ECONOMYNEXT – Sri Lanka’s state will expropriate sugar stocks imported by private traders before a 50 rupee a kilogram midnight tax was slapped, Trade Minister Nalin Fernando has said as more dramatic state interventions follow the controversial tax hike.
Under Sri Lanka’s so-called Special Commodity Levy law, taxes can be raised by the executive while the population is sleeping to be rubber stamped by a parliament.
After hiking taxes by 50 rupees a kilogram, price controls were slapped for a month in the first episode of state interventions.
“Today the cabinet decided to take-over to the state (rajayater pavara gena) stocks imported for 25 cents are kilogram and issue them to Lanka Sathosa, Supermarkets and selected Co-operatives to be sold at 275 rupees,” Trade Minister Nalin Fernando said in the latest in a series of state interventions following the midnight tax drama.
Sri Lanka is supposedly operating a ‘social market economy’ (Soziale Marktwirtschaft) which helped create a German economic miracle after post-World War II with the help of a strong Deutsche Mark, but the sugar interventions are more in line with the earlier controlled economy (Zwangswirtschaft) that it replaced, analysts say.
State Miniter for Finance Ranjith Siyambalapitiya said 19,000 metric tonnes of sugar imported before the tax, remained in the country until last week.
Minister Fernando said after the expropriation, a price control on sugar will be removed.
Sr Lanka’s ruling party came under corruption allegations after midnight tax was slapped, on top of an earlier tax on wheat.
There were similar corruption allegations against the last administration after a tax was cut.
“The special commodity levy is a very unusual type of tax: when it applies, no other indirect taxes (such as excises or the VAT) are due,” an International Monetary Fund corruption diagnostic report said.
“Moreover, the levy’s scope (and hence the scope of all other indirect taxes) and applicable rates can be changed overnight by signature of the Minister of Finance.
“Gazette notifications and approval by Parliament are only required as soon as convenient, which seems to create a tension with Sri Lanka’s constitution, requiring that Parliament have full control of public finances.” (Colombo/Nov20/2023)