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VAT issue still simmering, SLFP-UPFA members say people are up in arms Joint Opposition and oth protest march from Kand

Storm clouds are building over Government’s main partners on the impact of the Value Added Tax (VAT) which has dealt a blow to a large segment of Sri Lankans. The pro-Maithripala Sirisena Sri Lanka Freedom Party (SLFP), or the United People’s Freedom Alliance (UPFA), segment is unhappy over the political fallout from this exercise. The issue has been the main subject of conversation during informal meetings. At a dinner this week at the Colombo residence of a Galle District parliamentarian, their UNP counterparts came in for bitter criticism. The reason, they said, was the embarrassment caused to them and the damage to their party. It was a recipe, they noted, for their certain defeat at next year’s planned local government elections.

The UPFA position was articulated by Minister Mahinda Amaraweera who is the General Secretary. He told the Sunday Times later; “We are of the opinion that the VAT, introduced in May, should be amended in such a way as to provide relief to those worst affected. The manner in which the tax was increased was wrong. There should have been a process to educate the public before it was enforced.”

Amaraweera said just like the public, “we too have issues with the VAT. As members of the Government we have to face the people. You cannot introduce such measures by force.” He said in the next two weeks, members in the Government would meet President Sirisena and frankly express their views on the many implications of introducing VAT. “We need to keep the President informed about the impact, particularly at a time when we are facing a local government election,” he added.

March from Kandy

Even if Amaraweera did not say it, UPFA leaders in the Government are also concerned about a build-up against the Government of National Unity by different opposition groups. This has formed the subject of discussion by President Sirisena and his close allies in the recent weeks. Their attention has been focused on a protest march from Kandy to Colombo by Opposition groups on July 28. Those in the ‘Joint Opposition’ and former Minister Basil Rajapaksa’s unnamed political movement are co-ordinating this event with like-minded groups, including members of the Buddhist clergy. Rajapaksa is also trying to bring together chairpersons and members of the local government bodies which now remain dissolved.

On the night of July 27, the Opposition groups will attend a special ‘pooja’ at Sri Dalada Maligawa (Temple of the Tooth) in Kandy and begin their protest march the next day. The first leg of their march will be from Kandy to Mawanella. Thereafter, there will be overnight stops in Kegalle, Warakapola, Nittambuwa, Kadawatha and Colombo. Though there is pressure on former President Mahinda Rajapaksa to take part in the protest, he is most likely to receive them when they arrive in Colombo on August 1. It is here that the organisers have proposed to name Basil Rajapaksa’s new movement which is a precursor to a new political party. At least for Basil Rajapaksa, it comes at a time when he is indicted for the alleged misappropriation of Rs. 33 million from the Divineguma Department Fund which was under his Economic Affairs Ministry. Further legal action against him on the misuse of Government property and related matters is also under active consideration.

Last Tuesday, the ‘Joint Opposition’ parliamentary group met with former President Rajapaksa in the chair. Behind-the-scenes moves have gone on to pressure him to play a more active role. The meeting was at their ‘Nelum Pokuna’ office in Battaramulla. They decided to appoint a committee headed by G.L. Peiris to formulate a common position on the proposed Sri Lanka Constitution. Other members are Basil Rajapaksa, Raja Collure, Tissa Vithana, Jayantha Seneviratne, Sisira Jayakody and A.H.M. Azwer. They also discussed the need to step up their campaign for the planned local government elections.

The new turn of events for the Government over the VAT came after a ruling last Monday by a three judge bench of the Supreme Court – Chief Justice K. Sri Pavan, Justice Buvenaka Aluvihare and Justice Prasanna Jayawardena. Acting on a petition filed by National Freedom Front (NFF) leader Wimal Weerawansa, the court granted interim relief suspending the operation of the VAT and NBT (Nation Building Tax) revisions carried out by the Minister of Finance and the Commissioner General of Inland Revenue from May 2. The order will be valid until the relevant amendments to the Acts are passed by Parliament. As a result, the VAT revisions made -- new rates, thresholds pertaining to VAT and NBT -- by the Government remain on hold. Yet, many establishments continued to charge the same rate of VAT.

In making the order, the Supreme Court ruled that revisions made were illegal since they violate Article 148 of the Constitution which deals with parliamentary control of public finance. The application challenged the tax revisions on the basis that those revisions were illegal since they were not approved by parliament. They sought the courts intervention to annul the revisions. The next SC hearing on this case will be on December 6. Article 148 of the Constitution dealing with Finance states, “Parliament shall have full control over public finance. No tax, rate or any other levy shall be imposed by any local authority or any other public authority, except by or under the authority of a law passed by Parliament or of any existing law.”

On Thursday, UPFA parliamentarian Sisira Jayakody (Gampaha District) challenged before the Supreme Court the constitutionality of the Value Added Tax (Amendment) Bill. This Bill was tabled in Parliament to obtain its approval for the VAT revisions made on May 2. Jayakody is seeking a declaration that the Bill should become law only if it is passed by a two-thirds majority in Parliament and by the approval of the people at a referendum. He has said that certain clauses were inconsistent with provisions of the Constitution. Jayakody also said in his petition that the Bill, if it becomes law would be with retrospective effect. He has claimed that the Bill in its current form would contradict the interim order of the Supreme Court that temporally suspended the tax revisions on the basis that it was illegal.

The second reading of this Bill was originally scheduled up for debate on July 23. Prime Minister Ranil Wickremesinghe told media that it would be with retrospective effect thus giving legal effect to the imposition of VAT from May 2. Finance Minister Ravi Karunanayake told the Sunday Times; “We will of course, give all possible relief. In fact President Sirisena is discussing the matter with Prime Minister Wickremesinghe”, he said. He added that the duo had met last Monday, a day ahead of the weekly ministerial meeting, to discuss issues relating to VAT.

CoL committee under Sirisena

For the Government, the VAT and the NBT have become thorny issues. If it has displeased UPFA members and even a substantial section of the UNP, though they have not publicly voiced their views, the commitments in this regard made to the International Monetary Fund (IMF), will have to be honoured. It was one of the main assurances on which the IMF granted an Extended Fund Facility of US$ 1.5 billion in June. This will be spread over three years. The first tranche of this facility, nearly 168.1 million dollars (SDR 119.90m), has already been drawn. Just days earlier US$ 3 billion was raised with two different bond issues, each US$ 1.5 billion.

At the ministerial meeting on July 5, VAT and issues related to rising cost of living were discussed. More details of this session have now emerged. Reporting to ministers on his meeting with traders, Sirisena said some traders had even inflated prices of consumer items that did not come under VAT. He said the ministers should raise this issue when they attend meetings of the District Co-ordinating Committees in their respective areas. Sirisena will now chair a 12-member ministerial team that will monitor the cost of living periodically. Other members are Prime Minister Ranil Wickremesinghe, Ministers Ravi Karunanayake, Sarath Amunugama, Susil Premajayantha, Rishad Bathiuddin, Champika Ranawaka, Mahinda Amaraweera, Duminda Dissanayake, Kabir Hashim, Akila Viraj Kariyawasam and Malik Samarawickrema.

The same ministerial meeting on July 5 discussed what was titled “Resettlement of Protracted IDPs in the Northern Province.” The IDPs or Internally Displaced Persons were those forced to leave their homes during various stages of the separatist war. Resettlement programmes for them still continue and some still remain in refugee camps. The Ministers decided to “include traditional Sinhala villages in the