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Sunday, 29 May 2016

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Need for more targeted taxation

High society right now is abuzz with calculations of the increased costs of imported luxury vehicles following last week's tax increases on vehicles with over 1000 cc engines. The broad social band of middle and lower-middle income classes, however, can look forward to access to slightly cheaper small cars.

The Government, in its latest taxation foray, risky though higher taxation may be in terms of electorate reactions, is clearly endeavouring to do what this column has been advocating: to be more focussed in its harvesting of State revenue from the populace.

When the Value Added Tax was raised slightly, this column appreciated the care with which the Government applied the higher tax and defended the huge need for urgent enhancement of State revenue to meet the mounting national costs of the vast mountain of debt callously piled up by the previous regime. The mountain of debt faced by all Sri Lankans today is so vast and so intimidating that Finance Minister Ravi Karunanayake could not resist comparing it with the immensely tough physical and mental conditions braved by the first Sri Lankan to climb Mount Everest.

Even though the term 'speed-bump', used by the Minister, seemingly belittles the achievement of the Himalayan triumph by a Sri Lankan woman, the Minister was actually using the severity of the challenges overcome in that mountaineering achievement to drive home to the Sri Lankan public, the sheer enormity of the national debt burden. To the Finance Minister's credit, even as he appreciated the Himalayan triumph, he humbly admitted the difficulty of his own struggles to tackle the debt crisis.

The problem of State revenue has for too long been handled too timidly by successive regimes. The use of generic taxation or indirect taxation avoids annoying specific constituencies and is a typical ploy of voter-sensitive governments. There is, however, a limit to such coyness both in terms of avoiding voter annoyance as well as in terms of effective revenue gathering.

Indirect taxation whether in terms of duties and cesses or in terms of sales taxes, actually discriminates against the poorer sections while favouring the higher income groups. A 15 percent VAT, after all, bites deeper into the budgets of the lesser income-earners while its bite is felt much less by those with bigger budgets.

In reality, therefore, indirect taxation is more discriminatory in socio-economic terms since the poorer classes are more affected than the richer.

As economic analysts have been asking over the years, why is it that the Government refuses to systematically target those who can and should contribute their fair share to the national coffers? Why cannot the income tax threshold be fixed in a more elaborate manner that will precisely target different social layers to maximum effect with much less social hurt? And why is the public sector always let off the hook? And, most importantly, when will the professional political class stop being pampered with tax breaks even as they impose generic taxes on their voters?


Triumph of a Woman

When the first western explorers were attempting to climb the world's highest peak, they faced far more tough conditions in terms of unknown topography while the equipment they had - in the mid-20th Century - was primitive compared with the equipment available today. Today, the terrain is not only well known, but also certain difficult points up the Everest massif are routinely facilitated by ladders and ropes fixed by the hard-working local mountain guides and agencies. At the same time, modern equipment today somewhat reduces some of the horrific risks of injury and death.

Nevertheless, the climbing of Mount Everest or Chomolangma as it is traditionally known by the local Sherpa population and, Sagar Maatha as it is officially named by Nepal, is, all the same, a most physically challenging feat that risks death at every step, virtually, especially as climbers go above the 6,000 metre level. The oxygen levels in the air at that altitude - above 6,500 metres (26,000 ft) known as the 'Death Zone' - is far less than needed by a human, while the intense, sub-zero cold and severely gusting wind can kill at the slightest exposure of body.

Everest climbing is now an 'extreme sport' and hundreds attempt the climb every year, and one in ten people die in the attempt. Four people were killed on the mountain during the very days Sri Lanka's intrepid Jayanthi Kuru-Utumpala successfully 'summitted' the Earth's highest point, the very first Sri Lankan to do so. Her climbing partner, Johann Peries, also bravely climbed up to just 400 metres below the actual summit before giving up due to oxygen depletion.

The Sunday Observer salutes history-making Jayanthi and her climbing partner. Jayanthi Kuru-Utumpala will inspire all Sri Lankans with her courage and determination but, most importantly, is a beacon of hope for Sri Lankan women with her demonstration that women can achieve as much as men both in terms of physical achievement as well as of spiritual strength.

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