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Monday June 3rd, 2024

Concerns that Sri Lanka tax changes may violate democratic principles, defy Supreme Court order

ECONOMYNEXT – Concerns have been raised that a series of tax changes by cabinet decree without parliamentary consent may violate a recent Supreme Court order and also go against basic principles of representative democracy.

Sri Lanka’s Department of Inland Revenue has issued a series of directions to firms giving effect to cabinet and finance ministry decrees, without seeking parliament consent.

While some laws have provisions to change taxes by gazette (subsidiary legislation) deliberately by passing the parliament, some taxes require amendments to be passed to make them legal.

Court Order

“There is a principle that there is no taxation without legislation,” N R Gajendran, senior partner of Gajma, a tax consultancy told a seminar at the Ceylon Chamber of Commerce.

“And this was held in Sri Lanka in the recent past when Member of Parliament Wimal Weerawansa went to court when the VAT rates were increased. And the Supreme Court decided there is no taxation without legislation.”

He said the Department of Inland Revenue was told not to issue notices without legislation.

“But in this particular case, I don’t think anyone will go to the courts because the rates have come down,” Gajendran said.

“But hypothetically, it can happen. I don’t think there is foresight that the legislation will be passed before the parliamentary election.

Gajendran said some income taxes of some persons whose total earnings exceed certain thresholds may see an increase in their tax payments, especially after a withholding tax which was a final tax was removed.

“People may have not realized it yet,” he said.

“I don’t know whether the Department of Inland Revenue can put up a notice to say that that your tax rate has increased, to pay more tax in that event, because an order (from Supreme Court) is already there.”

Slashing of value added tax and changes to tobacco tax has already been queried by the Parliament’s Committee on Public Finances, which has asked for explanations on the economic justification.

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Taxation by Consent

Getting parliamentary approval (public discussion) is a fundamental principle democracy going back the origin of parliaments through the Magna Carta in Britain known as taxation by consent.

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Sri Lanka’s prerogative tax impunity checked in Magna Carta moment

Sri Lanka’s state aristocracy by popular vote; ‘King’ unware of tax by ‘Royal Prerogative’

British barons rose up against King John in 1214 when he raised a tax (scutage) for the sixth time without discussion. He was forced to sign the Magna Carta giving rise to the principle of taxation by consent.

The principle was further solidified by the British Bill of Rights of 1689 which is part of the un-codified constitution of that country strengthening the principle that “no taxes should be levied without the authority of Parliament” after King James II was seen to have arrogated many arbitrary powers.

The Bill of Rights put to an end to taxation by Royal Prerogative.

Sri Lanka does not have a Bill of Rights while the constitution itself tends to go against basic principle of restraining the state and tends to strengthen the rulers rather than checking their arbitrary powers on citizens, and the judicial system critics have said.

The constitution and arbitrary powers as well as lack of certainty in policy also undermine economic growth.

Economists call the lack of stable taxes and a government rules in the operating environment for businesses ‘Regime Uncertainty’.

Economist Robert Higgs had attributed the delay in the US recovery from the Great Depression, a collapse of the first recovery on state interventions by so-called ‘New Dealers’, a school of interventionist who used Keynesian principles and undermined property right and the business environment in the process.

Any legislation that legitimizes the tax changes should have retrospective effect. Many of the changes made in 2020 however are tax cuts.

In 2015, Sri Lanka’s then finance minister slammed retrospective taxes, undermining the business environment and property rights critics have said which contributed to weak investments under the previous regime. (Colombo/Feb12/2020)

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Water levels rising in Sri Lanka Kalu, Nilwala river basins: Irrigation Department

Sri Lanka Navy assisting in rescue operations (Pic courtesy SL Navy)

ECONOMYNEXT – Sri Lanka’s Irrigation Department has issued warnings that water levels in the Kalu and Nilwala river basins are rising and major flooding is possible due to the continuous rain. People living in close proximity are advised to take precautions.

“There is a high possibility of slowly increasing prevailing flood lowline areas of Kiriella, Millaniya, Ingiriya, Horana, Dodangoda, Bulathsinhala, Palinda Nuwara and Madurawala D/S divisions of Ratnapura and Kalutara Districts, up to next 48 hours,” it said issuing a warning.

“In addition, flood situation prevailing at upstream lowline areas of Ratnapura district will further be prevailing with a slight decrease.

“The residents and vehicle drivers running through those area are requested to pay high attention in this regard.

“Disaster Management Authorities are requested to take adequate precautions in this regard.”

The island is in the midst of south western monsoon.

DMC reported that 11,864 people belonging to 3,727 families have been affected due to the weather in Rathnapura, Kegalle, Kilinochchi, Jaffna, Mullaitivu, Kalutara, Gampaha, Colombo, Galle, Matara, Hambantota, Puttalam, Kurunegala, Kandy, Nuwara Eliya, Anuradhapura, Polonnaruwa, Badulla, Moneragala, and Trincomalee districts.

Meanwhile, the Meteorology Department stated that showers are expected on most parts of the island today.(Colombo/June3/2024)

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UNP gen secy defends call for postponing Sri Lanka poll, claims opposition silent

The UNP party headquarters in Pitakotte/EconomyNext

ECONOMYNEXT — United National Party (UNP) General Secretary Palitha Range Bandara has defended his call for postponing Sri Lanka’s presidential election by two years, claiming that his proposal was not undemocratic nor unconstitutional.

Speaking to reporters at the UNP headquarters Monday June 03 morning, Bandara also claimed that neither opposition leader Sajith Premadasa nor National People’s Power (NPP) leader Anura Kumara Dissanayake have spoken against his proposal.

“I have made no statement that’s undemocratic. My statement was in line with provisions of the constitution,” the former UNP parliamentarian said.

He quoted Section 86 of Chapter XIII of the constitution which says: “The President may, subject to the provisions of Article 85, submit to the People by Referendum any matter which in the opinion of the President is of national importance.”

Sections 87.1, 87.2 also elaborates on the matter and describes the parliament’s role, said Bandara.

“I spoke of a referendum and parliament’s duty. Neither of this is antidemocratic or unconstitutional. As per the constitution, priority should be given to ensuring people’s right to life,” he said.

“Some parties may be against what I proposed. They may criticse me. But what I ask them is to come to one position as political parties and make a statement on whether they’re ready to continue the ongoing economic programme,” he added.

Bandara claimed that, though thee has been much criticism of his proposal for a postponement of the presidential election, President Wickremesinghe’s rivals Premadasa and Dissanayake have yet to remark on the matter.

“I suggested that [Premadasa] make this proposal in parliament and for [Dissanayake] to second it. But I don’t see that either Premadasa nor Dissanayake is opposed to it. To date, I have not seen nor heard either of them utter a word against this. I believe they have no objection to my proposal which was made for the betterment of the country,” he said. (Colombo/Jun03/2024)

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300 of 100,000 trees in Colombo considered high risk: state minister

ECONOMYNEXT – Trees in Sri Lanka’s capital Colombo are being monitored by the municipal council, Army and Civil Defense Force as the severe weather conditions continue, State Minister for Defense Premitha Bandara Tennakoon said.

“Within the Colombo Municipal Council city limits, there are 100,000 trees. Of these, around 300 are considered high risk,” Tennakoon told reporters at a media conference to raise awareness about the current disaster management situation.

Not all trees required to be cut down he said. “We can trim some of the branches and retain them.”

The problem was that buildings in the vicinity of the tree had cut branches on one side, causing it to become unbalanced, the minister said.

New laws would be brought in so provincial/municipal institutions could strengthen enforcement of building codes.

“We don’t have a single institution that can issue a warning about a tree. Not one to tell us what trees can or cannot be planted near a road.

“Trees should be suitable for the area. Some trees have roots that spread and damage roads, buildings. When the roots can’t go deep, they tend to topple over.

“Now Environment Day is coming up, and anyone can go plant a tree by the road. We have to take a decision about this. We have to enforce laws strongly in future.” (Colombo/June3/2024)

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