While the broader economy contracted by 8.4 percent in the second quarter ended in June, the construction activities, which contributed an outsize 9.5 percent to the overall economic output, shrank by nearly twice as much as in the same period, indicating its importance to the Sri Lankan economy, specially in the post-war era.
According to the data released by the Census and Statistics Department, construction activities declined by a significant 16.2 percent in the April-June quarter, as the economic crisis sent ripple effects across multiple sectors.
The sputtering economy came to a near standstill in the second quarter, after the foreign exchange crisis unravelled in proportions and magnitudes, which nobody had anticipated, forcing the government to suspend almost all its big infrastructure projects.
Meanwhile, private developers scrambled to source materials such as cement and others amid their inability to find dollars to import them and soaring prices, which sent the cost of construction through the roof.
The cement imports plummeted 84 percent to 35,000 metric tonnes in June, bringing the first six-month slump to 26.2 percent to just over a million metric tonnes over the same period last year.
In the first half, the broader construction sector shed 8.9 percent of its value with its share in the total gross domestic product (GDP) coming down to 8.7 percent.
In the first half, the industry sector, with construction being part of, contributed 31.5 percent to the GDP, recording a decline of 7.1 percent over the same period, last year, compared to the 7.6 percent and 0.6 percent contractions recorded by the agriculture and services sectors, respectively.
As the government has suspended its major infrastructure projects, private developers have either followed suit or scaled down their projects and home building has significantly slowed down, due to the soaring construction cost.
It is unlikely that the industry could see any revival any time soon, given the acute shortage of foreign currency and the tight fiscal and monetary policies, which could stay for some time.
The depth of the construction sector’s decline and how long it continues will determine the fate of hundreds of thousands of people, who made a living out of the industry, which accounted for nearly one-tenth of the total economy.
Revenue management authority to enhance tax collection and end corruption
The government is planning to set up a separate revenue management authority to minimize corruption and financial leakage in the process of tax collection of the Inland Revenue Department (IRD) and Sri Lanka Customs, official sources disclosed.
Measures will be taken to draft a new bill to set up the authority with powers of a Directorate of Revenue or to amend the Inland Revenue Act with a view of separating revenue management and tax administration of the two key state revenue collection institutions.
Sri Lanka needs to improve its tax revenue to ensure that the government has enough money to spend towards welfare and growth while not running the risks of high budget deficits and debt levels.
This has become an extremely difficult task as the tax evasion has become the order of the day with many billionaire businessmen, rich men with high political connections even professionals are allowed to escape from the tax net by hundreds of corrupted officials in the two departments.
Details of these officials and tax evaders have made known to the government in a special report of the intelligence divisions.
Chairman of the Inland Revenue Commissioners Association and senior commissioner Sarath Abeyratne said that their association is ready to expose these top corrupt officials other rankers, persons with high political connections and some of the so called tax consultants.
The association is planning to meet President Ranil Wickremasinghe to reveal all the details of corrupt practices in the department which has resulted in billions of rupee loss of tax money for the country coffers.
The government should accord immediate priority to take stern action against such perpetrators rather than focusing attention on the setting up of new revenue management authority, he said that he cannot make any comments on the proposed authority which is still to be materialized.
The government has foregone massive amount of over Rs.515.15 billion during the past six years due to tax avoidance by several companies and the department is still continuing the recovery process and legal procedures against those tax evaders.
“These tax evaders were making use of the loop holes in tax net specially, regulations, taxation complexity, weakness in tax administration as well as official collection procedures and corruption”, he said.