Ravi K defuses traders’ revolt

* Lacklustre govt. anniversary meeting in Matara
* SLFP purge continues
* Prez Sirisena’s media director hauled before FCID
* What Gota wanted to tell CBK


The biggest and most immediate challenge facing this government is getting the VAT amendments passed in parliament. How this is handled may well determine the continued existence of the government. If they don’t increase tax revenue, SL may well get shut out of the IMF programme which will result in the private credit markets also refusing to lend to Sri Lanka, leading in turn to a sovereign default. Opposition to the VAT amendments comes from the trading community which has been up in arms against the imposition of VAT on wholesale and retail trade. Over the past few days the government tried to browbeat the trading community into submission by getting the Customs Department to seal the business establishments of some of the leaders of the trading community. The Island reported the week before last that the establishments of seven traders had been suddenly sealed by the Customs Department and that the traders had complained that this was a campaign of intimidation by the Government ahead of the reintroduction of the highly unpopular VAT (Amendment) Bill.

Three traders on Keyzer Street, Pettah and four others in Galle, Anuradhapura, Piliyandala and Pettah also had their establishments sealed. The owners, Indika Dress Point, Anuradhapura, and Prasad Textiles, Piliyandala, were the Secretary and President respectively of the Federation of Traders’ Associations which led the anti-VAT agitation. But this failed to intimidate the traders because a VAT on the wholesale and retail trade would drive quite a number of them out of business and this was literally a life and death matter for them. Besides, even the Customs unions took the side of the traders and began to issue media statements condemning what they called the government’s politically motivated targeting of traders.

A delegation of the Federation of Traders’ Associations met Finance Minister Ravi Karunanayake last Thursday to sort out the issue of business establishments that had been sealed. After discussing general issues faced by the business community, the traders broached the issue of the shops that had been sealed. The first three shops that had been sealed in Pettah had been reopened after depositing bonds with the Customs Department. The discussion on Thursday was to sort out the issues relating to the remaining four traders in Galle, Piliyandala, Anuradhapura and Pettah. The traders pointed out that they had gone to the Customs and presented all the documentation called for but that the Customs had kept asking them to talk to the minister. Ravi K had then said that he has nothing to do with it and that all this was the business of the Customs Department.

The traders pointed out that the last four establishments did not import and that they had the required documentation for the goods they sold and as such the Customs could not seal their establishments. Ravi K wanted to know who had directed them to him and the traders said it was the Director General, Customs. Thereupon Ravi K had called the Director General, Customs and instructed him to look into the traders’ complaints. The traders had thereupon gone to see the Director General, Customs and informed him that the Minister had sent them to him. The DGC had then summoned his officials and told them to look into the matter. They lifted the seals on two establishments after obtaining bank guarantees for Rs.1.2 million in the case of Prasad Traders and Rs. 900.000 in the case of Colombo Shirts, Pettah. The other two establishments in Galle and Anuradhapura were to be released on depositing bank guarantees.

The traders, who were all connected to the UNP and the SLFP (Sirisena faction), had approached Gayantha Karunatilleke, Vajira Abeywardene, Karu Jayasuriya, Duminda Dissanayake and even the wife of Shan Wickremesinghe, the PM’s brother, before they met Ravi Karunanayake. When they met the Finance Minister, the delegation had taken with them nine suggestions to increase government revenue without destroying the business community which went as follows.

1.      There are many people who are eligible to pay tax, and the government should seek to bring these people into the tax net.

2.      An amnesty should be declared to give those eligible for income tax an opportunity to register to pay tax without any penalties.

3.      Bring down the threshold for NBT from a turnover of Rs. one million to Rs. 300,000 per month so that virtually every small shop is brought within the net and to charge a low (1%) tax (The payment of NBT will give these small traders the ability to take bank loans and overdrafts and will also be beneficial for them).

4.      It should be made mandatory for all wholesale merchants to issue VAT invoices, which is not being done systematically at present.

5.      The opening of temporary VAT files to import goods should be stopped and only those having proper business registration and who pay NBT and income tax should be allowed to import goods. There are abuses now whereby goods are imported in the names of ‘naatamis’ (porters) and a lot of under-invoicing and bribing of Customs officials goes on thus depriving the government of legitimate revenue.

6.      When readymade garments are imported, the cess and all other taxes should be abolished and the import tax should be charged on the basis of the number of kilos imported as is done in the case of textiles so that Customs officials are not able to solicit bribes to exempt certain items from the taxes payable.

7.      Deemed VAT should be implemented for all businesses with turnover above Rs. 33,000 a day (When companies that are registered to pay VAT enter into transactions with small suppliers who do not have to pay VAT, the smaller party not paying VAT can issue an invoice saying that no VAT is applicable which the Government will consider as VAT paid).

8.      The wholesale trade should be given a lead time of three months to pay VAT on transactions because they sell on three months credit terms.

9.      Increase the VAT registration threshold to rupees one million a day for enterprises manufacturing items like food and locally produced garments so as to encourage small businesses and to increase employment.

Ravi K was pleased with the suggestions made by the traders and asked them to submit 10 proposals for the budget. So the traders have made progress on that front. The traders are to meet President Maithripala Sirisena on Monday to discuss the VAT increase and other issues.


Sirisena’s media director

hauled before FCID

Wasanthapriya Ramanayake is known to the journalistic fraternity as a columnist for the Lankadeepa but for more than two decades he was also a government servant retiring last year as the Director of Government Information. He is now a director of President Sirisena’s media division. Some days ago, there was a blistering article in the Lankaenews website alleging among other things that Ramanayake had used President Sirisena’s name to sidestep an investigation into a 30 million theft (horakama) he had committed by printing campaign material for Mahinda Rajapaksa’s presidential election campaign. Ramanayake had been described as an individual who had tried his best to make Mahinda Prime Minister till 17 August last year and after that attempt failed had done a somersault and joined Sirisena.  

The charge was that he had spent 30 million in government funds to print propaganda material for Mahinda Rajapaksa’s presidential election campaign when he was the Director of Government Information. When the FCID had phoned him in pursuance of an investigation into this matter he had mentioned president Sirisena’s name and tried to intimidate the FCID officer by asking him to come to the Presidential Secretariat if the police wanted to record a statement from him. The report further stated that the FCID officer had stated that they wanted to question him about a fraud (wanchawa) that had taken place during Mahinda Rajapaksa’s time and that he should not drag President Sirisena into this. This writer spoke to Ramanayake to ask him what this was about.  

Ramanayake explained that no one can print material for elections through the Information Department because the moment an election is declared, the elections Commissioner sends out a letter instructing all publications to be stopped. Even if the Information Department sent a book to be printed, the Government Printer will not print it after an election is declared. He said that the booklet under scrutiny had been printed some time before the election and that the Director General of Information (then Prof Ariyaratne Athugala – Ramanayake was one level below the DG as Director Information) has wide ranging powers to print material relating to the nation’s development and about the leaders of the state and government and that towards the end of the previous government’s term several publications had been printed about the progress made during that government’s tenure in various sectors.  

Ramanayake said that while there are books that are compiled by the Information Department itself, there are other books prepared by various ministries and printed by the Information Department on their behalf. If the DG- Information decides that material sent to them by a ministry is suitable, he sends it to the Government Printer with a note saying that the payment for this material will be made by the relevant ministry. The issue at hand is about three booklets sent by the Economic Development Ministry where the DG Information had informed the Government Printer that the ministry concerned would meet the cost of printing and that this had happened at least two months before the election. Ramanayake said that the Government Printer and his deputy had been questioned about as had some officers of the Information Department below him and that they will ultimately question the former Director General himself.  

Ramanayake explained that since the Economic Development Ministry does not exist any more the bill has been sent to the Information Department and that the amount involved is not Rs. 30 million as stated in the website report but three million. Furthermore, he denied that he had tried to throw his weight about when he had been asked to come before the FCID and that all he had done when the FCID wanted him to give him an address to send the notice to him was to say that he now works for the Presidential Secretariat and to send the notice there. When the FCID officer had asked for his private address, he had given it. Ramanayake said that the question he has is how this conversation between him and an officer of the FCID had gone to a website in a couple of hours. He also denied that he had asked the FCID to come and get a statement from him at the presidential secretariat.  

If a government department has performed a duty within its scope of work, any queries whether it has been properly done is the work of the Auditor General’s Department. The FCID has now encroached on the Auditor General’s work and thereby have managed to terrorise and paralyse the entire government service. There is a big difference in being questioned by the Auditor General’s Department and by the police.


What Gota wanted to tell CBK

Some days ago, former president Chandrika Kumaratunga gained public attention by making a statement to the effect that Gota had made money off a deal to buy six MiG fighters from Ukraine in 2006 and the planes bought had been so substandard and old that one of them had crashed while being flown to Sri Lanka. Gota issued an immediate clarification stating that only four MiG planes were bought and that none of them crashed on the way because they had been dismantled and brought to Sri Lanka in cargo planes. This MiG deal is probably the longest lived corruption issue in Sri Lanka’s history. It has kept surfacing from time to time for the past ten years. The original controversy arose not over the quality of the planes because there were no quality issues. The original allegation was that the purchase money had been credited to the offshore bank account of a ghost company. The real story relating to this so called MiG deal is as follows.

When the Chandrika Kumaratunga government bought two MiG-27 ground attack aircraft and one MiG-23 trainer aircraft in the year 2000, the contract for the supply of the planes was signed on the 24th of October 2000 with one T.S.Lee of DS Alliance of Singapore (We have based this brief account on documents submitted to the District Court of Mt Lavinia). MiG planes are not manufactured in Singapore and the seller was a middleman. The Rajapaksa government’s policy was to purchase arms directly from the manufacturers and to eliminate middlemen. Hence when there was a need in 2006 to purchase four MiG-27 aircraft and to get the three existing MiG-27 planes and one MiG-23 overhauled, the Rajapaksa government directly approached UKRINMASH the manufacturers of MiG planes in Ukraine. In the ‘letter of offer’ sent by UKRINMASH to the Ministry of Defence on the 6th of February 2006, it was specifically stated that this offer was being made in conjunction with a financier providing financing to the manufacturer and that the beneficiary of the letter of credit will be the financier. This formal letter of offer further said that they will inform the Sri Lankan government of the name of the beneficiary company within three days of signing the contract.

The UNP government of 2001-2004 had also made overtures to UKRINMASH for the purchase of four MiG- 27 aircraft and in the letter of offer they had sent to the then Defence Minister Tilak Marapone on the 22nd of April 2003, UKRINMASH had specified that the payment should be made to a finance company and that they will inform Sri Lanka of the name of the beneficiary company within three days of signing the contract. The method of payment laid out in the offer made to Mr Tilak Marapone the Defence Minister in that UNP government were exactly the same as the conditions given to the Rajapaksa government in 2006. Mr D.A.Peregudov a Director of UKRINMASH has written to the Sri Lanka Defence Ministry (during the Rajapaksa government) explaining that UKRINMASH is a fully state owned enterprise and that according to Ukrainian law, his establishment does not have the right to trade on credit terms and that they cannot offer credit facilities for two years as requested by the Rajapaksa government. Hence a financier by the name of Bellimissa Holdings Ltd would provide financing for the transaction.

When the contract was signed on the 26th of July 2006 for the supply of four MiG-27 aircraft and the overhaul of four other MiG aircraft, there were three signatories - the Commander of the Sri Lanka Air Force as the buyer, UKRINMASH as the seller and Bellimissa Holdings Ltd as the designated party which was to receive the payment. This is a legally binding contract under Ukrainian and international law between two government agencies in Sri Lanka and Ukraine. Section 23.1 of this contract specified that the buyer and the seller are aware that Bellimissa Holdings Ltd shall be involved to provide financing to facilitate the transaction and that all payments under this contract including freight charges shall be paid to Bellimissa Holdings Ltd. When the Invoice for the purchase and overhaul of the MiG aircraft was sent by UKRINMASH to the Commander of the Air Force on the 31st of July 2006, it was once again specified that the Bank of Ceylon should open letters of credit in favour of Bellimissa Holdings Ltd.

When a state owned enterprise in a foreign country enters into a legally binding contract for the supply goods with another government, the buyer has to make the payment as the seller specifies. There was nothing secret about the payment being made to Bellimissa Holdings Ltd, because they too were a signatory to the legal contract. The Rajapaksa government purchased these MiG aircraft directly from the manufacturers in Ukraine, the payment was made, the aircraft was delivered, they were used in the war and those aircraft were still in service until the time the Rajapaksas were voted out of office.


First anniversary celebrations

The first anniversary celebrations of the UNP-SLFP government was held in Matara last Friday. If the intention of the government was to upstage the Joint Opposition’s pada yathra by drawing record crowds to Matara, that certainly did not happen. The success of the Matara meeting can be gauged from the fact that even Rupavahini Corporation showed the first anniversary meeting of the National Unity Government as the fourth or fifth item on their news bulletin on Friday – a clear sign that they had been instructed to downplay the event. From the video footage available, this writer was able to gauge that the crowd was nowhere near the crowds present at the last Mahinda Sulanga rally held in Matara before the August parliamentary election. Since this was a meeting jointly organised by the two main political parties the UNP and the SLFP, the writing seems to be on the wall as far as the future of the government is concerned.

In the meantime the sporadic purge of Mahinda loyalists from the SLFP continued with the sacking of eight more stalwarts from posts held as Electoral Organisers. Among the seniors sacked this time were Mahinda Yapa Abeywardene, Pavithra Wanniarachchi, Rohita Abeygunawardene, C.B. Ratnayake, Gamini Lokuge, Kheliya Rambukwella and others. On Friday, Dullas Alahapperuma voluntarily stepped down from his position as Matara District leader of the SLFP in protest against the purge of party stalwarts. Due to palpable shifts in public opinion, the removal of Mahinda loyalist MPs from their electoral organiserships is becoming less and less effective. After the less than satisfactory anniversary meeting in Matara it is going to be even more so. What we seem to be heading for is a kind of Brexit effect when the three main established political parties in Britain were trounced by a tsunami of public opinion going in the opposite direction.

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