8 November 2017 02:24 pm Views - 1257
BY Muttukrishna Sarvananthan
Continued from yesterday
Heist of poor by state
Historically, Sri Lanka’s poverty alleviation programmes such as Janasaviya and Samurdhi are notorious for not covering the real poor and the needy; instead, the poverty alleviation programmes have been mostly handouts for the supporters of the ruling political parties at different time periods. (See Centre for Public Impact, 2017; Glinskaya, 2003) The poverty alleviation programmes are yet another heist of public finances in Sri Lanka by the privileged groups of people associated with the ruling political parties.
The taxation policy in Sri Lanka, at least since 1970, has shifted towards increasing the share of the consumption or indirect taxes as opposed to the income/wealth or direct taxes. The consumption taxes are regressive and income/wealth taxes are progressive because the unit or rate/s of the consumption taxes are applied uniformly across different income groups of the population, income/wealth taxes are applied as a proportion of the income/capital gains/wealth of an individual or a company. Hence, the burden of indirect taxes is heavier on the lower-income groups of people, which is very unfair on the lower strata of society.
At present (and in the recent past) around 80 percent of the government revenue accrues from indirect (consumption) taxes and only less than 20 percent accrues from direct (income) taxes. (See Moore, 2017; Waidyasekera, 2012)
However, Mick Moore’s claim that there have been significant transfers of wealth from the middle and lower classes of people to the people of upper class (what he terms as “The Political Economy of Long-Term Revenue Decline in Sri Lanka) because of progressive and significant reductions in universal welfare programmes (including cutbacks on universal free education and health services) coupled with tax concessions for selected elites in society, especially since 1990, is based on insufficient evidence and therefore untenable.
This author would argue that the significant cutbacks in universal welfare programmes (such as the free ration scheme for the entire population until 1977 irrespective of the income levels of the population) and progressive public disinvestments in free education and health services were/are partially offset by progressively increasing levels of universal subsidies for fuel (kerosene (paraffin), diesel and petrol), utilities (electricity, cooking gas and water), fertilisers and public transport (railways and passenger buses), especially since the world oil crisis of mid-1970s.
For example, the subsidies on kerosene/paraffin benefit the relatively poorer people than the people of higher income groups and the pricing formula for electricity and water heavily subsidises the lower levels of consumption or users whilst heavily penalising (overcharging) higher levels of consumption or users. (See Advocata, 2016, for data on enormous losses made by state-owned public enterprises in Sri Lanka such as the Ceylon Electricity Board, National Water Supply and Drainage Board, Ceylon Petroleum Corporation, SriLankan Airlines, inter alia) (Await a forthcoming rejoinder to Mick Moore by this author)
Under such patronising political culture embedded in greed-based democracy (as opposed to need-based democracy), enshrining of the ESCR as justiciable rights becomes sine qua non because the non-elected judiciary could play the role of an arbitrator between the citizens and the partisan and matronising/patronising elected executive and the legislature
Though the claim by Mick Moore that there have been significant transfers of wealth from lower and middle-income groups to the higher-income group (what is referred to as “The Political Economy of Long-Term Revenue Decline in Sri Lanka) is unconvincing, this author would concur with Mick Moore that the lower and middle-income groups have been unfairly and relatively much more affected by the regressive fiscal policies pursued by the successive governments, at least since 1970.
Unproductive uses of public money
During the course of preparing a vocational education and training plan and strategy for the Northern Province of Sri Lanka in 2014, this author found that out of the 25 districts in the country, the Galle District had the highest number of vocational education and training colleges per capita. When we probed why this was the case, it was found that the electoral constituency of the past few ministers in-charge of skills development was Galle. This is yet another example of matronage/patronage-based wasteful public expenditures in Sri Lanka.
The exorbitant public debt incurred by the Hambantota harbour and Mattala airport development projects are couple of other matronage/patronage-based wasteful public expenditures as Hambantota is the hometown of the former president of Sri Lanka.
The foregoing two examples of whimsical public expenditures demonstrate that the realisation of the economic, social and cultural rights (ESCR) by the citizens of Sri Lanka only through democratic processes and directive principles is a pipe dream for 99 percent of the population.
Under such patronising political culture embedded in greed-based democracy (as opposed to need-based democracy), enshrining of the ESCR as justiciable rights becomes sine qua non because the non-elected judiciary could play the role of an arbitrator between the citizens and the partisan and matronising/patronising elected executive and the legislature.
Inequality
Reducing the income and other inequalities have become prime development goals in developing countries with the sustainable development goals put in place by the global community of nations. During the post-independence period in Sri Lanka, early to mid-1970s had the least income inequality measured by the Gini Coefficient. The Gini Coefficient, which was 0.46 in 1953, dropped to 0.35 in 1973, increased to 0.45 in 1981/1982 and to 0.46 in 2003/2004. (See the Special Statistical Appendix Table 10 in the Central Bank of Sri Lanka, 2017)
However, the changes in income inequality have had a negative correlation with the changes in the unemployment rate during the post-independence period; whenever the income inequality decreased, the unemployment rate increased and vice versa. Thus, the unemployment rate, which was 16.6 percent in 1953, increased to 24.0 percent in 1973, dropped to 11.7 percent in 1981/1982 and to 9.0 in 2003/2004. (ibid)
It is ironic that while there is an ever increasing demand for “free” public services (especially education and health) by vociferous sections of the citizenry (for example, Inter-University Students’ Federation (IUSF) and Government Medical Officers’ Association (GMOA)), the very same sections of the citizenry are vociferously opposed to the new Inland Revenue Act, recently approved by the legislature
The Sri Lankan economy is trade dependent, whereby the exports and imports account for nearly half of gross domestic product (GDP) in the past three decades or so. A cross-country study has revealed that the positive impact of international trade in terms of poverty reduction is greater when there are proactive government interventions/policies to reduce income inequality and poverty. (See Rudra and Tirone, 2016) Therefore, in order for Sri Lanka to reap the maximum benefit out of its avowed export-led development strategy of the present government, it is imperative for Sri Lanka to reduce the income inequality for which the ESCR is sine qua non.
Inequality manifests in many different forms. Inequality among different people could be partly because of the ability of different people and/or efforts made by different people and partly because of some people unfairly (and sometimes criminally) appropriating income and wealth more than what they are eligible/qualified for and for the level of efforts they make. Governmental actions to reduce inequality should target the latter and not the former in order to reap the maximum welfare for
the people.
Directive principles versus justiciable rights
Legal and other professionals who oppose the incorporation of the ESCR in the proposed new constitution argue that the ESCR should be realised through the directive principles of the state rather than enshrining the ESCR as justiciable rights in the constitution. However, the antagonists of the ESCR do not seem to accept the fact that the Official Languages Act of 1987 in Sri Lanka (proclaiming Tamil as an official language in addition to Sinhala) is not fully implemented even today after 30 years of its enactment.
In the circumstance of the Official Languages Act of 1987 not being implemented due to administrative and political apathy, how can the citizens of Sri Lanka expect or trust the directive principles of the state to be implemented faithfully? Whilst we do accept that enshrining the ESCR as justiciable rights in the proposed new constitution would not guarantee sincere implementation of the same, we would argue that enshrining the ESCR as justiciable rights is necessary but not sufficient. (See Kaletski, et al, 2016)
Alleged incompetence of judiciary
The antagonists of the ESCR as justiciable rights claim that the judiciary in Sri Lanka does not have the competencies to adjudicate on the economic policies of the government. While we partially agree with such claim, we would argue that the judiciary is relatively much better educated and relatively much more level-headed and rational than most of the politicians in Sri Lanka.
Probably, exclusive courts could be set-up with specially trained justices to adjudicate on the matters of the ESCR (ala consumer affairs courts). Furthermore, the proposed constitutionalisation of the ESCR has to be specific as much as practically possible, in order not to give leeway to the judiciary as well as the wider legal fraternity to arbitrarily and whimsically interpret the law.
For example, the International Covenant on Economic, Social and Cultural Rights (ICESCR) mandates or obligates signatory countries towards “progressive realization (of the rights) utilizing the maximum of available resources”. In the view of this author, “maximum” in the foregoing could be interpreted in law whimsically and therefore needs to be more specifically defined.
an equal opportunities law (in terms of caste, ethnicity, gender, religion, sexuality, etc.) and enshrining of the ESCR as justiciable rights in the proposed new constitution of Sri Lanka are sine qua non for developing a perfectly competitive market economy in addition to fostering an inclusive economy and shared prosperity for all the citizens for the country
The very high SERF Index of Sri Lanka is an indication that legal enforcement of the ESCR could not be costly to the exchequer (because of its already higher position) and therefore the contrived fear of the antagonists for enshrining the ESCR as justiciable rights is unwarranted and unjustified.
As noted above, the fact that, in spite of the progressive decline of public expenditures on education and health since independence, the SERF Index of Sri Lanka has continued to rise, especially between 1985 and 2005. It is an indication that the financial cost of fulfilment of ESCR through judicial action need not be excessive. In any case, civil, economic, political and social rights of the citizens cannot and should not be deprived because of the financial cost involved.
Conclusions
According to the Freedom in the World 2013, compiled by the Freedom House in the United States of America (USA), Sri Lanka was one of the 14 countries which had experienced negative growth in the aggregate score (incorporating political rights and civil liberties) during the five-year period between 2009 and 2013 and was at high risk of social unrest among 65 such countries. (Freedom House, 2013)
The ratings for political rights (PR) and civil liberties (CL) range from one to seven, whereby one denotes “greatest degree of freedom” and seven denotes “smallest degree of freedom”. The combined average of the PR and CL ratings determines the status of the country whether they are free (1.0–2.5), partly free (3.0–5.0) or not free (5.5–7.0). (Freedom House, 2017, https://freedomhouse.org/report/methodology-freedom-world-2017)
During the 2006 to 2014 period, Sri Lanka’s PR rating was four (out of seven) between 2006 and 2010 and deteriorated to five (out of seven) between 2011 and 2014. However, the PR rating has improved to four during 2015 and further to three in 2016. Similarly, the CL rating remained flat at four between 2006 and 2013 but deteriorated to five in 2014. However, the CL rating has improved to four in 2015 and remains the same in 2016. (Freedom House, 2017)
Although there have been marginal improvements in both the political rights and civil liberties ratings of Sri Lanka in 2015 and 2016, it continues to be only a “partly free” country, according to the Freedom of the World ranking.
The civil and political rights (CPR) of human beings are intrinsically interconnected with the ESCR, which are what the human rights scholars term, “indivisibility of rights” or “intersectionality” in terms of feminist theory. There is a two-way relationship between the CPR and ESCR – the former rights cannot be fully realised without the realisation of the latter and vice versa.
Whilst accepting the validity of the legal maxim of “where there is a right, there is a remedy”, we would propose an economic maxim as well wherein ‘rights comes with responsibilities’, which should be inculcated to the citizenry from childhood. In the proposed new constitution, Sri Lankans should be inculcated with the knowledge and virtue that citizenship is a double-edged sword wherein the entitlements to public services by the citizens must be equally and indivisibly matched by the obligations to paying taxes (especially income and wealth taxes) by the citizens in order to finance such public services entitlements.
It is ironic that while there is an ever increasing demand for “free” public services (especially education and health) by vociferous sections of the citizenry (for example, Inter-University Students’ Federation (IUSF) and Government Medical Officers’ Association (GMOA)), the very same sections of the citizenry are vociferously opposed to the new Inland Revenue Act, recently approved by
the legislature.
The market economy in Sri Lanka does not have perfect competition because of its matronage/patronage and greed-based corporate, political and professional cultures (as opposed to merit and need-based cultures) as noted above. The ongoing Presidential Commission on the alleged bond scam and widely perceived insider trading in the capital market of Sri Lanka are slurs on the market economy of Sri Lanka.
Hence, an equal opportunities law (in terms of caste, ethnicity, gender, religion, sexuality, etc.) and enshrining of the ESCR as justiciable rights in the proposed new constitution of Sri Lanka are sine qua non for developing a perfectly competitive market economy in addition to fostering an inclusive economy and shared prosperity for all the citizens for the country.
(Muttukrishna Sarvananthan, Principal Researcher, Point Pedro Institute of Development, Point Pedro, Northern Province, can be reached at sarvi@pointpedro.org)