Govt. has second thoughts on taxing EPF, ETF and similar funds - EDITORIAL

It is no secret that the Gotabaya Rajapaksa government is struggling to come to terms with its worst ever economic crisis in decades. With Sri Lanka’s foreign reserves hitting rock-bottom, the government is looking for loans, swaps and credit lines from India, China or any other country to fill its depleted coffers.   

It had prompted former prime minister and United National Party (UNP) leader Ranil Wickremesinghe to request the government to reveal the factual situation with regard to the country’s foreign reserves and table the monthly economic situation reports in Parliament. He claimed that according to various reports if swap facilities and credit lines were unaccounted for, our current foreign reserves would amount to less than US$1billion, which is too alarming a state of affairs to contemplate.   

It is in this backdrop with the government looking at various options to fill its coffers that Finance Minister Basil Rajapaksa tabled the imposition of a one-time 25%Surcharge Tax on individuals and companies with an annual taxable income of Rs.2,000 billion or more. Also falling into this category was the Employee’s Provident Fund (EPF), the Employee’s Trust Fund (ETF) and nine other similar super annuation funds, which more often than not are the only form of savings that private and semi-government sector employees, who do not enjoy pension benefits, look forward to taking home on retirement as the only source of income to sustain themselves and their families.   

Samagi Jana Balavegaya (SJB) parliamentarian Dr. Harsha de Silva hit out at the government saying it had, for the first time in Sri Lanka’s history, imposed a 25% tax on the earnings of the EPF, ETF and other retirement funds. He maintained that this move was aimed at obtaining some Rs.70 billion from the savings of semi-government and private sector employees for the local government election campaign of the Sri Lanka Podujana Peramuna(SLPP).   

The National People’s Power (NPP) said the government was planning to use the surcharge tax to prop up its diminishing popularity and not for the welfare of the people. The NPP said it would galvanize public opinion to defeat this Bill if the government did not take immediate steps to exempt the mentioned funds from the surcharge tax.   

It said these funds belonged to the employees in the private and semi-government sectors. “We know how the government acted in the past, for example the investment in Greek bonds and loss-making ventures via the stock market resulting in these retirement funds incurring massive losses,” the NPP said adding that it did not believe in the government’s claim that it had no intention of taxing the EPF, ETF and other such funds while blaming the mix-up on the Inland Revenue Act misinterpreting the term ‘company’.   

The country is not the plaything of politicians to be governed and administered according to their whim. An efficient administration calls for policies that are well thought out and thought through. As experienced in recent times shortsighted and impulsive decisions will only push the country further into disarray. A case in point is the overnight ban on the import and use of chemical fertiliser, weedicides and herbicides resulting in a near 40% drop in the Maha season harvest.   

In a hurried move to appease the farmers, the government said it had set aside Rs.40 billion to pay compensation to paddy farmers while ignoring the fruit and vegetable farmers, who also suffered huge losses because of the fertiliser fiasco. Another outcome of the arbitrary ban on chemical fertiliser was that of having to pay US$6.7 million dollars to China’s Qingdao Seawin Biotech Group for a consignment of contaminated organic fertiliser even though not an ounce was unloaded. To cap it all the government has been compelled to import huge quantities of rice from China and Myanmar to avert a rice shortage in the country, once described as the granary of the East.   

Meanwhile, the government appears to have backed down in the face of the increasing public outcry against the imposition of the one-time 25% surcharge tax on the EPF, ETF and nine other superannuation funds. Finance Minister Basil Rajapaksa informed the Cabinet on Monday that these funds would be exempted from the surcharge tax.   
The government should not inflict more pain and suffering, such as the tax on the EPF, ETF and other retirement funds, on an already burdened people, for a majority of whom survival is a daily battle. There is no gainsaying the fact that Sri Lankans -- who are in no way responsible for any of the problems faced by this government -- deserve a better deal.  
Wishful thinking some might say!