Govt. urged not to make tax policy decisions behind closed doors

• Govt. leaders have to stop pretending that people don’t understand tax, says senior economist Dr. Devarajan
• Points out issue in SL is not lack of competence but lack of accountability
• Says such thinking has been scourge of country for decades 

As Sri Lanka has taken some bold steps in recent weeks to increase state revenue by way of increasing tax rates, despite the unprecedented economic hardships experienced by the people amid roaring inflation, the biggest mistake the policymakers continue with is making big decisions on tax policy behind closed doors, a couple of leading economists in the country pointed out.   

As taxes are borne by the people and businesses, Dr. Shantayanan Devarajan said it is imperative for them to be consulted in the decision-making process. The government should do away with treating tax policies as a complicated matter that cannot be understood by the public. 

“The real problem in Sri Lanka and I’ve seen in other countries as well is that politicians and political leaders have the incentive to pretend that it’s something sophisticated that the public won’t understand and therefore, feel they should make those decisions behind closed doors,” said Dr. Devarajan. 

Addressing a webinar hosted by Verite Research this week, the former World Bank Senior Director asserted that tax policy or budget policy is not rocket science. 

“It’s actually fairly straightforward. There’s a myth that it’s out something only, you know, sophisticated economists should be dealing with. No, it is very straightforward and it’s something that the people should know about and they can know about it because it is about their lives,” he added. 

Following the gazette of the new tax policy, the public and industries have voiced their concerns on the fact that they are unable to absorb the high rates, as they are still grappling with the ongoing economic crisis. The announcement by the government came as a shock to many. 

Dr. Devarajan pointed out that in Sri Lanka the issue is not the lack of competence or lack of advisors. It is a lack of accountability.  

“The problem is that the government feels like they can take the decision without consulting the public. 

And that’s the thing that we need to reverse in Sri Lanka; this has actually been the scourge of the country for decades,” he reiterated. 

The economist asserted that the people should caution the government that the budget would be scrutinised very carefully, not just what is published but the manner in which it is implemented as well. “The people should hold the government accountable,” he said. 

Expressing similar sentiments, Verite Research Executive Director Dr. Nishan de Mel noted that ultimately accountability is intrinsically important and not just instrumental in getting better outcomes for Sri Lanka, in terms of its economic recovery.  “The current discussion about why the country has failed before, it has failed because of a lack of analytical planning. It has failed because it does not go through the proper processes or follow or even follow through with the processes it has. And it has failed because it does not adopt an adequate set of policies to succeed,” he said.