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Taxing thoughts on taxing incomes

04 Nov 2022

  • Public acknowledges need to increase Govt. tax revenue but calls for more efficient tax management instead
BY Sumudu Chamara “First, I thought that the proposed personal income tax rate hike was a joke. What Government in its right mind would increase taxes like this when having three meals a day has become a huge challenge for the majority of the population?” This was a citizen’s response to the proposed personal income tax rate hikes, about which people in general are expressing great displeasure and has already been challenged in the Supreme Court (SC). Many people remain hopeful that the SC would give a verdict against the proposed tax rate hikes, which they said would be a “people-friendly” decision. During discussions with The Morning about the proposed personal income tax rate hikes, many people further opined that the Government must find new ways to increase its revenue, without putting the entirety of the burden of the economic crisis on the people.   More taxes amidst economic crisis    The majority of the people expressed great displeasure over the Government’s proposition. Their opposition is predominantly against the rates that the Government has proposed, not necessarily against the necessity of increasing the Government’s tax revenue. “I think that the Government has to do two things. First, it has to be aware and sensitive to the economic challenges that the people are facing; and secondly, it has to be creative and find new ways to increase its tax revenue without further oppressing the people,” said 29-year-old private sector worker Asitha Sanders.  He opined that while it is understandable that the Government has to increase its revenue including the tax revenue, the measures that the Government has to take in order to achieve it should not exacerbate the effects of the economic crisis on the people. Furthermore, he said that the Government should focus on increasing taxes on businessmen that rake in astronomical profits and evade taxes, not ordinary citizens.  “I think that the Government is thinking only about the national economy, and it seems to have forgotten about the state of the household economies. The cost of living has increased by around 200-300%, while ordinary citizens’ income either remains the same or has declined. In this context, although a person who made around Rs. 100,000 before the economy hit rock-bottom may have been considered a middle-class person, that is no longer really a substantial amount that deserves to be taxed. There are so many large gbusinessmen that make massive profits even amidst the economic crisis, and many of them are evading taxes through various crafty means. Why does the Government not pay attention to taxing them and investigating their income and assets in order to tax their true income first?”   Judicious use of tax revenue   “What benefits the people can expect from increased tax rates is a pressing concern that should be questioned,” according to Senuri Chanaki, a 35-year-old software engineer who is living and employed abroad. She said that the people’s right to know this information seems to have been ignored by the Government and forgotten by the people.  “Taxes are supposed to make people’s lives, as well as the economy, better. In many countries in Europe, there are massive tax-related deductions and some people lose almost half of their salary as taxes. However, they have excellent living conditions, which include properly managed public services that are improved in a timely manner. Now, the Government wants to increase personal income taxes, just to cover up the losses caused by the actions of many previous governments, which I think is not fair.  “If the Government wants to increase tax rates, be it direct or indirect taxes, it has to tell the people how these tax rate hikes are going to make the people’s lives or the state of the economy better, what sort of new or improved services will be provided, and what sort of public institutions would be saved.” Chanaki added that if these tax rate hikes were proposed because of the Government’s agreements with the International Monetary Fund (IMF), which she said she thinks is the case, the Government must reveal this to the country. She further opined that if the Government showed such a level of honesty and transparency, even the people would willingly pay more taxes.  “The people have a right to question this, and the Government has an obligation to reveal how the tax money would be spent,” she emphasised.  Meanwhile, several people that The Morning spoke to expressed doubts as to whether increased tax revenue, in the event that the proposed tax rate hikes are passed, would be squandered by the Government and the public sector. Forty-two-year-old mechanic Kanchana Palitha Silva noted thus: “Let us think for a moment that every citizen is willing to pay more taxes. The question is, what happens to that money? Sri Lankan governments have a very poor track record when it comes to the mismanagement of public funds. Most people do not think twice before openly claiming that as many as 90% of MPs are thieves. Even after the economy began to collapse, how many allegations of corruption, some of which involve borrowed money and foreign reserves, were reported? They are thieves and they are corrupt, and I cannot trust the Government to manage my hard-earned tax money carefully.”  He added that until the Government convinces the people that it has a proper plan to use the tax revenue to support the economy, the people would not pay taxes.    Taxing people to cover losses and inefficiency   However, according to some, there would be no need to increase personal income tax rates if the Government paid genuine attention to reducing waste and corruption in the public sector, which they said would help the Government to save a large amount of money, thereby reducing the need to increase personal tax rates at this juncture and rate. Sixty-year-old former public sector employee R. Sirimanna (name changed on request), shared his opinion: “All that the Government says and the people accept without questioning is that tax rates have to be increased because the Government needs to increase its revenue; or that the public sector is suffering losses and that they have to be covered. The Government never admits that bad decisions and inefficiency on its part along with corruption and waste in the public sector are the main reasons for these losses and inadequate income. Since there is no honesty in revealing such information, all that is being talked about is the need for increasing revenue and not about addressing the issues that have created a situation where these types of massive tax rate increases are necessary.”  He opined that in a context where the prevailing economic crisis has paved the way for many economic and social changes, paying serious attention to corruption, waste, and inefficiency in the Government and the public sectors should also be a concern. Unless and until the present or a future Government does that, he stressed, no amount of tax rate hikes or other forms of income would save Sri Lanka. All that such measures would do is exacerbate the people’s low quality of life, according to Sirimanna.    Sparking a trend of tax evasion?   In a context where many of those who spoke with The Morning said they are not willing to pay hivher taxes than they already do, there are signs that many people will tend to evade taxes.  “This is a time where I have to save every cent that I have. I have reduced all expenses that are not absolutely necessary, so that I can make sure that I have enough money to feed my family. I am not going to pay more taxes than I already do,” Sanders said, expressing hope that the SC would rule in favour of the people and against the proposed personal income tax rate hikes, which he said are unjust and oppressive. Meanwhile, expressing a similar opinion, 39-year-old entrepreneur Yasith Perera (name changed on request), said that evading taxes would become a normal practice in Sri Lankan society if the proposed personal income tax rates are passed.  “I do not want to pay more taxes for no clear improvement in my quality of life. Although illegal, what I will have to do is evade taxes by not revealing my true income. It may be wrong in the eyes of the law, but I believe that everyone would agree with the fact that it is the right thing to do as far as a person’s survival in this economic crisis is concerned. In a context where people and even the authorities are stealing from us, I think that this is not the biggest crime.”  Perera went on to say that if the Government is trying to save itself by putting the burden of the economic crisis on the people, there is nothing wrong with the people trying to save themselves by any means necessary. He added that at the end of the day, it is the people who have to ensure their own survival, and that the Government has no moral right to question the propriety of their survival strategies.  Moreover, several other persons stated that they are not willing to pay more taxes even if they had to, adding that activists should keep fighting against the proposed personal income tax rate hikes. One person said that if the Government decides to proceed with the proposed tax rate increases, it would be the beginning of another “aragalaya”, which he said would be impossible to manage.   


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