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Transparency & Public Accountability Fiscal Mismanagement

CASE STUDY – Sri Lanka a country under the purview of IMF, World Bank & ADB

CONSTITUTION & SOCIAL CONTRACT  RULE OF LAW  ATTORNEY GENERAL & THE JUDICIARY

This Book appallingly unravels insights into fiscal mismanagement devoid of public accountability, under the purview of IMF, World Bank, ADB, international developmental agencies, et al. Perverse amnesties were surreptitiously enacted into law by Parliament, transgressing the social contract and public trust doctrine, also frustrating the right of the citizenry to challenge their constitutionality. Amnesties granted immunity and pardon for offences, such as, terrorism funding, money laundering, drug peddling, human trafficking, proceeds of crime, etc., in contravention of international conventions, including UN Security Council Resolution on terrorism financing. The Supreme Court condemned the Statute, as ‘inimical to the rule of law’, ‘violative of the Universal Declaration of Human Rights and International Covenant on Civil & Political Rights’, and ‘had defrauded public revenue, causing extensive loss to the State’. Consequent controversy resulted in the ouster of the Government, with the new Government repealing the perverse law; however, with strange resistance against enforcement ! The Book also reveals how Parliament ignored an Auditor General’s Special Report on gross negligence of revenue administration and colossal VAT frauds, with tardy enforcement of the ‘rule of law’. ! The Book also deals with challenges in the Supreme Court against the Appropriation Bill, the Budget, for non-disclosure of borrowings and for lacking transparency, with the Ministry of Finance being castigated for operating a ‘Budget within a Budget’, with dubious expenditures, sans accountability. This Book reveals realities in fiscal mismanagement at highest levels, disclosing indifference and condoning by international agencies ! This is an invaluable Book for advocates of good governance and combat of economic crime, fraud and corruption, and those interested in public finance and law, and constitutional obligations of social contract and public trust.

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However, the above right of a citizen, as per Article 121 of the Constitution, has to be exercised by filing a Petition in the Supreme Court of Sri Lanka, within one week of the Bill having been placed on the Order Paper of Parliament. In the foregoing facts and circumstances of the Government Gazette notifying the citizenry of the presentation to Parliament of the aforesaid Bill, having been belatedly released, that too, with very limited numbers of copies, had in fact, rendered it an impossibility for a citizen to have exercised the right to challenge the constitutionality of the aforesaid Bill, within the narrow window of 7 days of the Bill having been placed on the Order Paper of Parliament.  This denied the citizenry the country of their constitutional right.

A Full Bench of the Supreme Court, who delivered Determinations in SC (SD) Nos. 22/2003 and 23/2003, inter-alia, pronounced that – ‘An amendment cannot be viewed in isolation. It certainly cannot derive a stamp of constitutionality from the Act that is in force …. The Court will strike down ….. unconscionable law prescribing procedure other than the ordinary procedure’

Having by my original Petition dated 29th July 2003, validly and constitutionally invoked the jurisdiction of the Supreme Court of Sri Lanka, to exercise the judicial power of the people, I, by my further Motion tendered on 25th September 2003, sought a review of the Determination made on 18th August 2003 by a 3 Judge Bench of the Supreme Court on the Bill to re-enact the provisions of Inland Revenue (Special Provisions) Act No. 10 of 2003, well before such Bill became law on 22nd October 2003. In my Application I had cited the above two Determinations in SC (SD) Nos. 22/2003 and 23/2003 made by a 5-Judge Bench of the Supreme Court. Nevertheless, my Application for such review was not entertained.

Nevertheless, whilst my persistent Application for a justifiable review on a matter of utmost national and public importance and interest was not entertained by the Supreme Court of Sri Lanka, however in August 2009 the Supreme Court of Sri Lanka constituted a 7-Judge Bench to review an Order of the Supreme Court made as far back as October 2008, on an Application of a personal nature made by P.B. Jayasundera, to reassume public Office, as Secretary Ministry of Finance & Secretary to the Treasury, at the behest of President Mahinda Rajapaksa.

Ironically just six months after the refusal of my Application for a review by the Supreme Court, in March 2004, on a Reference made under and in terms of Article 129 of the Constitution by President Chandrika Bandaranaike Kumaratunga to the Supreme Court of Sri Lanka, finally vindicating my consistent stance,  a Full Bench of the Supreme Court, pronounced the aforesaid perverse law to be ‘inimical to the rule of law’, violative of the ‘Universal Declaration of Human Rights and International Covenant on Civil & Political Rights’, and that it had defrauded public revenue, causing extensive loss to the State.

Ven. Rambukwelle Sri Vipassi Malwatte Mahanayake Thera was conducting the religious ceremonies on that day, to take out the sacred Tooth Relic from inside the seven golden caskets. He took me and my wife into the inner Chamber from the Official entrance to participate in this rare religious ceremony. When I entered, with a tray of jasmine flowers in my hand, I got the shock of my life, when I met face to face, in the inner Chamber, the former Prime Minister Ranil Wickremesinghe who had just been ousted from Office, as a consequence of my crusade. He had come from the side entrance, with the new Speaker of Parliament, W.J.M. Lokubandara and Chairman, United National Party, Malik Samarawickreme, to pay homage to the sacred Tooth Relic. This indeed was another very intriguing and strange coincident. The Ven. Rambukwelle Sri Vipassi Malwatte Mahanayake Thera peacefully gazed at both of us.

‘Even though the contribution of the Value Added Tax represented about 42 per cent of the Government Tax Revenue, its management is replete with serious deficiencies.’

‘The responsibilities devolving on the Secretary to the relevant Ministry in terms of the provisions in the Constitution, and on the Secretary to the Treasury and the respective Heads of Departments as the Accounting Officers through the Financial Regulations had not been discharged properly.’

‘Questionable responses made instead of taking the immediate steps necessary to be taken even after serious lapses are brought to the notice of the institutions concerned by audit, pose problems.’

Direct tax revenues are further eroded by tax holidays and exemptions, discriminatingly creating two classes in society, that too, without any quantification known of such loss of State revenues, and further contributing to the aggravation of poverty, with additional jeopardy being caused to the poor, through the incidence of rising levels of indirect taxes affecting their daily sustenance and livelihoods !

Foreign exchange earnings to service levels of foreign borrowings are essentially from sectors in which poor women are deployed, invariably to work in substandard conditions, such as in plantations, export garments and in overseas employment.  

‘Since such control is exercised by Parliament in trust for the People, we are of the opinion that the process should be transparent and in the public domain, so that People who remain Sovereign are informed as to the manner control is exercised.  It follows that any Act of Parliament concerning public finance should be premised on a disclosure of the basis of such enactment so as to be transparent in its implications. And, an Act lacking in such transparency or being an alienation of control by Parliament would be inconsistent with Article 148 of the Constitution.’

‘The Petitioner in S.D. 3/2008, Mr. Nihal Sri Amarasekera, submitted that the Recurrent and Capital Expenditure estimated at Rs. 980,634,464,000/- (approximately Rs. 980 Billion) specified in clause 2(1) being the total of the expenditure under the Heads set out in the first schedule does not in fact constitute the totality of governmental expenditure in the financial year 2009. That, this figure does not include the debt service payments due from Government by way of interest and capital in the financial year 2009 in respect of the loans taken and the debt raised by the Republic. On that basis he submitted that there is a non disclosure of the total expenditure of Government for the financial year 2009 and that clause 2 premised on such non disclosure is inconsistent with Article 148 of the Constitution.’

‘It was submitted that there are other provisions in the Constitution and specific laws that provide for payments from the Consolidated Fund and that such expenditure is not included in the sum of approximately RS. 980 Billion set out in clause 2(1). It was further submitted that detail of such expenditure would be tendered to Parliament in the Budget Estimates of 2009. An extract of which was submitted to Court. According to this extract in the financial year 2009 in addition to the Rs. 980 Billion specified as expenditure of Government, a further expenditure of Rs. 738,779,568,000/- (Approximately Rs. 738 billion) would have to be incurred for such other expenditure. Thus the expenditure of Government for the financial year 2009 would not only be 980 billion specified in clause 2(1) but also include a further Rs. 738 Billion, totaling Rs. 1719 Billion. Of this a component Rs. 722 Billion would be for debt service, whereas the estimated revenue for the year is Rs. 875 Billion.’

‘An examination of the subjects in respects of which and the amounts of such transfers reveal that the then Secretary to the Treasury has been operating a “Budget” of his own.’