This week, he rushed legislation through Parliament that increased the rate of Value Added Tax (VAT) from 15 percent to 18 percent. At first glance, that does not appear to be a significant increase but the devil is in the detail. Included in the new list of good and services subjected to VAT are 97 items listed for the first time, some of which form the backbone of our economy.
In rushing through the new regulations through Parliament, Wickremesinghe is only appeasing the International Monetary Fund (IMF). There is no debate about whether Sri Lanka should obtain assistance from the IMF given the dire circumstances it finds itself in but the manner in which Wickremesinghe is selling national assets and heaping taxes on a hapless public is alarming.
That Wickremesinghe was in a mighty hurry to placate the IMF Gods was evident when he wanted Parliament to sit last Sunday to debate the VAT regulations to a finish and have it endorsed by the legislature. However, he didn’t count on his erstwhile deputy, Opposition Leader Sajith Premadasa outsmarting him on that score.
The day being a Sunday and with the vote on the regulations being taken only later in the day, most MPs of the ruling Sri Lanka Podujana Peramuna (SLPP) preferred their Sunday siestas to being in Parliament. Premadasa noticed this and engineered a slow walkout of opposition MPs from the chamber, asking one of his MPs, Nalin Bandara Jayamaha, to remain and point out that there was no quorum in the House. That he did and Deputy Speaker Ajith Rajapaksa could do little more than ring the quorum bells and wait for SLPP MPs who couldn’t muster the bare minimum of 20 members- with opposition MPs remaining outside the chamber! Rajapaksa had no choice but to adjourn the debate for the day.
Wickremesinghe was reportedly furious at this turn of events, even though it would have been a tactic he would have been proud of, had he been in the Opposition. In an attempt to get even, he instructed the Leader of the House Susil Premajayantha, and Chief Opposition Whip Prasanna Ranatunga to ensure that regulations are abruptly voted on the following day, Monday. That did occur amidst strident protests from the Opposition with Wickremesinghe again displaying his penchant for petty bullying in Parliament although, strictly speaking, he shouldn’t be dictating terms to the legislature.
What has alarmed analysts is not the 3 percent increase in VAT but the inclusion of 97 new items. This would mean that these items will escalate in price by 18 percent, at least.
The list of these items makes for horrifying reading. They include all agricultural equipment and chemical fertilizer, all medical and pharmaceutical equipment, and computer equipment and software. This will guarantee that the services and products associated with agriculture, healthcare, and information technology will be more costly now which will be a crippling blow to these sectors which are struggling even now. Even services provided by travel agents in the tourism industry have been taxed- ah, what better way to promote tourism in the country!
However, just to ensure that the price hike is universal, topping the list are liquid petroleum gas, petrol, and diesel. As almost every product is associated with a transport cost, this will mean that practically every product and service in the country will see a substantial price hike from January 1, 2024, when the new regulations come into effect. To cap it all, State Minister of Finance Ranjith Siyambalapitiya tells us that inflation will be about 2.5 percent after the new regulations take effect- we will be lucky is it stays at 25 percent!
Predictably, the regulations were passed in Parliament with a majority of 45 votes, with 100 votes for and 55 against. Seventy MPs were either absent or abstained from voting. Former SLPP Minister Roshan Ranasinghe, sacked recently by Wickremesinghe was the only MP of note to vote against the regulations which were opposed by opposition parties in the House.
Mention must be made about the voting pattern. Sri Lanka Freedom Party (SLFP) leader and former President Maithripala Sirisena issued a statement saying the party will vote against the new taxes but he was absent at the time of voting. SLFPers who support the government defied the party and voted for the regulations.
More interestingly, the self-appointed ‘crown prince’ of the SLPP, issued a statement saying that he was against the new taxes when it was his father, Mahinda Rajapaksa who, as Finance Minister reduced the VAT drastically soon after assuming office in 2019. However, after all that gung-ho, the younger Rajapaksa was absent at the time of voting. Incidentally, Mahinda Rajapaksa himself voted for the higher taxes!
Namal Rajapaksa, if he entertains hopes of becoming a future leader of this country must learn to walk the talk, to stand up and be counted. If he is indeed against the taxes, he should have the backbone to attend Parliament and vote against it instead of taking cover under a statement issued before the media. Nothing that he has done so far makes him stand out as a leader on his own. It is high time that the young man realised that having the Rajapaksa surname is now more of a liability than an automatic ticket to power.
The Opposition can be content that while the government has had its way, it has had its say. What follows from January 1, 2024, will see an all-round increase in prices in all sectors and runaway inflation that will hurt the public even more than they are hurting now.
From an opposition perspective, that would be a perfect recipe to mobilize the masses in what is expected to be an election year. Whether they can do so- and whether Ranil Wickremesinghe will conduct elections as promised- are the only questions that remain. The outcome, at least as far as Ranil Wickremesinghe is concerned- is now certain.
