Sri Lanka alcohol tax revenues double after ethanol clampdown

Sri Lanka alcohol tax revenues double after ethanol clampdown
Apr 09, 2015 05:32 AM )

COLOMBO (EconomyNext) – Excise taxes from alcohol in Sri Lanka has doubled, going up by about 5 billion rupees a month after a clampdown on illegal imports of ethanol, the main ingredient of hard liquor, Finance Minister Ravi Karunanayake said.

Excise revenues which were 4.2 billion rupees in November 2014 under the Rajapaksa regime rose to 7,862 billion rupees in January, 7,652 billion in February and 9,490 billion rupees in March, Karunanayake told parliament.

The numbers indicate an increase of about 4 to 5 billion rupees in revenues a month or up to 60 billion rupees a year.

Karunanayake did not give numbers for December, which is usually high due to the New Year holiday season.

Sri Lanka's new Maithripala Sirisena administration had systematically clamped down on the tax unpaid imports of raw ethyl alcohol (ethanol).

On January 21, Karunanayake told EconomyNext that the estimated loss on tax unpaid alcohol was over 60 billion rupees, though he gave a more conservative 50 billion rupee figure in a revised budget a week later. Tax rates have also been systematically increased in recent budgets.

Karunanayake told parliament that he knew of several legislators in the current opposition who owned distilleries through nominees.

He taunted opposition legislators that he will reveal the names soon and asked why some of these distilleries were suddenly inactive after the change of administration.

Karunanayake introduced a 250 million rupee annual fee for alcohol producers in his revised January budget, which also hurts small and medium enterprises, and favours large distillers, reducing competition and economic freedoms.

Several firms have gone to court over the levy.

Imported ethanol was used by several distilleries owned by persons connected to the Rajapaksa administration to make tax unpaid arrack which were then sold through the legal alcohol distribution chain.

The legal distribution chain also changed sharply after 1994 from a series of mostly family owned shops to a network of outlets rented to operators on licenses issued to politically connected person, industry sources say.

Former Treasury Secretary P B Jayasundera also made unsuccessful attempts to stop illegal ethanol imports.

At least one head of is believed to have lost his job due to attempts to reduce on tax losses from ethanol and cars.