New tax rates unfeasible with 45% below poverty: Harsha

• Says cannot fathom measures to increase tax on exporters
• Tax increase must carry scientific basis; no analysis done 
• Country situation has changed dramatically over past 3 years

By Darshana Abayasingha 

Main Opposition MP Dr. Harsha de Silva says poverty in Sri Lanka has risen three-fold since 2019, and therefore the Government is mistaken to believe people can afford to pay taxes as per the recent proposal. 

The SJB MP said a survey carried out by the Department of Census and Statistics in 2019 as per old methodology had placed poverty in Sri Lanka at 3.3%. But in August this year the department had revealed poverty in Sri Lanka was actually 14.3% as per current criteria. Alongside this data, de Silva cited figures published by The World Bank which found poverty in Sri Lanka had risen to 25.6% this year from 13% in 2019. A survey conducted by the Department of Economics at the University of Peradeniya this year placed over 45% of Sri Lankans below the poverty line. 

“Since the coming of the Gotabaya Rajapaksa Government, due to their short-sighted policies, poverty has risen three-fold and over 9 million Sri Lankans fall below the poverty line as per the University study. The socio-economic strength that existed before 2019 does not exist today. 

I don’t think we ever had poverty over 40% in the past 50 years. We cannot implement this kind of tax regime at this point, the people cannot bear it,” de Silva said. 

In addition, the SJB MP said that just as he criticised the disastrous tax cuts of 2019, he lays the same level of criticism on the new structure, as Government has provided no scientific basis or analysis to support such implementation. De Silva said the Government must not blindly agree to increase revenue as mandated by the IMF and other agencies, it must take into account the ground realities and suffering of the people. 

In 2019, a family of four needed Rs. 27,684 a month to barely survive on food alone. Today that figure has risen to Rs. 53,840 a month without considering health, education, transport, communication and other costs. 

They say tax must be paid only by persons who earn Rs. 100,000 a month. But month-on-month food inflation is at over 130%. Under these tax slabs, anyone who is earning Rs. 100,000 will get to 36% much faster than seen in other countries. We should have retained PAYE tax as it was at 24%. The same people who shouted this was too high is now saying it must become 36%,” de Silva lamented. 

He pointed out Sri Lanka’s tax curve is not linear and places a lot of pressure on the middle class. The MP severely criticised the proposal to increase tax on exporters to 30%, adding he could not fathom how the country plans to encourage exporters and business when it places arbitrary high taxes on the very sector it must rely on for survival. 

He charged that casinos only pay tax of 40% and importers 30% tax, but exporters too have not been spared despite the dependency for foreign exchange having previously paid just 14%. 

“Some members of the Government said reports on poverty were untrue. But now the numbers are out there. Plus, how can we encourage an export economy in this manner, what is the basis for these rates? What we have today is not the same country we had in 2019. Yes, we need to do reforms and we need the support of the IMF, but I must tell the President we cannot be heavy-handed with our taxation in a country with over 40% poverty,” de Silva stated.

The MP said Government, MPs and Finance Ministry officials must have an open discussion on what really is possible, and questioned what steps the Government has taken to reduce public expenditure.