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SC told how record tax cuts and Gotabaya Govt.’s policies led to economic crisis
View(s):Record tax cuts that caused a drastic fall in government revenue were among a series of disastrous decisions taken by the previous government that plunged the country into the prevailing economic crisis, the Supreme Court was told this week.
Counsel for the petitioners made the argument when the SC took up two fundamental rights petitions regarding the economic crisis.
One petition has been filed by Dr. Athulasiri Kumara Samarakoon, Soosaiappu Neavis Morais and Dr. Mahim Mendis. The other petition has been filed by Chandra Jayaratne, Julian Bolling, Jehan CanagaRetna and Transparency International, Sri Lanka.
The case is being heard before a bench comprising Chief Justice Jayantha Jayasuriya, Justices Buwaneka Aluwihare, Vijith Malalgoda, L.T.B. Dehideniya and Murdhu Fernando. Among the respondents cited in both petitions are former Prime Minister and Finance Minister Mahinda Rajapaksa, former Finance Minister Basil Rajapaksa, former Central Bank (CBSL) Governors Ajith Nivard Cabraal and W.D. Lakshman, former Treasury Secretary S.R. Attygalle and members of the CBSL’s Monetary Board.
Appearing for the petitioners, counsel Upul Jayasuriya, PC said the country lost a staggering Rs. 600 billion after the tax cuts implemented by the government of former President Gotabaya Rajapaksa.
With Rs. 600 billion doled out to blue chip companies via the tax cuts, the government was left with no money to pay salaries of public servants, he said.
He also pointed out that the country faced a foreign reserve crisis due to the artificial pegging of the US dollar. As a result of this policy, the gap between the official rate and the unofficial rate widened from Rs. 203 to Rs. 270-280. Expat remittances reduced by nearly USD 400 million a month, Mr. Jayasuriya noted.
He accused former CBSL Governors Ajith Nivard Cabraal and W.D. Lakshman and former Treasury Secretary S.R. Attygalle of being responsible for the crisis.
The petitioners have identified the tax cuts introduced in late 2019 as the starting point of the economic problems they complain of, said Chandaka Jayasundere PC, who appeared for Mr. Jayaratne and a groups of petitioners.
The country defaulting on Sovereign debt on May 19 was a ramification of decisions taken by the respondents beginning in 2019, he stressed.
He pointed out that former Finance Minister Basil Rajapaksa and CBSL Governor Ajith Nivard Cabraal repeatedly refused to go to the International Monetary Fund (IMF) up until February 2022, and decided to do so only in March.
He said the refusal by the President and the former Ministers of Finance to seek IMF assistance, despite calls and demands from all quarters to do so was one of the reasons that eventually resulted in the country falling into bankruptcy.
The case will be taken up again on Wednesday.
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