Super Gain Tax, Mansion Tax not enacted due to lack of Parliamentary support
By Kelum Bandara
June 25, 2015

We have stopped all the unsolicited Bills. Ad hoc policy implementations no longer exists under the new administration. We will also consider open, transparent bidding to give everyone a chance Last year, the tax revenue was Rs.1050 billion. Debt repayment was Rs.1076 billion. Obviously, there is no funds left. If someone claims that they gave us an overflowing treasury, that person must get his brain examined We are unable to function with this Parliament. At the beginning, we had the support. So, we proposed them. Now, there are no confidence motions pending. At the beginning, we had the overwhelming support to pass the budget. This support has declined now. We cannot continue even with this Parliament We have the very inefficient tax collecting mechanism. We have given so many tax holidays. I have fought tooth and nail to stop tax holidays for casino projects. Competitiveness and justice are the cornerstones of our economy policy Our Ministry of Planning has no implementation power. I am not Basil Rajapaksa.

DEPUTY MINISTER OF POLICY PLANNING AND ECONOMIC AFFAIRS DR. HARSHA DE SILVA IN AN INTERVIEW WITH SAID THE GOVERNMENT WOULD UNVEIL A FIVE-YEAR ECONOMIC PLAN FOR THE DEVELOPMENT OF THE COUNTRY. HE SAID THOUGH THERE WERE DELAYS IN THE EXECUTION OF DEVELOPMENT WORK INITIATED UNDER THE PREVIOUS REGIME, THINGS WOULD FALL IN LINE SOON.

Q: As the economic affairs spokesman of the United National Party (UNP), how do you assess the present status of the economy?

I think there has been a lot of false advertising on the status of economy. The product that was advertised both locally and internationally was quite different to the product we received. For instance, the figures show how fast the economy is growing etc., were more intended for political campaigning than for actual independent policy making. So, there was a big discrepancy between what was said, what really was. I had been arguing as to how the household income found growth only by 0.5 percent. That we saw on the ground, despite claims about the economic growth of 7.5 percent. This is the question I raised. Soon I will explain to the country why that was. What we saw on the ground was the real picture. Peopleís income grew only by 0.5 percent during the last six years. There has been a lot of window dressing. It was cosmetic. Now, we have to deal with the reality. No targets were met for 2014. Revenue was declining. The expenditure was uphill. We just kept borrowing.

Q: But you were in the government for more than six months now and what are the corrective measures you took?

A: Now we have split the Ministry of Finance and Planning. Policy planning and Economic Affairs have been placed under Prime Minister Ranil Wickremesinghe. I function as his deputy. It would play a crucial, leading role in designing and developing an economic policy for the next five years. In doing so, we have been looking at how it has been done in the past. Changes we have begun to make are intended to work out a coherent plan. For instance, letís build an airport in the middle of a bird sanctuary.

Somebody asks for building a port in Hambantota and you do it. Somebody asks for the 2018 Commonwealth Games to be held in Hambantota, and you do it again. It would cost tens of billions of dollars. We do not know whose priorities they are. We do an analysis into the cost benefits of these projects. We are changing all these. Within the ministry, we have two important departments -- the Department of National Planning, and the External Resources Department. We are now trying to prioritize the programmes and projects and to decide where the money should be invested in. We intend where we can opt for public-private partnership.

We have stopped all the unsolicited Bills. Ad hoc policy implementations no longer exists under the new administration. We will also consider open, transparent bidding to give everyone a chance. We will only implement the most cost effective and beneficial projects.

Q: In your answer you referred to an airport in the middle of a bird sanctuary. Obviously, you are referring to the Mattala airport. Do you have any plans in store for this airport?

A: It is a cost that we have to bear unfortunately. I think we have to re-view this as not just an airport. Similarly at the port and the entire area where a lot of infrastructure has been laid at present. It is to create economic activities. We have to look at how others have brought in public-private partnerships to develop, not just ports and airports, but industrial parks and zones around them.

When you compare our Mattala airport and Hambantota port with their counterparts in Singapore, what is left here? Its nothing! Similarly with Hong Kong and Dubai. We stand far back. If you look at these three examples, and their economic growth, you would see how the airports and ports play huge catalytic roles in developing those countries.

Q: It means that you consider the same model for the development of Hambantota as well?

A: We will, already, we are talking to various parties who can look at how best these assets can be utilized.

Q: Also you mentioned about the fiveyear economic policy of the United National Party (UNP)-led government. What are the features of this policy?

A: Yes, we will be presenting our concept as a white paper within the next few weeks. It is the synthesis between strands of economic liberalism, emphasizing freedom and autonomy on the one hand, and on the other hand, strands of political liberalism that emphasizes equity and justice. Isnít that a powerful thing to say? We are trying to strike a balance between the two.

It is a liberal alternative to market socialist economy. So, that is our objective. This system would be pillared on competitiveness. We will try to convert this to the most competitive economy in this part of the world. The competitive economy is very simple. We have human resources and geographic location. These are the two factors that we have to make competitive.

Q: How do you intend to find the financial capital to do all these?

A: It is an interesting question. Last year, the tax revenue was Rs.1050 billion. Debt repayment was Rs.1076 billion. Obviously, there is no funds left. If someone claims that they gave us an overflowing treasury, that person must get his brain examined. What we inherited was an empty treasury. If tax revenues were not enough for repaying debt, we have little left as non-tax revenue. This is the biggest challenge as explained well by the professionals and the Central Bank in its 2014 report. The challenges are the continuing decline of tax revenue as a percentage of the GDP.

Q: How are you going to increase tax revenue?

A: This is the thing. On the one hand, it is not only revenue. It is also net revenue. The gross revenue is what matters. We have 10.5 percent of GDP as revenue. At one time, it was 19 percent. We have the very inefficient tax collecting mechanism. We have given so many tax holidays. I have fought tooth and nail to stop tax holidays for casino projects. Competitiveness and justice are the cornerstones of our economy policy.

Q: For the increase of tax revenue, you proposed certain taxes-Super Gain Tax, Mansion Tax etc., But the enabling legislation has not been passed as yet in Parliament to give effect to them...

A: We are unable to function with this Parliament. At the beginning, we had the support. So, we proposed them. Now, there are no confidence motions pending. At the beginning, we had the overwhelming support to pass the budget. This support has declined now. We cannot continue even with this Parliament.

We have to have a Parliament that can support and work with the President. This Parliament is just in contrast.

Q: In order to find financial capital needed for development, how dependent would you be on external borrowings?

A: We would go for investment-based infrastructure development rather than loan- funded infrastructure development projects. We have to consider the public-private partnership for road development as well; particularly for the proposed expressways and could consider that model at least for heavy traffic segments of such expressways.

Q: Now the government is being accused of suspending all the development projects that were in progress. People have been thrown out of employment. What are your views on this?

A: Actually, these are not genuine allegations. It has happened. For example, the Port City project has been suspended. We cannot deny it. That is because the agreement that has been signed and the various negative impacts the project may have were not taken into account in terms of environment, legal, security and security aspects. It has been suspended and reassessed.

Once everything is done, we can figure out how we could proceed. If one person climbs down a well hanging onto a rope, the other person should not necessarily do the same. We have to reach a position which is not detrimental to the country, but it should be beneficial to the country. If that is the case, we can restructure the project.

Yet, we have halted some other projects because they have failed to comply with the accepted norms in executing them.

Q: I do not refer to these mega projects, but the work on small projects such as construction of access roads, culverts and minor irrigation projects had been halted. How do you react to this situation?

A: Well, to be honest, there was a temporary suspension of these projects for a month around February. After that, all the projects were assigned to the District Secretaries to do the needful, and also to the relevant ministries. We disbanded the Economic Development Ministry. Our Ministry of Planning has no implementation power. I am not Basil Rajapaksa. The Prime Minister does not play the role of Basil. We have assigned subjects to various ministries. If it is a road project, it will be executed by the relevant ministry only. If it is a hospital project, it will be implemented by the Health ministry. All these projects are coordinated by the District Secretaries. But, we found that a lot of these projects had been approved without any funds allocated for implementation. Some even did not have contractual agreements.

It took us some time for us to keep things in order. And this is what happened. There were delays and people complained about them. But two years later, they would feel happy about such delays because of the cost reduction we did.

Source: Daily Mirror - Sri Lanka

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