all sides, VAT next?
Chamintha Thilakarathna, Nilika de Silva and Faraza Farook
With prices of essential commodities escalating, the people's
expectation of a consumer friendly economy after the December 5
election, appears to be backfiring with the potential danger of
a public backlash.
Within the past
six months, prices of fuel, electricity, water, telecommunications,
postage, medicines, foods and van and threewheeler fares have shot
up at a rate that millions of people find unbearable.
feel the government has practically done little or nothing to manage
and monitor the cost of living.
say the main reason for the rising prices is the steady decline
in the value of the rupees but consumers say the greed for more
profit and other hidden reasons are also playing a major role. Most
consumers are particularly disturbed about the validity of the huge
increase in electricity rates, while even the earlier 25% surcharge
has not been withdrawn. They ask whether the authorities are plundering
more money from the people to make up for losses caused by large
scale rackets in the Ceylon Electricity Board.
the CEB gave vague reasons including heavy losses and political
connections - in explaining why the surcharge was not withdrawn.
As a result
of the continuing surcharge , bureaucratically described as a fuel
adjustment charge a family of six members whose electricity bill
was an average of Rs.800 now has to pay about Rs.1800 a month.
in the dark for most of April due to the power cuts, but the blackout
blow was that we had to pay a higher bill," an angry consumer
the charges for tap water and telephone calls have also increased
leaving most consumers in a dizzy spin with little hope of any pay
increase or effective price monitoring by the government.
The gas price
crisis especially would be a laughing matter if it was not such
an expensive one, consumers say. The widely criticised Shell gas
first reduced prices under some government pressure but again increased
prices this month claiming world prices had gone up, though state
radio quoted a top Petroleum Corporation official as saying the
Shell gas hike was unjustified. As a competitive measure aimed at
providing relief to consumers the government has given the go ahead
for at least two more domestic gas companies. But most consumers
complain they cannot switch over to the less expensive one because
it would mean buying a new cylinder also at prices ranging from
They say unless
the government makes provisions for any brand of gas cylinder to
be used to buy any gas, setting up new companies would be of little
benefit to consumers.
Even for the
daily meals most families are now paying twice as much. Vegetable
prices have gone up by around 50% from January to June and with
fuel prices going up every month the rates are likely to soar to
three figure levels.
were raised in April by more than 25 percent. This hike means that
an ordinary letter to West Asia suddenly went up from Rs. 17 to
Rs. 23, and the cost of a registered letter or a parcel double.
But the service as such is not improving but getting worse.
of all fuels including petrol, diesel and kerosene have been raised
four times since February, the latest hike coming last Friday.
is another agonising area where the price of the pills appear to
be worse than the ills. Drug companies say they have no option because
the rupee value is falling. But patient right groups have been pointing
out that if good quality drugs are imported under generic names
or from cheaper sources in India or Pakistan the prices could be
brought down. Adding to the pain medicinal drugs which were hitherto
imported duty free are now to come under a 10% Value Added tax unless
the government reviews the VAT scheme in response to several appeals.
As vital as
food and health care is education with costs in the sector also
keeping pace with others. Many schools and tutories have increased
With most families
having little money left for outings or special meals, restaurants
are also feeling the pangs of the COL crisis.
said the number of customers had dropped by about 20 percent over
the past six months.
General Manager Suki Wu said, "we are unable to increase prices
instead, we have been absorbing the price hikes. However, we don't
know what VAT would do," he said.
will have VAT from July 1 and what will happen is as open as the
skies. Former PA minister and Labour leader Alavi Moulana put it
aptly saying that after VAT we might be flat. According to VAT all
goods and services will be taxed- 10% for items classified as essential
and 20% for others.(see box).
As other governments
did the UNF also has appointed high level committees with high level
ideas on monitoring and controlling the cost of living. But as usual
so much is promised and so little produced.
One of Sri
Lanka's most senior civil servants K.H.J. Wijedasa is now the chairman
of the inter ministerial committee on food security. What he says
offers little consolation to struggling people. "People who
believe that prices can be controlled are living in a fool's paradise,"
Mr. Wijedasa says.
prices are determined by OPEC . The Rupee depreciation against the
dollar reflects on the imports. If you embrace the open economy
or free market economy, it reflects on all the items that we import.
These are totally beyond human control," Mr. Wijedasa said.
a kilo of carrots is Rs. 100. How can you control the price of carrots?"
But other economists
do not agree with K.H.J. Wijedasa's carrot and stick outlook. They
say price trends in vegetables are determined by the season and
price controls are not impossible. As a market tactic food items
are often stocked as a means of price control. Similar methods could
be used to bring down cost of locally produced goods.
in all sectors are keeping pace, one exception is the pay packet.
Public Services Trade Union Federation Chief W.H. Piyadasa complains
that salaries of public servants have remained stagnant since 1997,
with the exception of a proposed temporary allowance of Rs.2200,
out of which the second half will be paid from October this year.
him the average salary of a public servant is Rs.3,400.Even to survive
public servants would need at least Rs. 2500 more.
The main Opposition PA- attacked by the UNP earlier mainly on grounds
of mismanagement of the economy-now asks with some justification
as to who is mis-managing what.
situation is a result of the poor policies of this government. It
cannot keep blaming the PA for the present economic woes. It's six
months since the UNF took office. Even Cabinet Ministers have said
at last weeks meeting they cannot cope with the rising cost of living.
The economy is on the verge of collapse," former minister Sarath
is "asleep at the wheel." The price of a litre of diesel
was Rs. 27 when we left office. Today it is Rs 33. The government
must be able to control prices otherwise why should there be a government
running the country?
we have one of the highest electricity rates in the world. The overall
COL has never been so high . Mismanagement by this government has
led to this situation. The rupee is also fast depreciating. The
government which came to power after harping about the high cost
of living under the PA has failed miserably to keep to its promises,"
Finance Minister K.N.Choksy strongly defends government policy claiming
VAT has more positives than negatives.
He said GST
and NSL together had imposed a tax of 19% while GST would levy only
10% on lots of essential items and that would provide some relief
Parliament Industries Minister Rohitha Bogollagama also defended
VAT saying the benefits would be seen in the long term.
The Ceylon Chamber of Commerce is warning that when VAT comes into
effect from next week what might happen is not likely to bring more
relief but more burdens for the people.
CCC chief and
economic analyst Chandra Jayaratne said he feared prices of all
commodities including essentials would go up with VAT.
a tax of 20% will be charged on non-essential goods and services,
10% will be charged on essential goods and services. This implies
that school fees, milk products , food, tea, sugar, pharmaceuticals,
fertilizers, basically every item henceforth will be taxed,"
He said that
under VAT only exports would not be taxed but there too some discrepancy
would arise with taxes for raw materials at the production level.
Mr. Jayaratne said he hoped the proposed VAT amendments to be introduced
in Parliament next month would make some exemptions but that too
would create other complications.
or no VAT
VAT works in four segmented lists. The high rated (non-essential),
low rated (essential) , exempted list, and the zero rated list.
refers to items where no input or output taxes are charged. In short,
these will be tax free and any tax charged will be reimbursed. This
category includes certain international transactions and exports.
refers to items and services that will not fall into either the
essential or the non-essential categories. However, these items
are taxed although the tax will not be as high as 10% or 20%. They
will pay input tax which means when purchasing items on this list
a small tax will charged. This will be in addition to price hikes
due to raw material tax inclusions.
and non-essential operate on a list basis. However, these lists
have yet to be finalised and they will directly charged the mentioned
rates. The exempted list includes a variety of items amounting to
hundreds that are impossible to be listed below, therefore, a selected
number have been listed.
Cinema, films, coconut, poonac, tea, coconut oil, potatoes,
oinions, infant milk products chillies, copra, planting material,
live birds, chicken breasts and parts, unprocessed meats, magazines,
journals, powdered milk, infant milk, condensed milk, lentile, sugar,
jaggery, sakkara, pharmaceutical products and raw material, ayurveda
unani and homoeopethic products and raw material, dried fish, maldevian
fish, bulk water, fertilisers, petrol, diesel, solar batteries,
fertilizers, motor coaches and chassies or body parts with over
25 seating capacities for public passenger transports, agricultural
tractors, machinery, solar systems, CFL bulbs, solar home systems,
industrila machinery other than personal or household items, electric
motor generators, electricity more than 30kW per month, electricity
bulbs, construction and sub construction contractors, hotels, guest
houses, restaurants, internal tours, private schools, services provided
by FEB, professions and vocations,etc.
Every item excluded in the essential and exempted lists such
as newspapers, bottled water, timber, processed meats, etc.
items(lower tax rates)
Unprocessed agriculture, fish items, forestry products, rice,
flour, wheat, liquid milk, public passenger transport, medical services
(govt and private), government education,etc.
SC allows rights case of mentally ill youth
By Laila Nasry
A young man in his late 20s, said to be mentally
ill as a result of being arrested and detained unlawfully, was given
the go ahead by the Supreme Court last Thursday in a fundamental
rights application filed on his behalf.
was filed by his lawyer M. Remadious on the instructions of Rajeshwary,
the mother of the young man.
A Bench comprising
Justices Shirani Bandaranayake, Ameer Ismail and Hector S. Yapa
fixed the hearing for August 23 and also directed the Registrar
to obtain medical reports from the Magistrate's Court at Polonnaruwa.
In the petition
Mr. Remadious states that having visited his client Anthonypillai
Napoleon alias Anna in the Remand Prison in Kalutara he was aware
of the condition of his client who was of unsound mind and unable
to communicate or comprehend anything.
alleges that his client who was of sound mind until the day of his
arrest suffers from such a state due to the trauma undergone while
being in custody.
Officer in Charge (OIC) of the Aralaganwila Police Station, IGP,
Superintendent of Prisons and the Attorney General as respondents,
the petition states that Anthonypillai Napoleon, the eldest and
entrusted with the duty of supporting his family was engaged in
the business of buying and selling betel at the time he went missing
on August 5, 1996.
mother Rajeshwary had made inquiries from the ICRC, Human Rights
Commission and the Committee on missing persons, the replies received
had been negative.
In the habit
of making inquiries from persons returning from prison by showing
them a photograph of her son, Rajeshwary was informed on one such
occasion on January 5, 2002 that there was a person who is mentally
unsound but who looks like her son.
7, she visited the Remand Prison in Kalutara and upon making inquiries
was shown her son whom she recognised immediately although he showed
no signs of recognising her as a result of his mental state.
records indicated that Anthonypillai had been brought to Kalutara
on November 27, 2001 on an order made by the Polonnaruwa Magistrate.
Anthonypilai's fundamental right was violated as a result of Aralaganwala
police failing in their duty to inform the Human Rights Commission
of the arrest, the petitioner requests court to declare his rights
guaranteed by Article 13(1) and 13(2) had been violated and order
compensation amounting to Rs. 200,000.
faith against two ministers
By Dilrukshi Handunnetti
Two no confidence motions against Interior Minister
John Amaratunga and Commerce and Consumer Affairs Minister Ravi
Karunanayake are to be tabled in Parliament next week.
leader Mahinda Rajapakse told The Sunday Times that it was tragic
that a new government of six months already merited no faith motions
against its ministers.
him, the Interior Minister would be charge sheeted for initiating
alleged false action against several PA legislators including Ajantha
de Soysa, Sarana Gunawardhane and Dilan Perera.
He said that
the action taken by the police to arrest these MPs on trumped up
charges added to the harassment caused by various police personnel
against identified PA supporters merited the no faith.
He added that
the UNF assumed office pledging to control the cost of living which
allegedly escalated during the PA administration due to bad financial
mismanagement. Mr. Rajapakse said the UNF had proved completely
ineffective in this area and a then vociferous opposition legislator
who was made the relevant minister has totally failed to contain
the rising CoL which has further burdened the public.