ECONOMYNEXT – Amid high import duties, ethanol the main ingredient for making arrack is being imported to Sri Lanka by politically connected persons with the knowledge of officials, Sri Lanka’s largest legal distillery has warned.
"When compared with last year we have noted a drastic increase in the illegal production of liquor," Harry Jayawardena, Chairman of Distilleries Corporation of Sri Lanka, the country’s largest maker of hard alcohol said without quantifying.
"We have also observed that a large amount of spirit is being smuggled into the country passing through the customs without payment of taxes by classifying the product as paint removers, thinner and spirit for eau de cologne etc, depriving the State by billions of Rupees.
"Such acts are carried out by powerful people belonging to political groups (and this is well known in the market) with the connivance of the enforcement authorities who turn a blind eye and deaf ear."
High import duties encourage smuggling. Import duties also results in the loss of taxes when the product is made domestically, with the tax potentially collected by the state to the ‘domestic manufacturer’ as profits.
In Sri Lanka ethanol for consumption and industrial use (for cologne) are now both taxed at high rates.
In Sri Lanka several distilleries are operated by politicians including ministers of the current administration who were ministers of the last administration.
Links have also been built with new ministers. Some distilleries are also owned by ex-ministers.
Jayawardena said large volumes of branded alcohol is being sold on which domestic excise duties have not been paid. (Colombo/Sep05/2018)