The devastating impact that the price increases in the country have had on the living standards of the people is brought out by survey after survey. A national citizens’ survey led by the United Nations Development Programme (UNDP) found more than 55% of the population to be vulnerable across three dimensions — education, health and disaster, and living standards — and 12 indicators, including school attendance, their physical condition of health, unemployment and indebtedness. In effect, the survey showed that more than 12 million people out of Sri Lanka’s 22 million population have been badly affected by the crisis and remain vulnerable amid claims of a recovering economy. People are being forced to sell their assets in order to maintain a minimal standard of living.

In another survey, the UN Food and Agriculture Organisation (FAO) has reported that the projected cereal production for this year is expected to fall below the five year average due to the ongoing obstacles in farmers’ access to the necessary inputs. The surging prices of key food items are also playing a role in constraining the economic accessibility of food for a significant number of households. Although the majority of the households in the country maintain food security, including through taking loans and the sale of assets, certain areas continue to grapple with pockets of food insecurity. In yet another report, the UN World Food Programme (WFP) has provided statistics from the Crop and Food Security Assessment Mission 2023, revealing that approximately 3.9 million Sri Lankans are moderately afflicted by food insecurity. 

Accompanying the permanent increase in the price levels are high levels of indirect and direct taxation that have been imposed on the people. This is a double blow. A statement by the Collective of Trade Unions and Civil Society Organisations in Sri Lanka said that, “In addition to lowering the direct income tax threshold to rob lower middle class households of more of their monthly pay packet, regressive indirect taxes (Value Added Tax) almost doubled to 15% between June and September of last year (2022). As a result, the poorer sections of the population shoulder the burden of taxation today. Food inflation shot up to almost 95% in September, 2022. With headline inflation at 57% at the end of 2022, real wages have fallen by nearly 50%. The World Bank estimates that 500,000 jobs have been lost as of 2022.”

The first problem 

The announcement by the Government is that it will be imposing wealth, inheritance and property taxes. This might seem justifiable as they will only affect those who have such assets to be taxed. However, this will also affect a significant proportion of the middle class people as well who can barely make ends meet and who may well have put all their assets into constructing a home and are repaying loans as a result. Despite public protests by trade unions, the Government forces through a new law to hike income tax to force superannuation funds to agree to a restructuring of bonds in the Employees’ Provident Fund (EPF) and other pension funds and obtain a lower return of savings. Foreign Affairs Minister, President’s Counsel M.U.M. Ali Sabry, citing a Central Bank assessment report, said that the impact of the new law could reduce the annual EPF return to 9.72% from the current 10.99% which is given with a 14% corporate tax.

The first problem with the Government’s efforts to find adequate resources to finance its budget deficit is that it is going after those who are already in the formal economic system. It is deepening the tax net to catch those even with relatively low incomes. It is those who are in the formal economic system, and are law abiding, who are being taxed and made to pay up. However, there is a large number of people who remain outside of this formal economic system and who make vast amounts of money and are able to evade the taxation of their income and wealth, which may even be parked abroad. An example would be the case of the space satellite brought up by Opposition Leader Sajith Premadasa in the Parliament. Even though the cost of this venture is more than that of the Indian rocket that went to the moon, when the query was raised, it was said to be privately funded. There is a need to investigate if taxes were paid by those who funded the project and on the sources of their income. 

The second problem 

 The second problem with the Government’s efforts to find adequate resources to overcome the economic challenge has been the absence of any system change. The United States Revolution of 1776 was on the slogan of, “No taxation without representation.” In Sri Lanka, it is taxation without accountability. The majority of the people are paying the price for the economic collapse caused by a smaller group who are being spared the burden of being held accountable or asked to bear at least a part of the burden and instead continue to remain in their positions. Everything in the past remains intact including the abuse of power, corruption and mismanagement. These all remain, and if hearsay is true especially with regard to corruption, the situation is even worse than before. The President and the Prime Minister may be notable exceptions, but, their financial cleanliness is no relief to the people who see ongoing depredations by others in power, whether it is in respect of emergency purchases of medicine, energy or fertilisers. 

The protest movement of a year ago whose suppression is now complete with the Government having broken it through the security forces, had three objectives in mind. The first objective was to send the then President (Gotabaya Rajapaksa) home. The second objective was to send the 225 Parliamentarians home. The third was to effect system change. There was a spirit of idealism captured by those of all ages and regions who came to public places to show their solidarity with the common cause. This idealism continues to live. A survey conducted by Verite Research has shown that approximately 60% of the public do not believe that the protest movement led to the wishes and aspirations of the people being fulfilled. In addition, 51% of the respondents said that corrupt and bad governance needs to be fixed in order to rebuild Sri Lanka, one year since the “aragalaya” (the public movement to overthrow the former Government led by Rajapaksa) protestors vacated the Galle Face Green on 10 August, 2022.

The buildup of frustration and anger in the society is growing by the day and every price and tax increase that casts an additional burden upon the people, which is not met by an equivalent sacrifice or demonstration of accountability by those in the Government, is bound to escalate those negative sentiments. The direction that the country is traveling in does not appear to be positive but instead negative. It needs to be kept in mind that command responsibility lies on them all for mismanagement and corruption. There is evidence that frustration and anger is being turned inwards and violence within families is increasing. So are robberies and killings. This frustration and anger can also take more collective forms against those of other communities. When elections can no longer be postponed, the frustration and anger will manifest itself in the manner of voting and if elections continue to be postponed, it can even lead to a renewed protest movement less idealistic than the one that came a year ago.

(The writer is the Executive Director of the National Peace Council)

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The views and opinions expressed in this article are those of the author, and do not necessarily reflect those of this publication.