Sri Lanka excessive beer tax policy benefited bondscam group: Minister

ECONOMYNEXT – An excessive tax hike on beer imposed by Sri Lanka’s ex-finance minister had benefited a company connected to a business group involved in bond market frauds, Health Minister Rajitha Senaratne said.

Finance Minister Mangala Samaraweera brought down taxes on beer in his last budget, to be more in line with its alcohol content.

Initially President Maithripala Sirisena and Health Minister Senaratne objected.

"I and the President examined this matter," Senarate said, responding to questions at a weekly news briefng why the tax was not raised again.

"Do you remember the last finance minister increased taxes on beer by very big margin?

"There is an opinion that it brought massive benefits (visharler vasi) a certain firm. That is a hard liquor manufacturer, which is connected to this same bond issue."

A Presidential Commission of inquiry said Perpetual Treasuries, connected to Arjun Aloysius, has have committed securities frauds involving government bonds and earned over eight billion rupees.

W M Mendis, a liquor maker is part of the perpetual group.

After then-Finance Minister Ravi Karunanayake raised beer taxes twice in 2015. Fitch, a rating agency said in early 2016 that it expected a switch from arrack to beer to reverse.

"We expect the trend of drinkers switching to beer from hard liquor to reverse in 2016, as taxes on the alcohol content in strong beer have caught up with those on hard liquor (spirits) after increases in excise taxes in October and November 2015," Fitch Ratings said.





In early 2017, Lion Beer, which produces Lion and Carlsberg brands said beer taxes were raised 70 percent and taxes on arrack, a hard alcohol was raised 25 percent, causing demand to collapse.

The firm said Sri Lanka’s beer sales volumes plunged 40 percent and arrack sales rose 14 percent after the steep hike in beer taxes, while toddy industry which pays little taxes was also up. (Colombo/Jan19/2018)

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