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Tax concessions: Recovering the lost billions?  

2 years ago

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Allegations have been levelled against the Government by Opposition political parties over the alleged tax concessions recently granted for imported sugar and coconut oil, claiming that the “tax game” operated by the Government has caused a loss of billions of rupees to state coffers.  They further alleged that the concessions are being enjoyed only by the ruling party loyalists and not by the public, as the prices in the local market have not been reduced in parallel to the tax reduction.  Nevertheless, the most pertinent question is whether authorities will initiate action to recover the billions of rupees lost to the Treasury.   As alleged by the Janatha Vimukthi Peramuna (JVP), by the end of last year, the Government had lost roughly Rs. 10 billion in tax revenue as a result of the reduction of sugar tax, and in the meantime has allegedly allowed a private coconut oil importer to earn an additional profit of Rs. 175 million.  While the benefit of the tax concessions is being enjoyed by several businessmen as alleged by Opposition political parties, the consumer rights activists are urging the Government to re-evaluate the tax policies as well as to direct the Consumer Affairs Authority (CAA) to take appropriate legal action against those who violate the already gazetted maximum retail price (MRP) formulas.  Speaking to The Sunday Morning, National Movement for Consumer Rights Protection Chairman Ranjith Vithanage stressed that the Government has failed to control the MRPs gazetted several times on consumer goods such as dhal, rice, sugar, canned fish, and several others.  Commenting on the sugar prices, Vithanage alleged that the time spent by the Government to gazette the reduced prices still left questions as to whether it was trying to help a few large scale businessmen.  “The consumers had to wait a month since the prices were reduced to get the benefit, but still only a few have benefitted,” he added.  Vithanage also said that the cost of living has skyrocketed during the last year and most people are now struggling to secure the minimum expenditure.  “The prices of all goods have been increased. The maximum retail prices imposed by the Government are not implementing. The authorities are not even monitoring the prices,” he stressed, adding that the retailers are selling the goods on their own prices.  “For all these, the consumers have to pay,” Vithanage added.  In the meantime, Association of Sri Lanka Canteen Owners (ASLCO) President Asela Sampath said the consumers are still waiting for the benefit of the tax reduction on imported sugar, as even though it’s been months since the prices have been reduced and a new MRP has been gazetted, the Government has failed to pass the benefit on to the consumers.        “Sugar for the controlled price is only available at Sathosa outlets. There are only around 500 outlets and our members cannot find sugar at that rate anywhere else. There are over 500,000 hotels and restaurants and the members cannot purchase sugar at that price. Sugar is still sold at Rs. 135 at grocery stores. If we get sugar for controlled prices, we will reduce the prices of bakery and sugar-related products,” he stressed.  It is now said that 90,000 Metric Tonnes of sugar had been imported to the country when the import duty was scrapped, and that the importers had to pay around Rs 4.5 billion to clear their consignments, he stressed.  Following a decision taken at the Cabinet Sub-Committee on Cost of Living, it was decided to reduce the excise duty on big onions, tinned-fish, dhal, and sugar from last October. Lanka Sathosa sells a kilogramme of big onions for Rs. 100, a can of tinned-fish for Rs. 200, a kilogramme of white sugar for Rs. 85, and a kilogramme of dhal for Rs. 150.  But the prices of almost all other retailers remained unchanged as alleged by many consumers.  Nevertheless, as alleged by JVP Leader Anura Kumara Dissanayake, around 100,000 MT of sugar was imported to the country at the end of last year with the new tax on sugar of Rs. 25 cents.  According to the new price formula issued last October, a kilogramme of sugar was expected to be sold at Rs. 85. However, the prices did not reduce even almost a month since the tax was reduced. As a result, the Government was urged to gazette the wholesale and retail sugar prices.  Meanwhile, a gazette notification outlining the wholesale and retail prices of white sugar that was to come into effect from 10 November was also issued by the CAA. The gazette states that the CAA, functioning under the powers vested in it by Section 20(5) of the Consumer Affairs Authority Act No. 09 of 2003, orders that no importer, distributor, supplier, or trader shall sell, expose, offer, or display for sale or supply for sale white sugar above the maximum price.  Accordingly, the maximum retail price (MRP) of packed white sugar was set at Rs. 90 per kilogramme and unpacked white sugar at Rs. 85 per kilogramme, while importers’ maximum wholesale price (MWP) was set at Rs. 80 per kilogramme.  Nevertheless, as alleged by the consumers, sugar was not available at local markets for the prices gazette by the CAA.  Meanwhile, Minister of Trade Dr. Bandula Gunawardana told the media that a tax will be imposed on sugar if the benefit of its price reduction is not passed on to the public. He has been quoted in media reports saying that there is no point in scrapping taxes if the benefit is not passed on to the people.  “Since doctors and other entities are saying that sugar must not be sold at low rates to the people, we will request the imposition of the taxes again,” the Minister had warned.  According to the daily price report issued by the Central Bank on 11 November, it is stated that the wholesale price of white sugar in Pettah was Rs. 100 per kilogramme.  Commenting on the tax issue on an earlier occasion, Dr. Gunawardana told The Sunday Morning that the decision to remove the tax on sugar was taken by the Ministry of Finance and they did not get in touch with the Ministry of Trade prior to taking the decision.  “The sugar prices were reduced to avoid a certain group of businessmen earning huge profits,” he said, adding that the CAA should monitor whether the prices have been reduced as per the recent gazette notification.  Similarly, the importing of coconut oil has also created tax turmoil, as allegations have been made by Opposition political parties that the Government has allowed private companies to obtain undue advantages while causing billions in losses to the State.    According to the Extraordinary Gazette Notification 2181/23 signed by the Minister of Finance on 26 June, the amount of tax on purified coconut oil was stated as Rs. 150 per kg. Subsequently, in another Special Gazette Notification issued on 10 July, the Minister of Finance stated that the Special Commodity Levy on coconut oil will be reduced by Rs. 25 per kg. It is stated that it should be valid for a period of six months from 11 July.  Despite this, issuing another Extraordinary Gazette, Prime Minister and Minister of Finance Mahinda Rajapaksa on 14 December, stated that the Special Commodity Levy on imported coconut oil will be Rs. 125 per kg of coconut oil.  The applicable levies have been reduced as follows – on the imports of coconut oil, from Rs. 150 per kg to Rs. 125 per kg; on other coconut oil, from Rs. 175 per kg to Rs. 150 per kg. The amended rates are applicable from 11 July 2020 for a period of six months. The levy on coconut oil was earlier increased on 26 June 2020.    However, while large-scale import companies enjoy this benefit, consumers do not benefit from lower coconut oil prices.  In the notice issued by the Finance Minister, it is also stated that the previous gazettes issued under 2183/44 and 2181/23 will be abolished, and the new tax on coconut oil would be Rs. 125.  When contacted by The Sunday Morning, Customs Media Spokesman and Director Sunil Jayaratne confirmed last week that the tax on coconut oil is Rs. 125, and Sri Lanka Customs is applying the Rs. 125 tax on each kilogramme of coconut oil imported to the country.  Nevertheless, the present market price on one litre of purified coconut oil (cooking coconut oil) is around Rs. 600.  Consumers alleged that there was no reduction at all on coconut oil. Instead, the prices have increased during the past few months. They also alleged that even though the Government has reduced the tax on imported coconut oil, the market price on coconut oil remained unchanged.  When contacted by The Sunday Morning, an official of the CAA who wished to remain anonymous noted that the authority is currently monitoring whether there is an unusual price difference in the market and if there’s such, the authority takes action against such retailers and wholesalers.  “At present, there’s no MRP for coconut oil. Also, there’s no sugar available in the market at the new prices with the tax reduction. Therefore, the authority doesn’t force the market to reduce the prices to avoid any shortage of those essentials,” he told The Sunday Morning He also said that the authority is taking practical measures, as it did not want to create an artificial shortage.  “If we start forcing the sellers, they might not release the sugar stocks to the market. If that happens, there will be a shortage in the market,” he added.   A senior official of the Ministry of Finance, who wished to remain anonymous, told The Sunday Morning that when a tax is reduced by a government, there is a reduction of the revenue received from the respective good, but that cannot be considered as a loss because that is the government policy.  Attempts made by The Sunday Morning to contact State Minister of Money and Capital Market and State Enterprise Reforms Ajith Nivard Cabraal to find out whether there’s truth to the allegations levelled by the Opposition political parties, were futile.  When contacted, Co-Cabinet Spokesman Keheliya Rambukwella noted that the question should be posed to the Finance Minister or State Minister Cabraal.  Attempts made to contact Trade Minister Dr. Bandula Gunawardana and Treasury Secretary S.R. Attygalle also proved futile. 

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