal is quite clear. It is to try and consolidate his position in the country and within his party where he has but a tenuous hold.
He does understand that if the government spends more on goods and services, it has to find revenue to pay for them.
The question is whether the current trend in government spending is in the national interest, meant to steady the economic ship so that it can sail smoothly after what the government perceives as the disastrous voyages of the Rajapaksa era.
Sirisena might remember the pledge he held out with the parties that went along with him that the cabinet will not exceed 25 and increased only if it was really essential.
Sirisena is fast approaching the moment when he will find his name etched in the Guinness Book of Records for having the world’s biggest cabinet in a country with a population of nearly 22 million. Sirisena may not like economists or their advice. But economists did not make that pledge. At the time he made this promise he must have felt that the country could be run adequately with 25 ministers.
So what has transpired in this country that it now requires close to a 100 persons to run this place? It was stated somewhere that it costs something like five million rupees a month to maintain a minister. Has this doling out posts been in the hope of winning over SLFP members especially those who were Rajapaksa loyalists, and thereby strengthening his hold in parliament and the country.
The other day the Irrigation and Water Resources Management ministry held a one-day conference in Colombo for farmers budgeted to cost some 30 million rupees. When this enormous expenditure was reported in the media a spokesman said that the President had approved the amount.
If that is correct surely this cannot be the actions of a leader who does not want to heap burdens on the people.
This latest VAT vexation is so that Sirisena could speak up at the May Day rally and tell the people how he removed the financial burdens that the UNP and its clique of economists tried to hoist on the people.
Shakespeare would have enjoyed this theatre of the absurd.