Sri Lanka: New taxes and the bad rule of law system

"In particular, the question that must be asked is: can any institution that deals with finances and revenue function in an environment which is not free of corruption in order to achieve its targets?"
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By Our Political Editor

(May 26, Colombo, Sri Lanka Guardian) The new programme of the government is to introduce new taxes. To meet with government expenditure and also the demands of the IMF, dealing with taxes has become an unavoidable task for the government. The simple question that the government must ask is as to how with a failed rule of law system will it be able to establish a successful system of taxation?

To have a successful system of taxation anywhere a precondition is to have a functioning rule of law system .It is beyond controversy that the rule of law system in Sri Lanka has collapsed. The clearest example of the collapsed system is that of the Sri Lankan police. With a bad policing system how is the government going to establish a successful taxation system?

Besides the police, all the public institutions have come to a standstill with the government's decision not to implement the 17th Amendment. Today all public institutions have been suspended due to the decision of the government not to appoint the Constitutional Council. This is matter that has been discussed repeatedly and there is no need to go into that discussion here.

The result of the collapsed institutions is felt by all institutions and one of those institutions that reflected it very badly in recent years has been the Inland Revenue Department (IRD). Before 1978 the IRD was one of the few institutions that enjoyed high prestige. Today it does not enjoy that credibility. The scandal regarding Value Added Tax is well known. That scandal involved billions of Rupees and at no stage was there any kind of credible action to put things in order.

Therefore, how can the Sri Lankan government establish a proper system of taxation which will enjoy credibility among the people and be able to achieve its targets?
According to reports it is said that the government needs to raise at least US$ 1 Billion if it is to meet the deficits it is currently facing. To raise this amount of money by taxation will require a system that will function in such a manner that will achieve the required target. Can any public institution in Sri Lanka achieve such a level of success in the present circumstance of the country?

In particular, the question that must be asked is: can any institution that deals with finances and revenue function in an environment which is not free of corruption in order to achieve its targets?

The government which so far has shown no scruples about undermining public institutions, now has to depend on these very same institutions in order to deal with its own revenue problems. When the government pursues a policy of undermining public institutions and their capacity to function in the manner required of them, how can the government use these same institutions in order to achieve its urgent targets? The government is now caught up in this paradox and there is no indication that it is willing to deal with the issue of reestablishing the credibility of public institutions in order to deal with this paradox. Indeed, the signs are that the government is continuing with the process of undermining public institutions.

The recent takeover by the president of the Attorney General's Department and the department of the legal draftsmen is a further step in the direction undermining the public institutions and their independence. No public institution has the independence that is required for the proper functioning of public servants.

It will be interesting to watch as to how the government is going to raise the required amount by way of taxes and at the same time continue to undermine the public institutions in the country. Herein lays one of the government's greatest challenges. Will it give up its stubborn resistance against independent public institutions or will it give up its ambition to raise the taxation as demanded by the IMF and to deal with its own deficits?