Has plutocracy invaded democracy in Sri Lanka?

The answer appears to be a significant “yes” as things unravel in Sri Lanka. There is a huge hue and cry on the Government’s budget proposal to impose a withholding tax of 25% on the interest income accruing the EPF and ETF. 

The trade unions representing employees in the private and public sector have the right and needs to stand up towards this unjust revenue collection introduced by the Finance Minister, Basil Rajapaksa, as a budget proposal.

The Minister of Finance appears to justify the position explaining the limited sources he must use to raise revenues to meet the public expenditure. The minister explains his constraints in imposing direct taxes on the private sector and indirect taxes on the public in various media statements. Is this a reasonable justification? Let us discuss this in this essay. 

Before we proceed, we need to understand what plutocracy means clearly. Plutocracy is just the opposite of democracy. Professor Kishore Mahbubani explains this lucidly; in a democracy, society is structured to take care of the vast majority. In a plutocracy, society is structured to take care of the interest of a small affluent minority. All evidence leads to this scenario in Sri Lanka. The renowned Western philosopher Pluto writes in ‘The Republic’ quoting Socrates, warning of the dangers of selecting ships’ captains by their wealth, instead of the captain’s competency in navigating the vessel. 

As things stand today in almost all representative democracies, the 1% of the privileged rally together and elect politicians into power to get their interest secured by deceiving the 99% of the sandwiched marginalised population. Nobel laureate Joseph Stiglitz argues that a democratically elected government is moving away from the people in the USA. Definition democracy government by the people for the people; now transforms governments of the 1%, by the 1%, and for the 1% notes Prof Stiglitz assessing the political trends in America. Being an American citizen, I wonder why our finance minister is too inclined with this thinking.

Has the Sri Lankan polity witnessed this situation overriding just rule, unfair distribution of resources similar in the USA? Has the rule of lawyers aligned with the politicians weakened the rule of law, whether Sri Lanka is moving towards plutocracy? This author posed two questions to the eminent Sri Lankan Human Rights jurist, W.J. Basil Fernando, during a Melbourne-based Voice for Democracy in Sri Lanka webinar on 5 February 2022. Basil Fernando affirmed and said that plutocracy had taken deep roots in the island nation.

Who are the ones who drive the election mechanisms with enormous financial resources and build up fake individuals as heroes and place them before the electorate in Sri Lanka? Once we find answers, the Sri Lankans could probably come together and influence the system change necessary to go out of the mess created by all political parties snatching the future of our next generation.

Facts speak for themselves; in the 2020 budget proposal, the deficit increased by nearly Rs. 1 trillion. As a result of foregone tax revenues from the sources, value-added tax 210 billion, an excise tax on motor vehicles 82 billion, corporate tax 46 billion, withholding tax 40 billion and PAYE tax 34 billion. How democratically elected governments payback to those who have sponsored their electoral victories in Sri Lanka. 

The Finance Minister’s for 2022 proposal is merely to borrow from the future and fill up the coffers to mobilise resources for wasteful and avoidable expenditure to fulfil the aspiration of their political masters who bring them to power, majority of the citizens getting cheated one election after the other. Imagine, in the current zero and negative interest rate era imposing a 25% withholding tax on interest income of the EPF/ETF, leaving the workers in an economically weaker position to spend their later stage in the lifespan. 

The latest statistics of the UN, on average, a person reaching 65 years in 2020, a man is likely to spend further 19 years, and a woman is expected live for another 22 years. The policymakers have no clue how they should address the alarming situation of the growing ageing population. They are only concerned about the next election. Senselessly the politicians are happy to rob the workers of hard earnings to meet their short-term objectives.

In all fairness, this trend, tapping into workers savings, is not a pure making of the “Pohottuwa” pundits. President R. Premadasa’s Government planned to convert the EPF to a pension scheme based on an arbitrary interest rate, assuring an annuity of Rs. 300 per month for retirees till death in the early nineties. This author was a member of the delegation representing the Ceylon Bank Employees’ Union appealed to preserve the EPF at the hearing of the parliamentary select committee in 1990. Finally, the EPF was saved from conversion to a social security fund at the dictates of multilateral agencies who propagated peopelisation by privatising profits and socialising problems. Gains for 1%, losses to the 99% that is plutocracy.

The influential people have thoroughly abused the EPF/ETF funds in connivance of the 1% of the privileged political gurus who bring them into political office. All those bad investments losses were conveniently passed on to the EPF at the expense of 99%. This article does not permit elaborate wasteful investments, making few companies trading in the Colombo Stock Exchange make massive gains. Some of those promoters who had the controlling interest of the companies have made enough, and their current stake is less than 1% leaving the majority of the EPF members to face the brunt fruits of the wrong investments. 

Then came the bond master from Singapore, who introduced the 30 years maturity bond enabling the perpetual stream of income for a group of Primary Dealers close to the policymakers serving as political gurus. 

Insider dealing is the name of the game. Those close to the ministers, especially those holding the finance portfolio, get their friends and families appointed to various regulatory bodies with influential positions in stock brokering and primary dealership companies. The infamous uncle and nephew’s perpetual racket is only the tip of the iceberg. Many have mastered the art of robbing banks from the inside cleverly. It is high time those who stole workers’ savings through their political connections were brought to justice and ended the worsening plutocratic trends in Sri Lanka.  

Unfortunately, the divided trade union movement in Sri Lanka is utterly powerless in influencing and lobbying for bringing the EPF/ETF managed by a team of trustees on behalf of the contributing members in the fund. They, too, are busy rallying with the 1% to elect the corrupted to power. At least the independent and democratically functioning trade unions need to take the lead to change the status quo and end the evolving plutocracy in Sri Lanka. We commend the efforts of such socially conscious trade unions coming forward to protect the workers’ hard-earned money. 

All Sri Lankans needs to rally around for a game-changer, not a name change. The political parties currently manoeuvring the representative democratic process are working beyond their expiry dates. The COVID-19 pandemic has taught many an unforgettable lesson, a new turning point of human civilisation.

The writer is the Director, Finance Sector,  Professionals and  Managers  Group Activities at UNI Asia & Pacific, Singapore. He could be reached via email [email protected]