Equitable development

Thursday, 6 July 2017 00:00 - - {{hitsCtrl.values.hits}}

Sri Lankans with Swiss bank accounts hit headlines this week, creating interesting reading for the public. In the grand scheme of things this may not be much and the fact that this money could have been legally earned after payment of taxes is possible and should not be lost sight of. However, it does make space to discuss growing inequality in Sri Lanka.

Sri Lankans had Swiss francs (CHF) 307 million in Swiss banks last year, according to the latest figures compiled by the Swiss National Bank as of 2016-end. The total money held in Swiss banks by foreign clients from across the world incidentally rose by a small margin from 1.41 trillion Swiss francs (CHF) to CHF 1.42 trillion during 2016.

Cash kept in global tax havens made major headlines with the Panama Papers leak in 2016, which focused world attention on the need to end tax havens and reduce inequality. Ironically, Britain and the US are two countries in the race to the bottom of loophole-ridden regulations that allow corrupt lawyers, bankers and real estate moguls to profit from shell companies created elsewhere in the world. Despite numerous conferences to end the flow of black money around the world and innumerable pledges by world leaders, almost no dent has been created in the fight to bring siphoned off funds back into the legitimate system.

For Sri Lanka, the battle is on many fronts. Successive governments have bowed to powerful lobbies and each year increased indirect taxes that have a deep impact on the poor but rarely affect the rich. As much as 80% of taxes are indirect and public expenditure is slashed yearly resulting in progressive reduction of Government revenue that can be invested in housing, healthcare and education essential to a developing country. The more Sri Lanka struggles to introduce new skills and professional training that is accessible to a larger percentage of young people, the more the country will struggle to transition into a knowledge economy. This is one side of the problem.

The other dimension is corrupt political leaders. Sri Lanka’s governance has become so riddled with corruption that the very system is now diseased and even a few officials who are trying to change the ‘business as usual’ attitude of politicians are struggling to make a dent in the corruption juggernaut. Corruption seeps into all levels of governance: lucrative contracts are handed out to businessmen linked to political parties, policies are made to benefit certain industries at the cost of others and reforming state-owned enterprises is hampered by the appointment of loyalists to boards. The list is long and does not make for pretty reading.

President Sirisena, who came to power promising to put corrupt officials of the previous Government behind bars, is now facing a crisis of faith over lack of results. Almost every Government press conference is laced with questions over stalled investigations and delayed results. Having put anti-corruption on the table, he and the Government are now struggling to honour the pledge. Corruption could well become the one platform that decides the fate and future of the Government but more important it cannot be allowed to define the destiny of Sri Lanka.