Taxes and SOEs

Saturday, 19 May 2018 00:57 - - {{hitsCtrl.values.hits}}

The State must not just impose taxes, it must pay them as well. Taxes that are imposed by the Government have to be paid by the public employees of state-owned enterprises (SOEs) and other entities, as well as by the private sector. In fact, SOEs have stronger responsibilities to adhere to tax policies because they are essentially run with taxpayer money. But, overwhelmingly, the discourse in Sri Lanka is on how the private sector should pay taxes, but that scrutiny is often missing with its public counterparts.

This glaring discrepancy came to light recently when it was reported that the Ceylon Electricity Board (CEB) had paid Rs. 1.4 billion on behalf of its employees as pay as you earn (PAYE) tax. PAYE tax should rightly be deducted from the salary of employees but instead, the tax payers footed this cost and according to reports, it was a decision that was not even approved by Cabinet, though the irregular move had been discussed. It was listed as an “irregular payment” in the CEB Annual Report. In addition, 39 different staff allowances were also allowed to be paid with no Cabinet approval or oversight.

The issue had been flagged in the Committee on Public Enterprises (COPE) and since then, snippets of reports have hinted that the same may have been done at the Ceylon Petroleum Corporation (CPC) as well. Such payments are a massive breach of public trust because the public, including all the professionals in the private sector, pay their taxes in good faith. When it is mismanaged in this manner, the public become less inclined to do their duty because they feel betrayed by the very system that is supposed to protect their interests.

SOEs paying their employees’ taxes are essentially breaching public trust by condoning and supporting double taxation of the masses. Sri Lanka still overwhelmingly relies on indirect taxes, which has a disproportionate impact on the poor. Moreover, public officials already enjoy many benefits their private sector workers do not, including vehicle permits, low-interest loans and a non-contributory pension scheme. In some instances, they also have access to better healthcare and enjoy more days off than their private sector counterparts. It is because of these benefits that the Government is still the preferred employee of the masses and unemployed graduates regularly hold protests in Colombo demanding public sector jobs. This is also why Governments increase hiring public workers when an election is on the horizon.

Taxes are often compared to death because neither is supposed to give preferential treatment. Death is the great equaliser because it comes for both the rich and poor. Similarly, taxes should be paid by both the public and private sectors. Taxes are levied so that inequalities across a society can be smoothened out and all people can have a moderately decent life that gives them access to basic rights. This effort of empowerment is intrinsic to a democracy and embedded in Sri Lanka’s effort to become a progressive society. Such an effort can only be achieved by everyone paying their dues.