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Budget largess will lead to more taxes: MR

Comments / {{hitsCtrl.values.hits}} Views / Wednesday, 10 April 2019 02:09

  • Says public sector salary increases and Samurdhi expansion clearly aimed at attracting votes 
  • Questions why Govt. did not see need of 6000 new recipients over last four years 
  • Insists taxes were lower during his Govt. and softened with higher growth  
  • Argues Budget 2015 gave similar relief to win parliamentary vote and taxes rose shortly after 
  • Revenue estimates for 2019 too ambitious, targets twice what was collected in 2014 


Budget 2019 was critiqued by Opposition Leader Mahinda Rajapaksa yesterday as an effort to win votes by increasing public sector salaries and expanding the number of Samurdhi recipients, and warned it would only lead to missed deficit targets.      

Opposition Leader Mahinda Rajapaksa

Slamming the Budget, which was passed in Parliament last week, as full of short-term policies, Rajapaksa insisted increased public expenditure would lead to more debt, which would have to be met with higher taxes. Rajapaksa argued that any increases of salary and other perks proposed by the Budget would be short-term, as they were locked between a weaker rupee and higher taxes, which would not provide long-term benefits to the public.  

“When Government salaries are increased, and various other concessions given, it may give the recipient the feeling that he has got something. But very soon, he finds that whatever is given by this Government with one hand is taken away by the other. Due mainly to excessive taxation and currency depreciation, any salary increase given by this Government disappears almost immediately,” Rajapaksa said in a statement. 

Rajapaksa pointed out that the Rs. 2,500 salary increase for Government servants, extension of Samurdhi to an additional 600,000 families, and pension hikes, were all targeted at getting votes. He said existing Samurdhi beneficiaries were allowed to withdraw up to Rs. 30,000 in two instalments this year from their accumulated funds in the Samurdhi Banks, as spending money for the New Year and Christmas. 

“The newly set up Office of Missing Persons is to pay a monthly allowance of Rs. 6,000 each for the families of all missing persons, until the Office of Reparations is established and a larger sum paid. The fact that this is an election year will naturally lead many people to suspect that all these provisions are election-related.”

“The Government seeks to justify extending Samurdhi benefits to an additional 600,000 families on the grounds that ‘deserving families’ had been kept out of the scheme for political reasons. It appears that the Government suddenly became aware of that alleged long-standing injustice only after ruling the country for over four years. The rhetoric of the Government makes it obvious that the additional 600,000 Samurdhi recipients will be selected on political criteria, for reasons more to do with elections than with poverty alleviation. There is an inherent contradiction in the Government claiming on the one hand that poverty has been reduced, and then increasing the number of Samurdhi recipients by over 40%,” the statement added. 

Rajapaksa argued that the purpose of having compulsory savings for Samurdhi recipients is to encourage the savings habit, and to enable them to utilise that money for self-employment and other livelihood related activities. Salary and pension increases, as well as the new Samurdhi recipients, will result in an increase in Government expenditure, which would be unsustainable.

“Through their first Budget in 2015, the Yahapalanaya Government gave a special allowance of Rs. 10,000 to all Government servants, reduced the price of fuel and gas and certain foodstuffs so as to win the Parliamentary election on August 2015. Thereafter, the taxes collected from the people were increased from Rs. 1,050 billion in 2014 to Rs. 1,355 billion in 2015 – an increase of Rs. 305 billion in a single year.”

“Such an increase would have been spread out over at least three years under my Government. As a matter of policy, we kept the year-on-year increase in taxes within the range of Rs. 50 to Rs.100 billion a year, so as not to oppress the public. Under my presidency, the economy grew at an average annual rate of 6% from 2006 to 2009 despite a raging war, and at 7.4% in the five post war years from 2010 to 2014. No Government in post-independence history has achieved an average growth rate of 6%, leave alone 7.4%. Because of that growth, the economy was able to absorb the relatively modest annual increases in taxation under my Government.” 

Rajapaksa pointed out that in 2019, the Government hopes to collect Rs. 2,077 billion as taxes – twice the amount that was collected in 2014. “All that money is to be wrung out of the public in a context where the annual growth rate has declined to 5% in 2015, 4.5% in 2016, and 3.1% in 2017, and it is expected to be around 3% in 2018. The total outstanding Government debt increased from Rs.7, 391 billion in 2014 to more than Rs. 11,859 billion by the end of 2018 - an increase of 62%.” 

He also contended that the steep currency depreciation led to an increase in imports in 2018, which did not take place when he was President.  

“Under my Government, taxes were much lower, and the exchange rate was controlled to prevent increases in the prices of imports. So whatever was given by my Government as salary increases actually stayed in the hands of the recipients. The Yahapalanaya Finance Minister, who became popular by increasing Government salaries by Rs. 10,000, and reducing the prices of fuel and foodstuffs, was forced out of the Finance Ministry and assigned the Foreign Ministry within a couple of years, after he became unpopular for increasing taxes to pay for those concessions. That gives an indication of the turnaround time between doling out concessions to win votes, and having to pay for them under the Yahapalanaya Government.”

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