The private sector has become a fetish of sorts in this country. An oft-suggested remedy for public sector ills, which are many, is privatisation. Big brains of the corporate sector project themselves as paragons of virtue and undertake messianic missions. Claiming the moral high ground, these worthies have also offered to coach politicians in good governance. In fact, some of them have been eminences grises under successive governments by virtue of being financiers of the two main political parties.
Of late, some of the corporate deities have laid bare their true faces and proved that they are as fallible and corrupt as or even worse than their public sector counterparts. They have fallen off their high pedestals and find themselves in lesser quarters behind bars in the exalted company of common thieves. Nothing has exposed their sordid operations more than a report the Committee on Public Enterprises (COPE) released on MP Wijeyadasa Rajapaksha`s watch.
General Secretary of the Democratic Left Front and presidential advisor Vasudeva Nanayakkara has lashed out at the local robber barons for their plunder of public assets while donning the mask of corporate social responsibility.
In a letter to President Mahinda Rajapaksa, Nanayakkara points out, as we reported yesterday, that corrupt and fraudulent methods that the corporate sector employed in the acquisition of State assets as in the case of the Sri Lanka Insurance Corporation, the Lanka Indian Oil Company and the Lanka Marine Services Ltd and their evasion of taxes and controls from 1985 to 2005 cost the country over one thousand billion rupees!
In US dollar terms, this colossal loss is equal to approximately five times the loan facility the government has sought from the IMF or five times the cost of the Hambantota Port project as well as the development of ports elsewhere! In other words, fraud and corruption that the private sector has resorted to in grabbing the public sector cash cows and their tax evasion etc have thwarted national development and placed the country at the mercy of international lending institutions.
Export rackets including non-repatriation of proceeds have, Nanayakkara says in his letter, deprived the country of a large amount of foreign exchange aggravating the Balance of Payment difficulties. It is no wonder that we have not yet been able to break free from the shackles of neo colonial forces, on whose aid we are dependent even 60 years after `Independence`.
Tax evasion and lapses involving collection, Nanayakkara points out quoting Auditor General`s reports, amounts to about one half of the tax revenue due to the Treasury. And the infamous VAT scandal alone has cost the country 3,500 million or 3.5 billion rupees. With this kind of money, we could have built many roads, bridges and schools or fed thousands of hungry mouths for years.
Direct taxes, we learn, account for a meagre 16 per cent of the GDP at present. It used to be around 20 per cent about ten years ago. Tax revenue has dropped mainly because of the introduction of VAT, which left room for rackets. Successive governments have, instead of streamlining tax collection and cracking down on evaders and racketeers, sought to compensate for the drop in revenue by increasing indirect taxes, which send prices of essential goods soaring much to the consternation of the ordinary public.
Tax holidays given to big businesses are also being grossly abused and, as Nanayakkara says, President Rajapaksa should carry out his pledge in his last budget speech to scrutinise tax concessions granted to the various BOI projects, from most of which no benefits as such have accrued to the economy.
In this democratic socialist republic, a poor man unable to cough up as little as one thousand rupees by way of a fine in a court of law gets thrown behind bars instantly. But, when big time crooks evade taxes amounting to millions, if not billions, of rupees, they are given amnesties which function as incentives for people not to pay taxes!
In 2003, the UNF government, in its wisdom, introduced the Tax Amnesty Act No 10, which was subsequently found fraudulent by the Supreme Court. Taxes due to the State coffers consequent to the annulment of the Tax Amnesty Act and taxes due on account of the annulment of tax holidays given to the LMSL, Nanayakkara says, have yet to be collected.
The current economic downturn is bound to lead to a further decline in tax revenue and failure on the part of the government to rake in taxes already due to the State is nothing but a crime.
Nanayakkara has rightly questioned the government`s wisdom of granting bailout packages to the collapsed registered finance companies with no prospects of recovering the rescue funds. The State is, no doubt, duty bound to prevent job losses and erosion of public and investor confidence in the financial market by granting finance companies and banks in dire straits pecuniary assistance to tide them over. But, public funds must not be poured into a bottomless pit while people are starving or struggling to make ends meet. Peter must not be robbed so that Paul could get away with his rackets!
We cannot but agree with Nanayakkara who, in the public interest, moved the Supreme Court successfully against the illegal sale of the Sri Lanka Insurance Corporation that the Auditor General must be empowered and given resources to investigate all scandalous and fraudulent deals in the alienation of public property under divestiture programmes and other corrupt deals. We also wholeheartedly endorse his call for the establishment of a presidential commission to investigate corruption involving public assets and revenue.
Unfortunately, Parliament, which is the guardian of public finance, has failed in its duty by turning a blind eye to the plunder of public assets as well as mega tax rackets exposed in reports by former Auditor General S. C. Mayadunne and his successor S. Swarnajothi.
There is no reason why President Rajapaksa, who in his Victory Day speech, declared war on corruption and other social evils, should not swing into action.