ECONOMYNEXT – Sri Lanka is planning to index alcohol taxes to inflation, State Minister for Finance Eran Wickramaratne has said.
“When we tax alcohol, we are now moving to the principle that we will follow an indexation relating to the rate of inflation,” Minister Wickramaratne said.
“Instead of taxing alcohol according to the wants of the minister or the ministry we will adopt this as a policy.”
“There have been accusations from time to time that taxes have been charged to benefit the ministry, or minister or someone.
“To avoid these suspicions we will move to indexing with inflation.”
Before Mangala Samaraweera was made finance minister, beer taxes were raised steeply, which critics charged would drive sales from strong beer to quarter bottles of arrack produced by the Perpetual group of companies.
Beer sales fell sharply as a result.
After Mangala Samaraweera came to office, a policy based on alcohol content was introduced.
In the 2019 budget taxes of all alcohol was raised by price of ‘gal’ or special arrack made of rectified spirits, the cheapest legal alcohol was not raised.
In March, excise taxes on beer and wine was raised 12 percent, domestic and foreign styles of alcohol (except special) was raised 8 percent.
Import taxes on wine and beer was raised 10 percent, and others 7.5 percent. A third gazette notice had also charged taxes on domestically produced wine and ‘sake’.
There have been concerns that the high price of legal alcohol was driving poorer sections of the community towards kassippu or illegal moonshine, which are sometimes mixed with methyl alcohol causing dehydration and death.
Illegal moonshine bring no tax revenues to the state. (Colombo/June30/2019 – Update II)