Unions bark; Caravan moves on
Trade unions launched their strike against the Government this week on a combo of issues from elections to electricity tariffs to taxes lest one of them was not enough to draw the workers out onto the streets. They paid little heed though to their obligations to pull the country out of the economic abyss it is in. It is all about rights, not duties. And one might say, 'it was all sound and fury signifying nothing' that would help bring that extra dollar to the economy.
With the IMF green light flashing for a bailout, the gasping economy will get some oxygen when Sri Lanka will be able to once again access foreign loans to tide over its immediate difficulties – only to keep borrowing, of course, for the next generation to settle the loans later. The quid pro quo is for Sri Lanka to submit to an IMF programme for economic reforms, among which is a move to shore up domestic revenue to finance its expenses one way or the other, and one way being by way of taxes.
Political analysts can decipher how many who took to the streets on Wednesday actually pay direct taxes. Some in the private and banking sectors have to pay not more than Rs. 1,000 in new taxes, but complain and walk out of their workplaces under union pressure and mob mentality.
The new culture is tax avoidance. Either by way of 'cash only' or not issuing a bus ticket, the name of the game is to avoid the tax man. And what of the Inland Revenue Department (IRD) tasked with collecting Rs. 1.6 trillion? Only last week, this newspaper published a damning report by the Auditor General of the deficient online system for tax collection that has so far cost Rs. 10 billion – the cost of holding the local government elections, and how those targets of Rs. 1.6 trillion are unlikely to be met.
Why? Because a Revenue Administration Management Information System, commonly called RAMIS, the online platform introduced in 2014 during the Presidency of Mahinda Rajapaksa, reeks of corruption. RAMIS is not working optimally. Contractual details are missing, and the astounding excuse trotted out is that the IRD signed an agreement with the Singaporean firm that provided RAMIS not to divulge the details, a matter the Auditor General says is unconstitutional.
As a result, the IRD is handling some 700,000 files manually, an ideal recipe for bribery and corruption. Rs. 500 billion is overdue in taxes. The Social Security Contribution Levy effective from October last year, and the Withholding Tax do not even have separate units at the IRD. Tax compliance which was 85 percent in the past had dropped to an all-time low of 45 percent in the absence of a robust follow-up system, in addition to bribery and corruption.
The burden of new taxes imposed on the protesting public can be eased and the IMF programme better implemented if the IRD systems are in place. The State Minister of Finance giving mere directives to the IRD this week to chase after professionals for not paying their income tax is a meaningless and fruitless exercise unless the IRD and the Finance Ministry turn the searchlight on the IRD itself, and see what is going on in there, and has gone on in there, in recent years.