Sunday, November 15, 2015

The thieves of old

A friend of mine was narrating a rather amusing story today. It concerned his father and of an incident that took place in the early 1980's.

My friend's grandmother was living alone at the time in her house in Angoda. As there were no telephones in the immediate vicinity and no way of calling for assistance my friend's father would sleep over a few days of the week, just to watch over things.

He would usually drive over in the evenings, park his car under the porch and sleep on the verandah, as it was cooler than the inside of the house. One night he awoke to see a thief trying to remove the windscreen wipers from his car.

He shouted and the thief took to his heels. Although my friend's father was not fit, he tried to give chase. In the dark he tripped over a flower pot, fell in a drain and broke his wrist. He was screaming in pain when something strange happened.

On hearing his cries, the thief turned back and with the help of someone else who turned up, took my friend's father to hospital.

An incident I thought was worth sharing, reflective of a more innocent age.

Thursday, November 05, 2015

Lunacy in Tax Policy: Super Gains Tax now suspended ?

The PM has apparently made a statement that the recently imposed Super Gains Tax is to be suspended; just hours after the Finance Minister boasted that the tax would raise Rs.65bn.

What on earth is going on?

The Super Gains Tax, a one-off 25% additional tax (ie over and above normal income tax) imposed on an individual  or a company that reports a profit in excess of Rs.2bn for the year of assessment commencing 1st April 2013.

This was first announced, to widespread dismay, in the mini budget of 29th January 2015. Fortunately, the Government was unable to pass the bill in parliament so the tax did not become law.

Following the August parliamentary election, the Government followed the bad practice of the past and 'bought over' a score of opposition MP's by offering them cabinet portfolios, saddling the country with yet another jumbo cabinet.

Using its captive majority, the Government passed the Super Gains Tax bill on the 20th of October. Two weeks later the PM has a sudden change of heart and claims that the Super Gains Tax will be suspended.

It seems that the laws of the land are dependent more on the whims of individuals than any sort of process, a truly disturbing situation.

To begin with policy making should not be in the manner of a conjurer pulling rabbits out of a hat but needs to follow a process of Green Papers and White Papers, as in the UK. 

Green Papers set out for discussion, proposals which are still at a formative stage. Once a firmer set of principles are agreed on, White Papers are issued by the Government as statements of policy, and often set out proposals for legislative changes, which may be debated before a Bill is introduced. Some White Papers may invite comments.

It is also important that the parliament be allowed to play its proper role to debate and discuss legislation. Buying over MP's needs to stop. Otherwise we end up with worthies such as Sir Joseph Porter in H.M.S Pinafore who boasted that:

I  always voted at my party's call,
And I never thought of thinking for myself at all.
I thought so little, they rewarded me
By making me the Ruler of the Queen's Navee!
I could go on in the vein for some length, there is so much wrong with the process that I don't even know where to begin. Stupidity does not even begin to describe the situation.

We expected much from this Government in terms of  restoration of process and procedure. This looks unlikely now.

Saturday, October 31, 2015

The protection of domestic agriculture

President Sirisena has recently called for the protection of domestic agriculture and for import substitution policies to help local cultivation.

Highlighting on the agriculture sector development, Sirisena said it was “a shame” that the country was importing agricultural products which could be cultivated in the country, adding that the Government was spending over Rs. 6,000 million annually on imports of essential foods. Import substitution has been a point repeatedly highlighted by the President, who has insisted Sri Lanka has the capacity to expand its production to competitively meet domestic needs. 

He pointed that high imports had negatively impacted the local farming industry and by extension the entire economy. Thus, implementing new policies to encourage local agricultural products was essential for the country to regain its status of self-sufficiency, he stressed.

Such policy is not new, it has been followed before in various forms in Sri Lanka since the 1960's. President Sirisena is a decent man and I am sure he genuinely believes that helping farmers will alleviate poverty. Unfortunately he is wrong.

Protecting local farmers will help raise prices of agricultural produce and the farmers will undoubtedly be better off. But what of the consumers? The people who must pay higher prices for food, because cheaper imported food is either taxed or its import is banned?

It is easy to assume that townsfolk are richer than rural villagers and paying higher prices for food will leave them unaffected. This is to ignore the large number of urban and rural workers including casual labourers who are amongst the poorer section of the population and who will suffer in consequence.

The Sri Lanka Labour Force Survey for 2014 identifies that just 26.4% of the workforce (or 2.2m people) are employed in agriculture.  The vast majority (73.6%) are employed elsewhere. The statistics do not reveal sectoral break ups but the number employed in agriculture would certainly include the tea plantation workers (several hundred thousand of them); leaving these out means that the beneficiaries of agricultural protection would be an even smaller proportion of the population.

The classic debate for agricultural protection took place in England in the 1840's in the case of the Corn Laws. The laws, which protected rich landlords at the expense of the poor labourers were repealed in 1846.

Sri Lanka already suffers from high food prices thanks to duties imposed on essentials from canned fish to dhal, simply because the Government sees this as the best way to raise revenue.

The Government needs to work on lightening this burden consumers, not increasing it.

Sunday, August 09, 2015

How should we vote?

Indi had written something urging citizens to vote for good people.  Just before the last election I did an assessment of the candidates.

What we have now is something of a re-run of the same issues but with the advantage of having a short track record of the Sirisena administration to compare against Mahinda.  

Looking back at the past few months the worst fear of the Sirisena candidacy - that there would be continued dictatorial rule under a new face has not been realised. Sirisena has not abused the powers of the presidency and some powers were curtailed - despite the best attempts of the Rajapaksa camp to stymie these efforts.

While there have been problems, there is an improvement in the rule of law and governance. Sure, things are not perfect but on the whole thing have been better. Even the notorious Mervyn Silva is quiet.

In stark contrast to the presidential poll, this campaign has been the most peaceful and by all accounts the fairest in a couple of decades. The elections commissioner is asserting his independence and the candidates seem to be abiding by rules, for the most part.

At the end of the day, this is what we really need as the foundation of society: a state run on a system of law, not one run on the whims of a handful of people.

Society also seems far more peaceful; just over a  year ago we had violence in Aluthgama, but since January things have been quiet and restrictions on freedom of expression have abated. In contrast, the Mahinda campaign is playing on fear of minorities and threatens to turn the clock back.

Of course there is a great deal more to be done and the current Government is not without its flaws, but at least we are moving in the right direction.

They say the first thing to do when you are in a hole is to stop digging. The Sirisena administration may not have done a lot but least they have stopped excavating.

The Rajapaksa camp is busy organising spades, mammoties and backhoes to get back to what they know best.

The choice now is fairly clear.

Wednesday, June 03, 2015

CA Sri Lanka, Audit Firms & Their Slaves - some thoughts

A former accounting trainee V Kanthaiya had written an article faulting accounting firms for underpaying their trainees and going on to describe this as modern day slavery. There is some substance to his complaint but the charge of slavery is perhaps taking things too far. Serendipity has weighed in on the side of the student, these are my thoughts on the matter. 

While there is a problem of underpayment, things have improved a great deal over the past few decades.

In my father's day one apparently had to place a bond with the firm in order to be admitted as a trainee. The bond was non refundable but the allowance paid to the trainee over the four years was equal to the value of the bond. In other words 'allowance' the students received was only a repayment of the original bond, excluding interest. In effect students had to pay for the privilege of being a trainee!

Although current allowances are still low, at least they represent actual payment from the firm and it is a big improvement on the amount of Rs300/- that was the standard starting monthly allowance twenty years ago.

I do notice that the trainees work great deal harder, much longer hours and do more demanding work (although the firms themselves take less and less responsibility-the representations made by management are now at ridiculous levels- the firms take almost no responsibility at all - almost everything is taken on the representation of the management!) The firms do not even perform the simple service of putting the accounts into the audit format, which used to be standard previously, all work is passed on to the client.

I do think the firms could increase the training allowances, at least in line with inflation; I don't think they have been revised in the last 5 or perhaps 10 years.

My bigger grouse with the profession is its hasty embrace of the ill-conceived IFRS basis of accounting. IFRS was a knee-jerk reaction to problem that was fundamentally in the sphere of economics, all that accountants needed to do was ensure better disclosure of contingent liabilities and positions held in the market. This could have easily been achieved by way of notes, there was no need to turn the fundamental basis of accounting, developed over a couple of centuries on its head.

The basic principle in accounting is the proper recording of transactions, with IFRS the accounting system records notional, unrealised gains and losses that can distort reality.

Nothing illustrates this better than the 'poster boy' for the introduction of IFRS in Sri Lanka: a certain firm called Touchwood Investments PLC.

In their eternal wisdom, the auditors and accountants of Touchwood determined that the true position of Touchwood would only be reflected by adopting IFRS methodology, which they proceeded to do with gusto, neglecting to notice the minor fact that the so called investment scheme is what is known as a Ponzi scheme.

That a Ponzi scheme could be dressed up to appear as a legitimate investment is a damning testament to the fundamental flaws inherent in IFRS.

Such is the complexity of IFRS that management and even accountants have difficulty understanding their own figures. This provides lucrative opportunities for accounting firms to sell additional consultancy services to clients, which suits the profession very well.

Unfortunately it is now deeply entrenched so no one has the sufficient incentive to unwind it, at least until the next big implosion in the banking sector.

Related Post : Touchwood - Sri Lanka's listed Ponzi scheme

Wednesday, April 29, 2015

Colombo's last Gothamba Rotti cart

This evening when returning home I came across something that I had believed was extinct: a man wheeling a cart selling gothamba rotti.

Piyadasa, making gothamba rottis.

These were a familiar sight years ago, the carts would go by in the evening, 'bell' clanging. The 'bell' was not a real bell but the head of a small mammoty which would be stuck with a small metal rod to make that familiar clanging sound. There would be a sudden shout - "gothamba rotti- does anyone want?" there would be a split-second decision and someone would be sent running out to flag it down.

People would need to be quick, the carts were generally wheeled at quite a fast pace. As children my cousins and brothers would run out looking for the cart. If it had gone past we would sometimes chase it down the road, plate in hand, with someone else running behind with a bowl of eggs-needed to make the egg gothambas.

If caught in time, the owner would turn the cart in the driveway or porch of the house and make whatever rottis the household wanted before moving on.

Sometimes the rotties would be made on the side of the main road, which would attract neighbours and passers-by who would stand around waiting to place their orders. The stove in the cart had a small metal pipe attached into which the owner would blow, whenever the fire died down. As children we would eagerly take turns to keep blowing at the fire.

Although gothamba rotti is available in shops I have always preferred it from a cart, the rotti is is much lighter and crispy. The wood fire adds a distinct aroma to the rotti that gives it a unique flavour not found in ones in the shops.

I had not seen a rotti cart in years, so I stopped immediately and ordered some. Not a lot has changed from what I remember I my childhood although he has added cheese, chocolate and vegetable to the traditional plain and egg gothamba's. I seem to remember that the carts had some kind of brake but Piyadasa has improvised his own.

Piyadasa's improvised brake system

I asked Piyadasa, the owner what happened to all the carts. He says everyone he know has given up, its hard work and people prefer to do other jobs. He thinks that he is probably the last cart that is operating in Colombo.

His day starts in the morning buying ingredients and preparing the dough, which he says takes pretty much the whole day. He then sets off in the evening at about 5pm and will be on the go on until 9pm or 10pm, when he finishes his last order. Then he wheels the cart back, washes it down before going to bed.

He is based in Borella and has a few set routes: Tuesdays, Wednesdays and Fridays its Cinnamon Gardens, on the other days it is the area beyond the Borella junction, towards Cotta road. He does have a phone number: so if you can now call him up to find out where he is and try some of his delicious rottis.

I'm staying up writing this because I feel like a stuffed christmas turkey after gorging on gothamba rotti.

Piyadasa : Gothamba Rotti Cart Mobile : 0725-813-455

Friday, April 24, 2015

The BBS is a Western conspiracy

The former president has revealed that the Bodhu Bala Sena (BBS), an organisation that claims to fight for the rights of Sri Lanka's Buddhists is in fact a conspiracy hatched by Western powers. It was allegedly launched by the opposition and Western powers to defeat him in the election. It is a pity that the article concerned did not get a response from the BBS spokesman to this charge, it would have been interesting.

The BBS was launched in mid 2011 but the former President called a snap election only in October 2014, two years ahead of schedule. How did those Westerners know when the election would be called?

They must have had amazing prescience, to have launched the BBS a full three years before the actual declaration of the election. The date of the election was known only to the ex-president and his astrologer. Perhaps the Norwegian's were also consulting an astrologer ?

He claims his election campaign was undone by the BBS, but then why did the ex-President, carrying all the power of the presidency fail to heed the appeals of the Muslim community and even his own ministers and do something about the BBS?

The US, one of the countries accused of sponsoring the BBS revoked the visa of  the General Secretary of the organisation Galabodaaththe Gnanasara Thero, which is a lot more than the Government ever did.

The BBS clearly broke the law on many occasions, yet no action was ever taken. He admits that he turned a blind eye to the antics of Mervyn Silva, perhaps he did so as well to the BBS.

The BBS seems to have gone underground after the election, perhaps stricken by the same mysterious forces that affected Mervyn Silva?

Update: The BBS has issued a statement urging the government not to harm Gotabhaya Rajapaksa. They claim that Chandrika Bandaranaike has some designs on Gota, which are at the behest of Western countries. Very confusing, these Western countries, no? One never knows what they are up to.
urge the government not to harm former defense secretary Gotabaya Rajapaksa - See more at:
urge the government not to harm former defense secretary Gotabaya Rajapaksa - See more at:
urge the government not to harm former defense secretary Gotabaya Rajapaksa - See more at: