Sugath Kulatunga

In recent times there were many instances where unscrupulous business houses have made massive scandalous profits in trade or on investments with the collusion of errant politicians and public agencies. Typical examples are the ill-gotten gains in the sugar scandal and the outrageous embezzlement in the Central Bank bond case. So far the public is not aware whether any part of this loot has been recovered. There was some indication that only a part of the Rs 20 billion excess profit could be recovered through the present income tax provisions.  

Windfall bounties occur with change of policies of the government like the substantial reduction in VAT charges, reduction in customs and other duties and rewards granted by dishonest politicians in undervalued privatizations. A good example was the privatization of the Insurance Corporation by President CBK. In recent times the devaluation of the currency gave an incomparable opportunity to traders to increase price of goods with impunity far beyond the actual price increase as a result of the devaluation and restriction on imports.

Many enlightened governments impose windfall taxes to collect revenue, bring about a level playground in the trade and to penalize the beneficiaries of manipulated windfall profits. Windfall taxes are technologically neutral, not retroactive, and does not affect long term price trends.” However, it is believed that reluctance to impose windfall taxes is due to politicians who create the windfalls and share the pillage are opposed to it.

In September 2022, the Council of the European Union agreed to impose an EU-wide windfall profits tax on fossil fuel companies. Nine months after the EU Council approved the EU-wide windfall tax, 25 European countries have announced, proposed, or implemented the EU-wide windfall tax or some variation of it. Countries like Belgium, Germany and France have imposed a 100 % windfall tax on electricity producers and most others have imposed a 90 % tax on electricity producers and companies in the energy and fossil fuel sectors with a high annual turnover in 2021. A few countries have imposed this tax on even banks. https://kpmg.com/xx/en/home/services/tax/regional-tax-centers/eu-tax-centre/eu-e-news.html

In Sri Lanka there is hardly a need to dig deep to identify Windfall beneficiaries who still actively gain windfall bounties by evading regulations and fleecing the public. One wonders whether they have a mutual benefit arrangement with Consumer welfare authorities. To name a few culprits are the wheat flour manufacturers and rice millers and most importers of essential goods. There is a strong mafia controlling the import and trade of essential commodities led by the sugar and the Pettah gang. While even the EU is taxing windfall bonanzas of leading enterprises Sri Lanka government continues to allow import firms to make unconscionable windfall profits. This behavior of the government has led to opposition critics to accuse the government of making an early start to raise illegal funds for the 2024 Presidential election campaign.

All governments go only for the sprats and allow the sharks to thrive. Political sharks protects and frolic with them. My late neighbor used to say Kata Kiyannada? Monawa Karannada?

Sugath Kulatunga