 |
 . |
The political package and civil peace
by Tisaranee Gunasekara
This is a slightly abridged version of a paper presented at a workshop on Post Settlement Peace Building in Sri Lanka by the International Centre of Ethnic Studies, Kandy. The writer was Director of the People’s Bank, Director, Research and Publications of the Peoples Bank and Editor, Economic Review from ’89 to ’94).
"Repent what’s past; avoid what is to come
And do not spread the compost on the
weeds
To make them ranker".Shakespeare, Hamlet
Sri Lanka is a country which is affected by multiple polarisation along almost every possible line - ethnic, political, economic and social. (The only major exceptions so far being religion and gender). Its post-independence history is littered with instances of policy packages introduced to solve one issue impacting adversely on some other issue.
Encouraged by the offer of support from the leader of the UNP, the government has announced its intention of bringing the new constitution (which includes the devolution package) before the Parliament by early April. If the UNP continues with its new line, the government will have the requisite two thirds to steer the Constitution/Package through the Parliament - with a national referendum being the next step.
Sri Lanka is a country where violent upheavals are never far away - as the events of the last twenty five years amply demonstrate. Therefore neither the aforementioned twin problems nor the proposed solutions should be considered in a vacuum. In a country as volatile and as prone to cataclysms as this, strategic problems and proposed solutions should be considered first and foremost in relation to civil peace and systemic stability. This is necessary because facts clearly indicate that violent political upheavals in the south have a much greater negative impact on the country and the living standards of the people than the war in the north-east.
The Southern Determinant
Since Sri Lanka is a society affected by multiple polarisations, the objective of durable peace has two components - a) peace between the North and the South and b) peace in the South. In order to be successful, any proposed political solution should be capable of bringing about a speedy end to the war in the North without destabilising the South.
This implies that for a political solution to be viable it should satisfy two conditions.
1) It should have the support of the majority of the Sinhala populace or at least it should not be opposed by alienate a Sinhala majority (it cannot be another Indo-Lanka Accord, imposed on a reluctant Sinhala populace by force or as the outcome of a manifestly unfree and unfair referendum).
2) It should not contain any provisions/conditions the implementation of which can reasonably be expected to cause instability and unrest in the South.
Sri Lanka is no stranger to systemic instability and violent anti-systemic upheaval. The country experienced two armed insurgencies aimed at capturing state power (at the centre) in less than two decades. On both occasions, the motive social force was the poor (often unemployed) youth belonging to the majority community who perceived and depicted their struggle as one against a privileged elite - an economic/social minority and an ethnic minority. This was more overt and direct in the case of the second insurgency (1987-1989) which came very close to capturing state power-though it was not absent in the ideological mix of the first insurrection. The root causes of this conflagration were economic and social: the iniquitous growth of the post 77 period, further compounded by the rapid increase in youth unemployment by mid 80’s. The catalyst of this conflagration was the attempt to implement a political solution to the ethnic problem based on a substantial devolution of power - the Indo Lanka Accord.
The two year southern insurgency had a far greater negative impact on economic growth than the decades old war in the North/East. The war in the North/East commenced in 1983 and though growth slowed down consequently, it was only during the 87-89 period that the economy experienced a crisis of survival. After the defeat of the southern insurgency in November/December 1989, the economy picked up again and from 1990 onwards successive governments have managed to maintain a moderately high rate of growth, despite the persistence of the war and the rapidly escalating military expenditure.
Military expenditure increased sharply between 1989 and 1990 (by 67%) because of the resumption of the war in the North/East by the LTTE. Despite this massive jump in defence expenditure, almost all the major economic indicators improved tremendously. Growth rate improved significantly, from 2.3% in 1989 to 6.2% in 1990. And this high growth also became more equitable - the Gini coefficient improved significantly, from 0.52 in 1986/87 to 0.43 in 90/91; the rate of absolute poverty also improved - from 27.33% in 1986/87 to 22.36% in 1990/91 according to the World Bank Headcount Index I and from 40.6 in 1986/87 to 35.34 in 1990/91 according to the World Bank Headcount Index II. The only exception seems to have been the rate of inflation which increased from 11.6% in 1989 to 21.4% in 1990. However, it was possible to bring inflation under control by the next year; it was down to 12.2%, despite a further increase in military expenditure between 1990 and 1991.
What this demonstrates is that while there has been a distinct correlation between the performance of the economy/ living standards of the people and unrest in the South, there is no such direct correlation between the performance of the economy/living standards of the people and the war in the North/East.
Making allowances for the fact that the performance of the economy depends on a wide variety of factors, it could also be suggested that that an incorrect economic strategy on the part of the national government can damage the economy far more than war/increased military expenditure. For example, the performance of the economy in the 1970-76 period - when there was no war and consequently military expenditure was low - was far worse than the performance of the economy during the 1983-86 and 1990-96 period, despite the war and the galloping military expenditure.
The other important indicators also show a similar trend. For example, the country’s rate of unemployment reached its highest mark not in the post 83 period (i.e. due to the exacerbated ethnic conflict and the war) but in the 70-77 period i.e. due to incorrect economic policies of the incumbent regime. Similarly, the death rate in the country increased for the first time since Independence during the 70-77 period. The only other time the death rate increased was between 88-89 i.e. during the high tide of the JVP (Janatha Vimukthi Peramuna - People’s Liberation Front) insurgency. Though the war in the North/East recommenced in 1990, death rate fell in 1990 and has continued this downward trend since then.
On the past three decades it could indeed be said that it was not the war which has had the greatest negative impact on the economy and the living standards of the people. Violent civil unrest in the South and incorrect economic strategies implemented by the government have been far more important as depressants.
Though it is undeniable that the war is having an adverse impact on the economy, and that without the massive military expenditure the country is likely to have grown at a faster pace, the main danger to the economy, to growth and development does not stem from war in the North East but from unrest in the South. Therefore any attempt to end the war in the North-East or any proposed political solution to the ethnic problem must not be of the sort that will destabilise the South. Any political solution which causes the destabilisation of the South will fail to bring about the desired durable peace. Such a political package will thus be counterproductive in the extreme, creating far more dangerous problems than it solves. This is the backdrop against which the economic-development consequences of the proposed Package should be studied.
Devolution And Regional Inequity
During the anti-systemic insurgency of 87-89, one of the most popular slogans used in the JVP orchestrated anti-accord student demonstrations in underdeveloped rural areas was: "colombata kiri apata kekiri" ( Milk for Colombo, Kekiri - a cheap vegetable - for us).
Regional inequity has long been a politically important issue in Sri Lanka. It has been a contributory factor to both the secessionist war in the North-East and the two anti-systemic insurgencies in the South. Tamils felt that their traditional areas - the Northern and Eastern provinces - were deliberately neglected by the successive (Sinhala dominated) Colombo governments. The need to foster greater regional equity by reversing this post Independence trend of ethnicity based regional discrimination is a key argument used by proponents of greater devolution (upto and including federalism).
Though speakers on both side of the ‘devolution debate’ admit the existence of regional inequities and the need to combat these, their perception of what these disparities are and how they could be alleviated are completely at variance. Therefore any political solution to the ethnic problem, if it is to be viable and sustainable, will have to take both these diametrically different perceptions into account and find some way of achieving a viable synthesis.
The proposed package’s perception of and approach to this complex issue of regional disparities falls far short of these requirements. The basic premise of the package in this regard is that regional disparities have been caused by excessive centralisation of political power. What is deemed to follow from this premise is that devolution of power to the regions will bring about greater equality among the regions in respect of development. However, as discussed below, the experiences of a number of Third World countries with federal/quasi-federal systems clearly demonstrate that greater devolution of power (even including full blown federalism) is often not the appropriate antidote for regional socio-economic disparities.
India
India is a country that is plagued by considerable regional disparities, despite a decades old quasi federal structure (depicted by many pro-devolutionists as a model for Sri Lanka). For example, the real GDP per capita in Punjab is 185% of the national average while in Bihar it is only 68% of the national average. The Human Development Index (HDI) in Uttar Pradesh (UP) is 33% lower than the national average and 60% lower than HDI in Kerala. Life expectancy at birth in Kerala is 120% of the national average while in the Uttar Pradesh it is only 86% of the national average. Adult literacy in Kerala is 188% of the national average while in Bihar it is only 68% of the national average. The Human Poverty Index (HPI) in Kerala is 15%; in Rajasthan and Bihar it is more than 50% and in Orissa 42%. There are wide disparities within the regions as well. For example, there is wide variation in the level of human development among the 95 districts in the largest Indian state - Madhya Pradesh. The HDI of Indore (0.619) and Bhopal (0.609) are four times higher than the HDI of backward districts such as Tikamgarh (0.156).
Mexico
Mexico presents another example of a federal system suffering from chronic regional disparities. Real GDP per capita in Chihuahua is 122% of the national average while in Chiapas it is only 57% of the national average. The HDI of the state of Oaxaco is 20% lower than the national average. Life expectancy in Quintana Roo is 109% of the national average while in Puebla it is only 89% of the national average. Adult literacy in Mexico DF is 105% of the national average while in Chiapas it is only 76% of the national average. The HDI of the non-indigenous people (0.887) is 1.3 times more than that of the indigenous people. This is because, despite the existence of a federal system, the indigenous people have less access to social services and infrastructure and, consequently, have lower literacy rates, higher infant mortality rates and a higher incidence of poverty (81 % among indigenous people; 18% among non-indigenous people).
Brazil
Regional inequity has been identified as federal Brazil’s "most stubborn development challenge" (Economist 29.8.98). Four decades of regional policies have not succeeded in closing the gap between the developed and underdeveloped areas in Brazil. In the northeastern states of Brazil, GDP per capita is only about half the national average. They account for only 28% of the country’s total population but almost half of its poor. This region as a whole has a Human Poverty Index of 46%; this stands in sharp contrast to the South which has a HPI of 17% and the Southeast which has a HPI 14%. And, according to the UNDP, these
disparities have grown over the past two decades. A typical Northeasterner gets only 3.3 years of schooling which is half the national average. "Applying the United Nation’s human development criteria, southern Brazil approximates the poorer countries of Europe, the Northeast is more like those of Africa 2" (Ibid.) This is despite the fact that Brazil follows a system of financial allocation which distributes its tax revenue preferentially to the poorer states - a system which is quite similar to the one contained in the devolution package for Sri Lanka.
Nigeria
According to the UNDP Nigeria’s regional disparities are among the worst in the world. The HDI of the state of Bendel is 0.666 which puts it ahead of "progressive country like Sri Lanka 3" (Human Development Report 1997); at the bottom of the states is Borno with an HDI of 0.156 - lower than that of any country in the world. Average Life Expectancy is only 40 years - which is 18 years less than Bendel. The Adult Literacy Rate in Borno is 12% - which is less than one quarter of the national average. The state of Kaduna has a per capita GDP which is less than half of that of Bendel. And the UNDP warns "these disparities contain the potential for major social, economic and political unrest....4" (Ibid.).
The argument that regional disparities persist even in federal/quasi-federal systems because of the absence of actual devolution of power to the periphery is tenuous be proven conclusively. The two main statistical ratios used to measure the actual degree of devolution prevailing in a country are:
i) Financial Autonomy Ratio which gives an indication of how autonomous the local government is from the central government regarding funding; and
ii) Social Expenditure Decentralisation Ratio which indicates the extent to which social expenditure is decentralised.
India has a low Financial Autonomy Ratio (48 in 1988) while Mexico and Brazil both have a high Financial Autonomy Ratio (Brazil 80 in 1988 and Mexico 99 in 1987). However all three countries suffer from massive regional disparities. India and Nigeria have a high Social Decentralisation Ratio (India - 85 in 1988; Nigeria - 69 in 1988); despite this, there are wide variations in growth and human welfare indicators among the regions in both countries. On the other hand unitary Indonesia which was commended by the UNDP for a relatively more successful record at combating regional inequities has a low financial autonomy ratio (21 in 1989); it also has a low social decentralisation ratio (35 in 1989).
According to the UNDP (which is a proponent of greater decentralisation and devolution) there is no clear and unambiguous proof that devolution works in practice the way it is supposed to in theory.
"In general, devolving power to regions, although promoting equity within individual regions, can increase disparities among them. Within the region covered by a local authority the effect can be positive. If decentralisation produces more effective government services, the effect will be redistributive - since poor people generally make use of local public services than rich ones. But unless the central government takes compensatory action, decentralisation can increase the disparities between various regions and districts. Passing more responsibility for taxation and expenditure to local governments can benefit richer areas. One reason for this is that richer areas have more political influence and can lobby more effectively for resources. In the Mexican state of Guerrero, decentralising the health system allowed the wealthier areas to negotiate higher budgets. As a result people living in the tourist areas and in the most important cities were better off, while the Indians and peasants living in small dispersed settlements suffered a significant decline in services. In general decentralisation causes inter regional disparities to worsen unless the central government takes strong action. 5" (HDR ’93).
The World Bank (which also supports decentralisation) has a similar analysis:
"Centralisation allows the national government more discretion to counter regional income disparities by managing regional differences in levels of public service provision and taxation. With decentralisation, an equitable outcome can no longer be guaranteed or, at least, may be more cliff cult to achieve. And wealthier local government and regions may benefit disproportionately from being given greater taxing power.... Serious macro economic imbalances can occur if major tax bases are inappropriately assigned. In India, for example, important tax bases have been assigned to sub-national governments. This has left the central government, despite a growing public debt and pension liabilities, with a tax base, consisting mainly of income, foreign trade, and excise taxes, that is too small to cope comfortably with its expenditure’ responsibility Economic and financial distortions may also arise from subnational governments ability to exploit weaknesses at the centre... 6" (World Development Report ’97).
(To be continued)
Political vacuum filled with chewing gum
by Sirisena Cooray
Former General-Secretary of the UNP
In this new phase of post-presidential elections hardly anyone seems to have recognised the new realignment of political forces. The new scenario presents two basic factors. First, it has tipped the balance in favour of the government and weakened the opposition. Before the presidential election the government was on very shaky grounds. After the election the government has strengthened its position. It is not because the President Chandrika Bandaranaike Kumaratunga won the elections. It is plainly because the UNP has lost its way and is wandering in a wilderness.
President Kumaratunga would have been weak even after she won if there was a formidable opposition. Her strength is not in her electoral gains. In fact her percentage dropped from around 62 percent to 52 per cent. Her strength is in winning over the opposition parties to her side. Not only the dissident UNPers but also opposition groups like Dinesh Gunawardene were brought under her wing. If you add the minority parties and the other fragments of the left-wing parties what is there left of the opposition?
Only the UNP! But under Mr. Ranil Wickremesinghe it has consistently been a party in decline. The internal dissension and the string of electoral defeats have made it the weakest political force. That is only one side of the story. But the more damaging aspect is his leadership style that makes President Kumaratunga look like an "iron lady". In her public performances, she seems to have taken over the role of the leader of the opposition in addition to that of the head of state.
She seems to have no compunction in wading aggressively into issues and personalities. Mr. Wickremesinghe, on the other hand, avoids facing all issues. Or, by the time he wakes up to take up the issue it usually had run away in another direction leaving him wondering as to what had happened to his leadership. This creates a negative impression of him as a leader. The quality of leadership can be tested by the leaders’ capacity to pick up issues that affect the nation and the party and either defend or oppose as the case may be. Every UNP leader, whether in opposition or government, has picked up vital issues for the nation and fought for each one of them democratically.
As Leader of the Opposition his role is to defend the interests of the nation and the party. That is what the UNP and people expect him to do. Besides, he is paid to do that job. But since he has not shown any skill or willingness either to act decisively in opposing critical issues that affect the nation should the taxpayers’ money be spent on keeping him in office? In any other organisation the failures are sacked. But Mr. Wickremesinghe has failed to sack himself.
Let me give two very recent examples of the failure of the UNP to take timely action. Take the case of Mr. Alavi Moulana leading a demonstration demanding the sacking of the UNPers in the public service. He is using the UNPers as a scapegoat for the failures of the PA government. So far Mr. Wickremesinghe has not uttered a word in defence either of the UNP supporters and sympathisers or of the fundamental rights of citizens working in public administrations to hold political opinions contrary to those in power. How long will it take Mr. Wickremesinghe to wake up and defend the rights of ordinary citizens, not to mention the rights of UNPers who are targeted by the PA?
Consider also his sudden conversion to the PA ‘Devolution Package’. If he is genuinely committed to support the constitutional reforms why did it take so long for him to support it? He could have saved all the trouble for the UNPers and the nation if he came clean in the first place. Is he doing it in the national interest or is he doing it in order to save his own skin? Or is he doing it because his hands are forced by political circumstances?
Mr. Wickremesinghe’s reaction to these two issues is typical of his leadership style. He will either not react at all (as in the case of PA attacks on UNPers) or he will delay his reaction until his hands are forced. The UNPers and the people are entitled to a leader who is prepared to defend their rights. The UNP, whatever its faults as a party, has always stood for rights of the people and for individual freedom of choice. Its philosophy has been in giving the individuals the right to run their own affairs whether in economic or politics. The UNP must come out fighting at all times when the rights of individuals are violated. But the UNP of Mr. Wickremesinghe seems to be paralysed when the rights of the individuals are undermined by the state. No UNPer can be certain that their leader will defend them, either in courts or in public, if they are attacked.
It is his inability to act that has caused the decline of the UNP into its present state. His failure is most noticeable at the highest political level. While President Kumaratunga is showing her ability to juggle all shades of political opponents and keep them within and around the PA, he has shown no capacity to keep under his leadership even the staunch UNP supporters who had dedicated their lives to the party. They are running away from him as fast as they could. A prominent UNPer asked me. "How can he get the public to vote for him when he can’t even get his niece (Ishini Wickramasinghe) and first cousin (Rajiva Wijesinghe) to vote for him?"
Mr. Wickremesinghe obviously is stumbling from one internal crisis to another. After sound beating at the last election even the UNPers are confessing that they have no chance of winning the next parliamentary election under Mr. Wickremesinghe. If Mr. Wickremesinghe’s past performance is a guide he won’t lift a finger but will wait for the media to do his dirty work. They have been doing a good job in leading the attack against the PA. But can the opposition mounted in the media be a substitute for a solid and vigorous political opposition led by a dynamic leader? People certainly read the Sunday Leader and the Ravaya and enjoy it. The editors are doing a very good job. But can the people vote for either of them?
All the signs indicate that Mr. Wickremesinghe cannot stop the decline of UNP into further chaos. He seems to be incapable of cracking even a joke. The one joke he cracked backfired with disastrous results. If he can’t lead, if he can’t oppose, if he can’t convince his own party men to follow him, if his relations don’t see any point in voting for him and if he can’t even crack a joke what is the future of the UNP? Is it heading for disintegration? His latest disaster is in losing the case against the UNPers whom he expelled in a hurry. He comes alive only to take action against UNPers who are a threat to him. He rushed to sack Mr. Wijepala Mendis and was forced to eat crow by the courts. Now the courts have defeated him again and he is dithering not knowing whether to act or not to act.
The crisis in the UNP is because the rank and file and his peers have lost faith in him. All the rumblings within the party accuse him as the main liability. Some of them are openly urging him to unite the party. But he plans to thrive on divisive politics. Where can this divisive politics take him? His divisive leadership has resulted in either more and more UNPers running into the PA camp, or weakening the UNP as an effective opposition that could lead the nation at the next elections.
The strength of a democracy is not only in a stable government but also in a stable opposition. If there is no viable opposition what follows? What are the implications for the nation? It simply means that we are in a dangerous political vacuum with no one to provide an alternative leadership. This is the second factor that dominates the new political scenario in the post-presidential elections. The first, as I mentioned earlier, was the strength gained by the PA government as a result of a weak opposition.
This, of course, is a negative strength which the government cannot use to stop its free fall into the vacuum. Whatever strength it has will evaporate as it spins in the vacuum. The immediate need, therefore, is to fill vacuum in the opposition. But this can’t be done by chewing gum. Since Mr. Wickremesinghe’s UNP is unable to fill the vacuum there is a need for a Third Force. The nation disillusioned with the two major parties is in the mood for a Third Force. The response I am getting right now from the dejected UNPers and the general public indicates that there is a groundswell for alternative politics. The people out there are looking for alternatives that will bring national unity, peace, stability and economic progress. They are not going to be satisfied with chewing gum.
Mr. Wickremesinghe’s idea of progress is to make our people chew more gum. Singapore, which is known as the Asian miracle, banned chewing gum as a product that harmed its national interests. But, unfortunately, Mr. Wickremesinghe is stuck in his own chewing gum.
E-Commerce - Posing New Challenges to the Revenue Department
by C. P. E. Gunasingam,
Attorney-at-Law,
Tax ConsultantFrom last week
In general tax compliance is facilitated by identifying key "taxing points" for example reporting and withholding requirements can be imposed on financial institutions which are easy to identify. In contrast, one of the greatest commercial advantages of electronic commerce is that it often eliminates the need for intermediating institutions. Although from a purely economic perspective such friction free capitalism may be an advantage of the new technologies, the potential loss of these intermediating functions poses a problem for revenue administrations.Finally the use of electronic commerce technologies, in the form of intranets, by multinationals and collaborative groups may tend to increase the prevalence of transfer pricing and increase the difficulty of detecting such behaviour. The predicted growth of international electronic commerce much of which may be undertaken by smaller less sophisticated businesses, may mean that the number of unintentional breaches of international revenue laws could increase.
Sale of digitised products
Where the transaction involves the sale of physical goods the electronic transaction resembles a mail order sale of a product.
The real headache for the tax gatherer would involve the sale of digitised on-line products. The Internet provides a market place for a significant number of digitised products which have no physical entity. These on-line E-products are capable of delivery though the computer communications system by-passing customs systems thus rendering obsolete the traditional ways of monitoring international trade.
Development of electronic payment systems
Currently about 90% of financial transactions are paid for by cash, cheques or credit cards.
However, new technology has created electronic payment systems making it possible to pay for goods and services over the Internet. Some of the methods would link existing electronic banking and payment systems including credit and debit card networks with new retail interfaces via the Internet. "Electronic money" which would be based on stored value, smart card or other technologies is also under development.
"Electronic payment" has the potential to partially displace, traditional methods of payment and to create new forms of money in which value is represented in digital form. The use of electronic forms of payment could as predicted by Gupta result in the creation of a new type of negotiable instrument. Thus the role of traditional intermediaries such as bankers will be minimised resulting in a loss of valuable revenue intelligence.
The powers of the Assessor
Where electronic commerce is taxable the operation of the Sri Lankan tax system depends upon self assessment and the existence of a physical representative of the taxpayer in Sri Lanka who can be held accountable. Foreign Internet traders cannot be sanctioned for failure to pay tax since foreign jurisdictions do not enforce another country’s fiscal regime.
In terms of Section 97 of the Act the onus is cast on the taxpayer to assess the amount of income tax to which that person is liable under the Act. When deciding whether to accept or reject the Return submitted, the Assessor should critically examine the tax Return submitted by the taxpayer and would have also to resort to the examination of additional information. While the taxpayer may be willing to proffer the required information quite often the assessor would have to resort to other sources of information to verify the validity and accuracy of the Return submitted by the taxpayer and the information furnished. To achieve this result wide statutory powers are conceded to him.
Section 92
Statutory weapons in the Revenue’s information gathering armoury are contained in the following provisions of the Inland Revenue Act.
While in terms of Section 92 of the Act the taxpayer is required to submit a Return on or before the 30 of November following the end of that year of assessment subsections (3) and (4) empower the Assessor to give notice to any person requiring him:
• to furnish fuller or further returns
• to furnish fuller and further information
• to produce or transmit any documents specified
• to attend in person or by an authorised representative for an interview.In certain circumstances the Revenue may need further information which is in the possession of a third party with whom the taxpayer conducts commercial and/or other transactions. In order to meet this exigency the Deputy Commissioner has been empowered under subsection (5) to give notice in writing to any person requiring that person to inter alia produce or transmit specified documents, books of account etc., or to attend in person to be examined on any specified matter.
By Inland Revenue (Amendment) Act No: 52 of 1998 for purposes of Section 92, the term "document" was amended to "include any diskette, tape compact disc or any other thing in which any computer programme or data is recorded in codified form or in electronic or magnet medium".
The Commissioner General of Inland Revenue is empowered to gather information from foreign countries with which Sri Lanka has a Tax Treaty. Article 26 of the OECD Model Tax Convention provides for an Exchange of information clause which enables the competent authorities of each state to exchange information.
Most tax treaties lay down general principles not only for the avoidance of double taxation but also for the prevention of fraud or fiscal evasion. To combat fiscal evasion provision is made for the exchange of information.
According to the recent Report of the UK Board of Inland Revenue during the year ended 31 March, 1998 information relating to 175000 persons were received from foreign tax authorities and nearly 150,000 sent out on a reciprocal basis. The report stressed the importance of such information to the Revenue which helped to ensure in great measure to tackle fiscal evasion.
The OECD News release on its recommendations to improve exchange of tax information dated 18, February 1997 refers to two recommendations that have been adopted by the OECD Council. The use of tax identification numbers in an international context which will use technological developments to improve the exchange of information while respecting the legitimate rights of taxpayers to confidentiality of tax information.
The use of a revised OECD standard magnetic format for automatic exchange of information.
Section 161 and Section 161A
In terms of S.161 officers are empowered to enter and search any premises (including the residence) of the taxpayers. The officers are authoritised to seize and deliver to the Commissioner General any such articles, books of account or other documents
In order to ensure that the Revenue has the ability to seize information stored in digitised form in a computer diskette or compact disk, the term "document" has been legislatively defined by virtue of Inland Revenue (Amendment) Act No: 52 of 1998. In terms of the amending legislation a "document" for purposes of Section 161 and Section 161A would now "include any diskette, tape compact disc or any other thing in which any computer programme or data is recorded in codified form or in electronic or magnet medium."
Further under Section 161A they are authorised to enter any business premises and examine books of account registers records or other documents. They may examine and take copies of or may even take possession of any such books, registers records or other documents or make identification marks thereon.
In recognition of the increased usage of computers by taxpayers in their places of business, by virtue of Section 30 of the Act No. 52 of 1998 the Commissioner General or an authorised officer may "operate any computer found in any such building and take printouts of the whole or part of any entries recorded or stored.
In the light of above mentioned amendments it would appear that the officers of the Revenue Department are armed with the requisite powers to seek additional information stored in the computer of the taxpayer. The computer however is a labyrinthian machine and even a moderately computer literate taxpayer could hide information in the machine beyond reach of the tax gatherer (e.g.: encryption of documents).
The availability of additional information gathered using the statutory powers would undoubtedly enable the Assessor to verify the accuracy of a person’s return of income. It would also serve as an alternative means of computing income by the preparation of an assets betterment statement by comparing the excess of assets over liabilities (net Assets) at the end of the year with the corresponding excess at the beginning of the year to determine the increase in net assets.
In the light of the discussion the following recommendations are submitted for further consideration:
Since the present powers conceded to the officers of the Department appear to be inadequate to detect faceless transactions in cyberspace the Revenue in consultation with foreign tax authorities may need to invest more heavily in training officers and developing/purchasing software which can detect tax evasion. While cybercops, cybercrime and even cyber terrorism have become commonplace, the time is probably right to initiate a program to develop the cyber tax-investigator capable of conducting searches in cyberspace.
As noted above the advent of electronic commerce will considerably complicate this ever evolving scenario and the Sri Lankan Revenue Authorities will have to develop modalities and policies to deal with the challenges of E-Commerce or face the prospect of a considerable loss of tax revenue. In this regard it may be pertinent to follow closely the policies adopted in other jurisdictions.
As noted by a number of writers complications relating to contract law, criminal law and evidence will arise with the advent and proliferation of electronic commerce . India is taking adequate steps in this regard. On December 16, 1999 the Indian Government introduced in the Lok Sabha the much awaited cyber law legislation to provide a legal framework for electronic commerce and governance. The Information Technology Bill 1999, proposes to make amendments to the Indian Penal Code and the Indian Evidence Act. The new legislation follows the United Nations resolution that all countries should favourably consider its model law on electronic commerce framed in 1996.
The significant part of the Bill is that it provides for a regulatory regime to supervise digital signature system, essential for carrying out financial transactions through the Internet and other electronic modes. To enable electronic governance, the Bill proposes the use and acceptance of electronic records and digital signatures in Government offices and agencies making interaction between citizens and Government easy.
The Bill also proposes to create civil and criminal liabilities for contravention of the proposed legislation. It seeks to have an electronic gazette where regulations, rules, orders, by-laws, and notifications can be accessed over the Internet.
UNCITRAL, the United Nations Commission on International Trade Law has formulated a model law on Electronic Commerce which is said to apply to "any kind of information in the form of a data message, used in the context of commercial activities". The model law deals with such diverse issues as the formation and validity of contracts, the admissibility and evidential weight of data messages, actions related to the carriage of goods etc.
The United Nations General Assembly by resolution has recommended that all States give favourable consideration to the Mode Law when they enact or revise their laws in view of the need for uniformity of the law applicable to alternatives to paper based methods of communication and storage of information.
However, despite the existence of a model law and the expected proliferation of E-commerce the Sri Lankan legislature has to date only seen fit to amend the Evidence Ordnance (by Act No. 14 of 1995), and the Inland Revenue Act in a very superficial and piecemeal way. It is submitted that the time has now dawned for Sri Lanka to actively contemplate the drafting of legislation to deal with the many aspects of this country’s cyber future. The Amendment to the Evidence Ordinance makes computer evidence admissible in any legal proceeding under certain circumstances.
In conclusion
Just as space engineers would not consider harnessing wind power on a trip to the moon, are we unnecessarily burdening electronic commerce with such anachronistic concepts as "residence", "source of income" and "permanent establishment.. It is not altogether foolhardy to forecast the development in the foreseeable future of an innovative system to enable the levy and collection of tax on income derived from and sourced in cyberspace. Such tax computed may take the form of a electronic tax levied on the income derived from each and every transaction in cyberspace, with suitable adjustments on transactions where losses are incurred.
As governments throughout the world gear up for a digital future, Sri Lanka too must consider what legislative and administrative action will need to be initiated. For as noted by John Dryden, of the OECD the formidable growth potential of global electronic commerce has pushed it towards the top of the agenda in boardrooms and government offices throughout the world. With electronic commerce comes the risk of unhealthy tax competition between OECD countries which without agreement could end up distorting the market in years to come. A whole string of high level meetings including the OECD Council at Ministerial level and summits of the G-8, have stressed the economic potential of electronic commerce. The main message from these meetings is that governments should work together with the private sector to take electronic commerce by the horns and steer its development.
Concluded
The requirement for new animal welfare legislation in Sri Lanka
by Senaka Weeraratna
Continued from last week
In a major report entitled ‘Going for the Kill‘ issued by the UK based Vegetarians International Voice for Animals (VIVA), in 1998, that examined all aspects of religious slaughter, the key findings were that the loss of consciousness when an animal’s throat is cut using the Dhabh method is not immediate. The Report quoted Professor Donald Brown, a Cambridge University specialist in farm animal behaviour as saying " There is a period of consciousness after the throat is cut which may last for 30 seconds to several minutes during which time the animal must be in great pain and distress. "
It has also been said that the knife used for the Dhabh method of slaughter both in the UK and Sri Lanka is not always sharp enough. The use of a blunt knife makes it very difficult to slit the throat of an animal thereby leading to even greater and prolonged fear and pain.
Animal Rights activists in Sri Lanka have asserted that the Dhabh method of slaughter would fall within the legal definition of ‘killing an animal in an unnecessarily cruel manner‘ as stated in Section 4 of the Prevention of Cruelty to Animals Ordinance (see article entitled ‘Cruelty to animals - the need for amending the law‘ by Dharmapala Senaratne, President, Vegan Sri Lanka, - Daily News March 18, 1999).
In most western countries such as Iceland, Norway, Finland, Sweden Switzerland and Austria, the religious slaughter of animals is prohibited. Instead these countries have adopted the Bolt Pistol and Electrical Stunning methods prior to slaughter. The use of either of these methods stuns the animal and it becomes unconscious and the neck cutting then takes place without the animal undergoing an agonising time. Britain outlawed religious home slaughter in March, 1999.
It was reported in the Sri Lankan newspapers at the beginning of 1999 of a proposed move by the Government to bring legislation in Parliament to legalise the Halal‘ or ‘Dhabh‘ method of slaughter. In the wake of several letters of protests from Animal Welfare organisations and the Sri Lanka Vegetarian Society, this attempt has apparently been shelved or withdrawn. The introduction of such a piece of legislation would have been a retrogressive step as the current trends in the world are towards embracing humane methods that minimise pain to animals rather than legalising ancient and outdated cruel practices (that are being abandoned by most modern societies).
The current public debate in Sri Lanka on the religious slaughter of animals has raised some significant moral and legal including Constitutional law, questions. They are as follows:
1) Shouldn’t the avoidance of pain to the animals rather than anyone else be the paramount consideration in determining the method of slaughter?
2) Is the freedom of religion a reasonable defence for preserving what is basically a cruel and inhumane method of slaughter when modern relatively painless alternative methods are available?
3) Though Sri Lanka’s Constitution grants freedom of religion, shouldn’t there be Constitutional limits to what should be allowed to be done to defenceless animals in the name of religion?
4) Traditional Buddhist cultural values eg. Ahimsa, involve the protection of animals. Shouldn’t these values be given a greater emphasis and limits imposed on the causing of harm to animals?
5) Do animals have a right to protection from cruelty in Sri Lanka?
6) If so, to what extent is the State prepared to enforce these animal rights?
Animal Sacrifice
Animal sacrifice continues to take place unabated in Sri Lanka on days of religious significance to Muslims eg. Haj. Certain sections of Hindus also engage in animal sacrifice. There have been newspaper reports of the sacrifice of fully-developed goats at the Pirayanpathai Vyravar Kovil near Chakanai, Jaffna. According to this report (1997) animal sacrifice has commenced in Jaffna again after several years.
On Muslim festival days such as the Eid el Kabir, animal sacrifice is conducted in Mosques, private homes and on the premises of some Embassies of Middle Eastern countries. On March 27, 1999 the day of Eid el Kabir, a group of neighbours of a particular embassy from a Muslim country, and concerned citizens demonstrated in front of this Embassy in Colombo 7, carrying placards protesting against the slaughter of cattle within the Embassy premises, which is surrounded by private residences. They complained that the agonising cries of the cattle being slaughtered had forced some of the neighbours to move out of their houses the year before for a couple of days in order to get over the trauma. (Refer letter to the Editor of the Daily News under the heading ‘Slaughtering of Cattle in Residential Areas’, April 10, 1999). Though there is widespread opposition to this evil practice in the Sri Lankan community, no Government has taken any steps so far to prohibit animal sacrifice in places of religious worship and in private residences.
The principle of ‘Ahimsa‘ developed in India in the wake of the opposition raised against animal sacrifice by both the Buddha and Mahavira (the founder of Jainism). The Buddha whose gentle disposition was offended by the unnecessary cruelty performed on the altars of the gods, visited the priests officiating in the temples, and made the following remarks:
"Ignorance only can make these men prepare festivals and hold vast meetings for sacrifices. Far better to revere the truth than try to appease the gods by shedding blood.
"What love can a man possess who believes that the destruction of life alone will atone for evil deeds? Can a new wrong expiate old wrongs? And can the slaughter of an innocent victim blot out the evil deeds of mankind? This is practising religion by the neglect of moral conduct.
"Purify your hearts and cease to kill; that is true religion.
"Rituals have no efficacy; prayers are vain repetitions; and incantations have no saving power. But to abandon covetousness and lust, to become free from evil passions, and to give up all hatred and ill will, that is the right sacrifice and the true worship. "
See ‘The Gospel of Buddha‘ compiled from ancient records by Paul Carus, (Senate, London, 1997 reprint, page 33).
Britain has banned religious home slaughter with effect from March 16, 1999. A number of Indian States and Territories have enacted statutes prohibiting animal sacrifice for the purpose of any religious worship or adoration. They include the:
1) Tamil Nadu Animal and Bird Sacrifices Prohibition Act, 1950
2) Andhra Pradesh Animal and Birds Sacrifices (Prohibition ) Act, 1950
3) Rajasthan Animal and Birds Sacrifices (Prohibition) Act, 1975
4) Pondicherry Animal and Bird Sacrifices Prohibition Act, 1965
5) Gujarat Animal and Bird Sacrifices (Prevention) Act, 1972
6) Karnataka Prevention of Animal Sacrifices Act, 1959, and
7) Karnataka Prevention of Animal Sacrifices Rules, 1963In pre-colonial Sri Lanka, animal sacrifice was strictly prohibited. This policy needs to be revived as the country enters a new millennium.
Research and Teaching using Animals
Is anyone keeping a count of the number of animals killed in Sri Lankan secondary and tertiary education in subjects like Biology, Zoology, Physiology, Biochemistry and Anatomy? This number is most likely to be substantial perhaps running to thousands of animals, including both vertebrates and invertebrates. Most of these animals are being used to demonstrate scientific principles that have been established for decades.
While there is an increasing focus in Sri Lanka on the ‘humaneness’ (or lack of it) of the method used to slaughter animals for food, so far there has been no public comment on the ethics of use of animals in the classroom or in scientific experiments. The use of animals in science is also a form of animal sacrifice in the sense that an animal’s life is dispensed with in experiments in the hope that some chance benefit would accrue to human beings.
In western countries the ethical implications of scientific experimentation on animals is a subject of increasing public discussion. Vivisection, particularly is under public scrutiny as regards its ultimate benefit in the learning process. In the USA, students have claimed the right to choose humane alternatives to dissection without being penalised. For example, in Pennsylvania, USA, the Student Right Option was included in the Pennsylvania School Code in 1992. It guarantees non-animal dissection alternatives to all Pennsylvania students.
Animal dissection has been banned from schools in Argentina in 1987, and in Slovakia in 1994. In 1993 a law took effect in Italy that recognises the right of conscientious objectors to refuse to participate in animal experimentation. In 1997, the Government of India announced that animal dissection would be made optional for school students in India. The State Government of Gujarat, India, has placed a ban on the dissection of frogs for science practical at the higher secondary levels.
Section 17 of the Indian Prevention of Cruelty to Animals Act, 1960 empowers the Central Government of India to constitute a Committee for Control and Supervision of Experiments on Animals. One of the duties of this Committee is to see in particular that experiments on animals are avoided wherever it is possible to do so. This would be done in medical schools, hospitals, colleges and secondary schools, if other teaching devices such as books, models, films and the like would suffice.
There are an increasing number of alternatives to dissection. The Humane Society of the United States operates a loan program to provide students and the educators with up-to-date alternatives to classroom dissection and live animal experimentation as a way to assist those who object to dissection and to encourage the adoption of humane alternatives in the classroom. Such alternatives include computer simulations, videos, plasticised specimens, ethically sourced cadavers (from animals or people that have died naturally or in accidents), models, self-experimentation and clinical experiences.
In India, the ‘Blue Cross of India‘, a leading Animal Welfare organisation offers Compurat, Compufrog, Compubird and the like to any school that wants them. Other alternatives include Biovisual products, three dimensional chart models, video cassettes, slides and cinefilms. In Australia, Monash University offers an interactive multi-media presentation called ‘E-Rat ‘ to replace the dissection of real rats in its Biology classroom. Biology lecturer Dr. Martin Predevac was quoted in the ‘Week-end Australian‘ (July 25, 1998) as saying "Students will learn just as much, if not more, by doing it on a computer screen".
Continued next week
| NEWS | EDITORIAL | DEFENCE | FEATURES | LEISURE | BUSINESS | SPORTS | ADS
|