Sri Lankan thinking on national issues, spending and taxes



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DR RAVI P.RANNAN-ELIYA


In the past month, there’s been no shortage of views in the media on what the country needs and what the public wants, but on November 16, the voters will have their say. That is all that counts in a democracy - but the ballot box inevitably simplifies public views to simple choices without nuance or caveats. Which means - especially if the elections are close - that we will continue to argue and debate what the public wanted.


A key weakness in our civic life is the lack of regular, independent polling of public opinion. Some of our political parties are busy polling even now, but what we will learn of this, if anything, will only be if it suits their interests. I share here some findings on current public opinion that I and some other researchers have collected in the past two months. These are from a larger national scientific study, which is interviewing and tracking a panel of thousands of Sri Lankans from all backgrounds and all districts. Although this has mainly focused on healthcare coverage, in recent months we have also asked people their views on a range of policy issues.


What are Sri Lankans concerned about?


When we ask people to tell us in their own words what they think are the issues facing the country, it is clear that the upcoming polls can be described as the first normal peacetime election in over thirty years. Unlike in past elections since the 1980s, the war or ethnic issue is no longer the dominant concern. Eighty-two percent of the public rank economic issues, such as growth, jobs and the cost of living as the one of the two most important issues.


The second most important concern is governance (33%). Here, interestingly, only one in ten (11%) Sri Lankans cite corruption or will use the term good governance, and they tend to be the better-off, whilst most (25%) - complain about political interference and politicization of the state. One might conclude that our voters are far more pragmatic than they are often given credit for – they aren’t so attached to slogans about corruption or good governance, but they do care that their government delivers efficiently and also fairly.


Coming third are concerns about the lack of security and the recent terrorism (13%) This is almost certainly a recent, temporary development, since very few respondents raised the ethnic issue or the LTTE as being a priority concern. After these, health (5%) and education (4%) round-off the top tier concerns.


What do Sri Lankans want government to spend more money on?


Concerns about the economy and security do not mean that Sri Lankans want government to provide things or spend money. On the economy, we find a healthy range of opinions from those who want the government to provide jobs or to run businesses, to those who want less government involvement in the economy and see jobs as a personal responsibility, with no dominant view. Instead, when asked what they want the government to spend money on, the large majority of Sri Lankans want government to spend more money - first on education (63%) and health (54%) and then agriculture (17%). In contrast, only 5% of people want more money spent on the army or the police.


Taken as a whole, these suggest that Sri Lankans today want first and foremost the government to deliver better living standards, but in the area of spending they want government to spend more money on social services. This particular preference for spending should not surprise us much, since Sri Lanka is a low spender on education and health, compared to the successful Asian economies that it aspires to emulate.


But do they want to pay for it?


The problem is that whilst Sri Lankans by a large margin want more money spent on education and health, the government today is in no position to do that. Decades of lowering taxes (from 19% of GDP in 1990 to 12% in 2017) means that the state can barely cover its routine expenses, let alone pay back debt or invest in needed infrastructure. Indeed, if there is one reason to explain a recent administration’s failure to meet its promise to raise education spending to 6% of GDP, it is that it failed to raise the taxes to make it feasible.


To find out if Sri Lankans will support increased taxes to pay for this increased spending, we asked some of our respondents whether they want government to increase spending, after first telling them that any increase in spending must be fully paid for by an increase in income tax or VAT. Their responses are revealing. Although support for large increases in spending falls when voters are told it will need increased taxes, large majorities continue to support increases in spending on health (82%) and education (80%), even if this is fully financed by increases in taxation.


Support does depend on the tax involved. We asked our respondents what tax increases they would support to pay for increased health spending. Support was very high, across the board for increases in tobacco (97%), alcohol (93%) and corporate income (77%) taxes. A majority (57%) also support increases in personal income tax, but the richest 20% of Sri Lankans oppose this by a small margin. In contrast, most Sri Lankans oppose increasing VAT to pay for increased health spending, although opposition to VAT increases is quite small amongst the richest Sri Lankans.


It’s likely that people oppose VAT because it’s a very visible tax, but our data also suggest another reason. A large majority of our respondents also tell us that they think that the income differences between rich and poor are too large, and a majority also want government action to reduce this disparity. Large majorities also support more progressive taxation, in which the rich pay a larger share of their income in taxes than the non-rich. These views are quite similar to those today in most advanced capitalist democracies, where most voters express increasing concerns about growing rich-poor gaps and the failure of taxes to reverse this or to finance adequate social services.


Many commentators will argue that Sri Lankans are truly a nation of lotus eaters, who don’t want to face up to the costs of having what they want. Politicians naturally fear that raising taxes to pay for the increased spending that voters want would be political suicide. But our data suggests Sri Lankans are far more realistic and are increasingly like voters in the rich capitalist economies. They want improved health and education, and they will support increases in direct taxes (but not VAT) to pay for this. Where opposition exists is essentially amongst the richest one fifth of Sri Lankans, who oppose increases in income tax and are more likely to favour increases in VAT. Curiously, this suggests that IMF recommendations to government on taxes and spending have been far closer to what most Sri Lankans want, than recent governments who appear to have aligned themselves with the better-offs in our society.


Some thoughts


How politicians respond to these views is likely to remain a critical question in the years to come. It is natural that at election time, politicians will indulge the public with all manner of populist spending promises. And it is just as natural that the "serious" people will criticize them on grounds of fiscal profligacy. However, that criticism is misplaced. It is the whole point of democracy that politicians respond to the desire of voters for improved social services or reduced income disparities, especially in a country like ours where taxes and social spending are low. The fiscal profligacy only arises if politicians choose not to raise taxes to pay for these promises. Whether it is right to do so is not really a technical decision…it is a political choice, the kind of choice that we have the ballot box for.


Any new government that pledges to improve health, education and many other things, is likely to fail in that objective unless they increase taxation. The question we have to ask is who will they listen to? The silent, realist majority of Sri Lankans? Or the vocal and articulate wealthy in our society? I would venture that the stability and success of any new government is likely to depend on how it answers this.


(Dr Ravi P. Rannan-Eliya is Executive Director of the Institute for Health Policy. The views and opinions expressed in this article are his alone and do not necessarily reflect the opinions of this Institute.The statistics cited are based on interviews carried out during October and November 2019. The results have been statistically reweighted and adjusted to represent the Sri Lankan adult population.)


Email: ravi@ihp.lk


 
 
 
 
 
 
 
 
 
 
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