Sri Lanka to combat revenue losses from sin taxes

COLOMBO (EconomyNext) – Sri Lanka will take a series of measures to stop an estimated 50 billion rupees lost from non-tax paid alcohol and will also raise revenues from direct levies on producers, according to proposals in an interim budget.

Finance Minister Ravi Karunanayake said alcohol and beer makers will be charged 200 million rupee a month tax, which will kill-off smaller alcohol makers.

"This provision has been made in order to discourage the smalltime operators and rationalize the number of manufacturers," he said.

There had been allegations that ethanol, the main ingredient to produce ‘gal’ arrack was being imported by politically connected persons who ran distilleries and who were then selling tax unpaid alcohol through legal channels.

Sophisticated scanning equipment will be installed at Sri Lanka Customs to recover an estimated 50 billion rupees lost from items including ethanol Karunayake told parliament.
Alcohol sales outlets will also be charged a 250,000 one-off levy.

Liquor licenses will in future be given through a tender process from 2016, he said.

There would also be attempts made to "formalize" the industry where a ‘beedi’ a type of cheap cigarette is made.

"The high taxes on cigarettes have shifted the consumption towards low priced products…"Karunanayake told parliament.

"Hence, steps will be initiated to formalize the Beedi industry. The issues of concern would be the numbers employed in the industry and the ability to continue the operation by relevant Beedi manufacturers."

In an interim budget, the Maithripala Sirisena administration slapped a series of one-off taxes on private firms in particular, which can set a precedent for future rulers to do the same.





The current administration is looking hither and thither for cash after promising a deadly salary hike for state workers which had hit the country’s exchange rate, and raise the tax burden on ordinary people.

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