Tuesday, November 26, 2013

The Budget Farce! – Captains of Industry don’t want to rock the gravy train.

Yesterday's Budget seminar at the Kingsbury Hotel, where the Whos who of Colombo were present, was a total and unadulterated non event. It is embarrassing to even hear the Big Boys being so sycophantic, if it was true! They only think about their survival, without thinking about the Country's survival. In short the budget was ZILCH!

No mention was made about the benefit that this country receives from over US$10B from remittances of workers, as that figure is grossly discounted in official figures. The Growth rate is purely attributable to this and NOTHING in the budget will add to that growth which is already discounted. If we had NO budget the growth will be higher.

If anyone including Koshi Mathai of the IMF continue to say this is a great budget they are all eating out of the Govt. gravy train and don’t want to rock it. Yes even that paragon of virtue Koshi, who seems to want to live here forever, as it is just too good to leave. Nowhere in the world in future, will he be called to address so many important gatherings, and no where will he ever feel so important, so why not praise your hosts? Just good sense, if it want for the fact that the public are taken for a ride. The IMF is being scammed by this person.

The budget is a rich man’s budget where even the rumor of a WEALTH TAX did not materialize, as it was shot down before it even made it to the Speech by whom BUT THE VERY WEALTHY. So they paid the Govt. back handsomely by PRAISING this budget. So it is dog eat dog, or let us all share the spoils! I hear behind closed doors they argued furiously that it would be a disincentive to investment, and will encourage capital flight. THERE IS NO BASIS FOR THAT. 

Let us list some of the glaring issues.

1   The percent of public expenditure paid out of direct income taxes is one of the lowest in the world. The RICH MUST be brought into the income tax bracket even if they are not charged a wealth tax. It is easily done, we know who the 50,000 who do not pay taxes are, they don't even have a tax file, but they travel in Rs30M + cars and sport utes. 

2    The indirect tax burden on the poor on basic food stuffs, (Rs30 on a Kg of Sugar) is the highest in the world, making our poor Sri Lankans one of the highest consumption taxed people on earth. The man who earns and spends 75% of his Rs 20,000 monthly income (US$150) on food for his family and mobile phone pays 15% of this gross in taxes.

3    The estimates of Revenue from Taxes is way off the mark, and they always play a ruse to overestimate this to appear to keep within their borrowing limits.

4    The corruption cost built into the infrastructure element of the Capital Expenditure is way too high, and so 20% of the Capital Expenditure is wasted, and not put into the project itself if it was transparent. (If only this could be added to Education!)

5   The interest on Public Debt, mainly foreign borrowings is way too high. I can renegotiate them at interest rates as much as 50% less, if corruption is not involved in seeking these loans. This will save at least Rs150B a year in interest alone!!

6    It is a national disgrace to spend and allocate so much money to Sri Lankan and Mihin airlines, when we will not be able to compete with the hundreds of aircraft that the Gulf Countries are now ordering, and so will have in use in the next 10 years. There are cheaper ways to fly.

7                   There is NO effort to use renewable energy resources, starting with NO duty on 100% electric cars and reduced duty on hybrids. Accordingly there is no corresponding tax on high polluters like 3 wheelers, that can reduce air pollution by leaps, and save lives, and make this country a ecologically sound state.

8              There is NO serious effort to encourage ORGANIC agriculture, like direct subsidies for this and reduction in the Fertilizer subsidy still further that contributes to CKDU. The Rs1B allocated to safe water is NOT enough, too little too late and will not reverse the current impending disaster, of 50,000 seriously ill kidney patients within a four years.

9                   Encourage off shore and on shore wind turbines and scrapping Sampur should have been a cornerstone of the Budget if we are serious about energy conservation, reduction in pollution, and ecologically at the forefront.

10                   The Tax (increase by 25%) on all telecommunication bills, will affect everyone in the Country, with the poorest again bearing the tax proportionately more (meaning regressive) with no counter to it!

11               There is NO COL (cost of living) allowances for pensioners, govt. servants, or any other lower paid people in as much as any increase bears any resemblance to the cost of living. The small amounts granted do not scratch the surface.

12                   MOST importantly there is NO INVESTMENT in Education over and above allocations to pay the existing teachers’ salaries. This is the most IMPORTANT infrastructural investment that is needed to enhance the KNOWLEDGE economy. Education has a long lead time, which if not spent now will take years for Sri Lanka to achieve knowledge supremacy. Foreign Tertiary establishments are NOT sufficient to fill the gap, which is most acute at the Montessori, and Primary levels to change our thinking, from followers to thinkers!

13                 Silly tools like tax holidays for getting a stock market quotation WILL NOT improve the CSE. Only a forced sell down of shares to increase the public float, will make any difference to the foreign investment in our Stock Market.

14                   A serious look at transfer pricing by multinationals is now the order of the day, as way too much untaxed profits are disappearing due to the ignorance of our Inland Revenue and Customs Authorities who are INTELLECTUALLY UNABLE to grasp this concept. With SL now seen as a growing economy they (MNCs) will not leave or threaten as they did in the past. It is the connivance of our people that permit this today.

15                NO Clear assurances of the rule of law have been made to encourage FDI, which is the only real requirement for long term FDI knowing your money is safe from being forcibly taken over. The track record of this Govt. is poor, and the legal system corrupt, so it is only the high risk gamblers like the Packers who will invest.   

This is just a few points that were obvious to me in the few minutes I took to type  this up. I am sure you can add to this list.

Take heed to what I say as we are only too ready to accept the spin that comes out of Temple Trees. It is all hogwash and we had better be prepared for the downfall.

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