Minister of Finance Basil Rajapaksa returned to Sri Lanka on 1 January after a weeks-long holiday abroad, and as if belatedly celebrating the Sri Lankan Christmas that he missed, announced several unexpected relief measures in a late night press conference hurriedly organised and held shortly after 2022’s weekly Cabinet meeting.
Rajapaksa announced a relief package worth a staggering Rs. 229 billion, through which public sector employees and pensioners will be provided a monthly allowance of Rs. 5,000, and Samurdhi beneficiaries a monthly allowance of Rs. 1,000. More interestingly, he announced the removal of taxes on medicines and essential food items, and an increase in the purchase price of paddy by Rs. 25.
However, the removal of taxes on medicines and essential food items was questioned on social media platforms soon after Rajapaksa’s speech. The main, obvious concern is whether and how the general public would receive the benefit of such a tax removal, and one reason for this doubt could be the fact that similar decisions in the past have not benefited the general public. The removal of taxes on sugar did not result in any benefit to the public, and the Government lost both tax income and an opportunity to ease the economic burden on the public. That is a prime example that shows that a mere tax removal does not help the public, and in a context where price controls on almost all essential food items have been removed, there is really no clarity as to how Rajapaksa’s promise could result in something beneficial to the public.
While the prices of goods is a matter that affects the entire country, when it comes to the ability to purchase goods, public sector employees are likely to be in a favourable position, as they are getting a Rs. 5,000 raise whereas the income of those in the private and informal sectors, who are equally affected by the economic collapse, is not assured. In this regard, Rajapaksa requested private sector employers to provide relief to private sector workers. But, what would a request do, especially in a context where the Government has done very little to help the pandemic-hit private sector get back on its feet?
Even though a Government cannot support the private and informal sector employees in the same way it supports public sector employees, a Government cannot simply make a request from private employers, in a context where the World Bank has said that the country’s informal sector employment makes up approximately 65-70% of the country’s workforce and is associated with lower working conditions and earnings when compared with the formal sector.
One of the main concerns the proposed relief measures raise is how practical they are, and the assurance that they would not result in the Government having to seek more revenue from the public, especially in the form of taxes, later. When we look at Rajapaksa’s decision to purchase paddy at an additional Rs. 25, the immediate question is whether that would not affect consumers by causing an increase in the prices of rice. Rajapaksa did not provide any clarification as to whether the increased Rs. 25 per a kilogramme of paddy – which has to be added to the price of rice in a context where more than one kilo of paddy is required to produce a kilo of rice – will be managed. If the public has to pay that cost, the removal of taxes on rice would not make any difference.
The bottom line is, even though providing relief can help the public significantly at a time like this, providing relief is not necessarily the best approach for a Government at all times. The bitter truth is, the Sri Lankan general public is addicted to these temporary relief measures, and Sri Lankan Governments are to blame as they keep misusing the said addiction to ignore pressing economic challenges. The best approach is, taking steps to create a situation where reliefs are not necessary, and taking long-term measures that strengthen the people to strengthen their own economy.
At the end of the day, if the Government has to take more loans or print more money in order to provide the relief announced yesterday, what Rajapaksa has provided is not relief in the true sense of the word, but a loan to the public which has to be paid later in the form of taxes or increased prices of goods.The future burden of belated ‘relief’
04 Jan 2022
The future burden of belated ‘relief’
04 Jan 2022
Minister of Finance Basil Rajapaksa returned to Sri Lanka on 1 January after a weeks-long holiday abroad, and as if belatedly celebrating the Sri Lankan Christmas that he missed, announced several unexpected relief measures in a late night press conference hurriedly organised and held shortly after 2022’s weekly Cabinet meeting.
Rajapaksa announced a relief package worth a staggering Rs. 229 billion, through which public sector employees and pensioners will be provided a monthly allowance of Rs. 5,000, and Samurdhi beneficiaries a monthly allowance of Rs. 1,000. More interestingly, he announced the removal of taxes on medicines and essential food items, and an increase in the purchase price of paddy by Rs. 25.
However, the removal of taxes on medicines and essential food items was questioned on social media platforms soon after Rajapaksa’s speech. The main, obvious concern is whether and how the general public would receive the benefit of such a tax removal, and one reason for this doubt could be the fact that similar decisions in the past have not benefited the general public. The removal of taxes on sugar did not result in any benefit to the public, and the Government lost both tax income and an opportunity to ease the economic burden on the public. That is a prime example that shows that a mere tax removal does not help the public, and in a context where price controls on almost all essential food items have been removed, there is really no clarity as to how Rajapaksa’s promise could result in something beneficial to the public.
While the prices of goods is a matter that affects the entire country, when it comes to the ability to purchase goods, public sector employees are likely to be in a favourable position, as they are getting a Rs. 5,000 raise whereas the income of those in the private and informal sectors, who are equally affected by the economic collapse, is not assured. In this regard, Rajapaksa requested private sector employers to provide relief to private sector workers. But, what would a request do, especially in a context where the Government has done very little to help the pandemic-hit private sector get back on its feet?
Even though a Government cannot support the private and informal sector employees in the same way it supports public sector employees, a Government cannot simply make a request from private employers, in a context where the World Bank has said that the country’s informal sector employment makes up approximately 65-70% of the country’s workforce and is associated with lower working conditions and earnings when compared with the formal sector.
One of the main concerns the proposed relief measures raise is how practical they are, and the assurance that they would not result in the Government having to seek more revenue from the public, especially in the form of taxes, later. When we look at Rajapaksa’s decision to purchase paddy at an additional Rs. 25, the immediate question is whether that would not affect consumers by causing an increase in the prices of rice. Rajapaksa did not provide any clarification as to whether the increased Rs. 25 per a kilogramme of paddy – which has to be added to the price of rice in a context where more than one kilo of paddy is required to produce a kilo of rice – will be managed. If the public has to pay that cost, the removal of taxes on rice would not make any difference.
The bottom line is, even though providing relief can help the public significantly at a time like this, providing relief is not necessarily the best approach for a Government at all times. The bitter truth is, the Sri Lankan general public is addicted to these temporary relief measures, and Sri Lankan Governments are to blame as they keep misusing the said addiction to ignore pressing economic challenges. The best approach is, taking steps to create a situation where reliefs are not necessary, and taking long-term measures that strengthen the people to strengthen their own economy.
At the end of the day, if the Government has to take more loans or print more money in order to provide the relief announced yesterday, what Rajapaksa has provided is not relief in the true sense of the word, but a loan to the public which has to be paid later in the form of taxes or increased prices of goods.Kapruka
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Discover Kapruka, the leading online shopping platform in Sri Lanka, where you can conveniently send Gifts and Flowers to your loved ones for any event. Explore a wide range of popular Shopping Categories on Kapruka, including Toys, Groceries, Electronics, Birthday Cakes, Fruits, Chocolates, Automobile, Mother and Baby Products, Clothing, and Fashion. Additionally, Kapruka offers unique online services like Money Remittance, Astrology, Medicine Delivery, and access to over 700 Top Brands. Also If you’re interested in selling with Kapruka, Partner Central by Kapruka is the best solution to start with. Moreover, through Kapruka Global Shop, you can also enjoy the convenience of purchasing products from renowned platforms like Amazon and eBay and have them delivered to Sri Lanka.Send love straight to their heart this Valentine's with our thoughtful gifts!