Borrowings and money printing by the state are minimized when state revenue is high. Then, bank interest rates decrease, which is good for businesses. And, inflation drops, which is good for consumers.
If not, money can be printed without raising taxes. Since the government cannot obtain foreign loans, it can borrow more and more locally. That is not a stable solution. The economy continues to go downhill. There will be no way out from bankruptcy. That is what happened in countries like Mozambique.
Those affected by increased taxes are the rich minority. They expelled the Gotabaya Rajapaksa regime that cut taxes and gave them maximum concessions. Now, they are throwing money to expel Ranil too. They ousted the good governance regime of 2015-19 because of the impact from direct taxes. Gotabaya cut taxes to satisfy them. Were they satisfied?
This despicable commercialized and managerial class without any vision, culture or ethics does not get satisfied by anything. It cannot be satisfied either. A higher amount of taxes cannot be levied from them. They know how to avoid tax payments by manipulating accounts or by bribing officials.
They contribute to the parties that catch thieves too. That is the way things work.
Anyone trying to govern by satisfying this despicable class will suffer the same fate that befell Gotabaya. Even Ranil may suffer the same fate. We do not know if Ranil has come to understand this or how he is going to counter it.
(By Ajith Perakum Jayasinghe)
Political and social analyst