Sri Lanka’s Liquor Industry and the 26 Billion Rupee Tax Revenue Loss

The Commissioner General of Excise, responding to a Right to Information Act request, disclosed that the 10 liquor companies collectively owe the government an astonishing amount exceeding 678 crores of rupees.

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A liquor shop in Sri Lanka [File Photo]

In a recent development, a group of social activists, led by Sanjay Mahawatta, has submitted a fundamental rights petition to the Supreme Court of Sri Lanka. The petition seeks to address the alarming issue of tax evasion by 10 prominent liquor manufacturing companies, totaling over 678 crores of rupees. The failure to collect these taxes has reportedly led to a significant impact on the national economy, causing a loss of 26 billion rupees in tax revenue in the year 2022 alone.

The petition specifically names the companies involved in this tax evasion, shedding light on their non-compliance with government regulations. The list includes:

  1. W.M. Mendes Company
  2. North West Distilleries Pvt
  3. Global Blenders and Bottlers Pvt
  4. McCallum Brewing Company
  5. Kalutara Distilleries Company
  6. Finland Distilleries Corporation Pvt
  7. Synergy Distilleries Pvt
  8. Randenigala Distilleries Lanka Company
  9. Higurana Distilleries Pvt
  10. Royal Ceylon Distilleries Pvt

The petition, filed through lawyer Manjula Balasuriya, targets key officials, including the Excise Commissioner General, the Secretary of the Ministry of Finance, State Minister for Finance Ranjith Siambalapitiya, the Auditor General, and the aforementioned liquor companies. The petitioners assert that the respondents, through negligence and lack of proper mechanisms, have violated fundamental rights and significantly impacted the country’s economy.

The Commissioner General of Excise, responding to a Right to Information Act request, disclosed that the 10 liquor companies collectively owe the government an astonishing amount exceeding 678 crores of rupees. This revelation has raised concerns about the effectiveness of tax collection processes and enforcement mechanisms.

The petition highlights the legal framework governing tax collection from liquor manufacturing companies. According to the Liquor Tax Act, companies are required to pay taxes for products within specific timeframes. The Excise Department is also empowered to impose surcharges for unpaid taxes. Despite these provisions, the petitioners argue that companies deliberately evade payments, and the authorities are failing to enforce the law adequately.

The petitioners contend that the respondents, particularly the Excise Commissioner General, have violated the fundamental rights of citizens by neglecting their duty to collect taxes. They argue that the resulting economic strain has led to increased taxes on goods and services, burdening consumers.

The petitioners request the Supreme Court to issue several reliefs, including:

  • An order for the Commissioner General of Liquor Tax to submit a report detailing the outstanding taxes and defaulting companies.
  • An interim restraining order suspending licenses of defaulting liquor manufacturing companies until the case is heard.
  • An interim order preventing the re-issuance of licenses to companies that have defaulted in tax payments.
  • An order compelling the Commissioner General of Excise to take immediate steps to collect unpaid taxes from the defaulting companies.

This legal action underscores the urgency of addressing tax evasion in Sri Lanka’s liquor industry. The Supreme Court’s intervention is crucial in ensuring accountability, protecting the national economy, and upholding the rights of citizens affected by the consequences of tax evasion. The outcome of this case will likely set a precedent for future efforts to combat tax evasion in the country.

Sri Lanka Guardian

The Sri Lanka Guardian is an online web portal founded in August 2007 by a group of concerned Sri Lankan citizens including journalists, activists, academics and retired civil servants. We are independent and non-profit. Email: editor@slguardian.org

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