Saturday 20th January, 2024

The government is all out to boost state revenue further. It has already jacked up taxes and tariffs exponentially, and achieved a marginal primary surplus. It has increased VAT to an unprecedented level to meet a shortfall in its projected revenue, making life even more miserable for the people. Oppressive taxes lead to social unrest and even popular uprisings. State workers are on the warpath, demanding a pay hike. The government can increase state revenue without causing so much suffering to the public if it streamlines tax collection, but it has allowed some of its cronies to dodge taxes with impunity.

The Committee on Public Finance (COPF) has recently faulted the Finance Ministry and Inland Revenue for their failure to rake in foregone taxes from a number of companies that benefited from the 2020 sugar scam. The COPF, headed by SJB MP Dr. Harsha de Silva, has expressed its displeasure at the failure of the authorities to collect taxes from the aforesaid companies despite a 99.5% reduction in the Special Commodity Levy (SCL) on sugar imports, as stipulated by Extraordinary Gazette dated 13 Oct., 2020. Among the beneficiaries of the scam are some companies which funded the SLPP’s election campaigns in 2019 and 2020.

After being ensconced in power, the SLPP government reduced the SCL on sugar from LKR 50/kg to LKR 0.25/kg on 13 October 2020 so that its cronies who had placed orders for sugar could make a killing. The Gotabaya Rajapaksa administration claimed that it had waived the SCL to reduce the sugar price in the domestic market for the benefit of the public, but nothing of the sort happened; the sugar price remained high. The cumulative loss of state revenue due to the scam amounted to more than LKR 59 billion as of December 2022, according to some independent economists.

In Nov. 2023, the government increased the SCL on sugar from LKR 0.25/kg to LK 50/kg on the pretext of righting a wrong. That move is said to have helped increase state revenue by LKR 27 billion a year, but it stood the government’s cronies in good stead, for they were able to jack up the prices of sugar in their warehouses, having replenished stocks in advance. Hence, the restoration of the SCL on sugar came to be dubbed the second sugar scam. The COPF has expressed serious concern about the manner in which the SCL on sugar was restored, according to media reports.

In other words, in 2020, pro-SLPP importers made huge profits by refusing to reduce the sugar price in the local market despite the virtual abolition of the SCL on sugar, and in 2023 they struck it rich by increasing the price of sugar immediately after the restoration of the SCL on sugar to the previous level. Heads crooks win, tails the public loses!

The COPF has, on the basis of the findings in a forensic audit by the Auditor General on the sugar scam, ordered Inland Revenue to submit, within one week, a comprehensive report on their failure to collect the forgone taxes. Government politicians are sure to go all out to protect the interests of the rogue companies that have made unconscionable profits from the sugar scams. This is an election year and they are in need of funds.

Let the Opposition be urged to flog the issue of uncollected taxes aggressively and ensure that Inland Revenue recovers from the sugar scammers what is due to the state urgently. It is hoped that the COPF will reveal to the public the content of the report Inland Revenue has been directed to submit on the forgone taxes.