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Illicit artificial toddy trade deprives govt. of Rs. 80 billion in revenue annually

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State Minister promises remedial action

By Saman Indrajith

One of the topics that kept reverberating throughout the budget debate that ended in parliament last Wednesday was the drain of excise revenue as a result of loopholes in the tax net by artificial toddy manufacturing businessmen.

Various facets of the issue were raised by SJB Matara District MP Buddhika Pathirana during the question time on three separate days highlighting the severity of the damage inflicted on the national economy by tax evading toddy businessmen who deprive the government coffers of a whopping Rs. 80 billion annually.

Following the disclosure by MP Pathriana, State Minister of Money & Capital Market and State Enterprise Reforms Ajith Nivard Cabraal promised remedial action.

Commissioner-General of Excise, Ariyadasa Bodaragama, acknowledged that there exists a tax leakage but he was wary of the figure of Rs. 80 billion.

Bodaragama is due to retire at the end of the month. Deputy Commissioner-General of the Inland Revenue Department, M. J. Gunasiri has been named as his successor.

Challenges before Gunasiri, as the new Excise Commissioner-General, are enormous, and whether he would be able to help Minister Cabraal deliver on his promise remains to be seen.

As Gunasiri earlier served as Deputy Commissioner-General Tax Administration (Corporate Small Entities & Non Corporate Sector) at the Inland Revenue Department, his expertise may be useful to remedy the situation. However, he has only three more months of service before his retirement. Unless he is given a service extension, the task of finding solutions to the tax evasion issue raised by Pathirana will probably have to wait till another Commissioner-General is appointed.

Pathirana told The Sunday Island that the government coffer is bound to lose over Rs. 80 billion a year due to tax evasion by artificial toddy manufacturers and the ramifications to the national economy are more acute if the health cost is also taken into account.

“We have seen many instances of serious health problems that illicit brewers caused to the people. Artificial toddy is produced by mixing urea, ammonia, nickel cadmium of old batteries and sugar. This harmful brew is sold at liquor shops and used for manufacturing ‘coconut arrack’ and vinegar.

“Suppose we overlook tipplers who consume the toxic brew knowingly or unknowingly, what about innocent consumers who buy vinegar? In Sri Lankan food culture, vinegar is an integral part. Imagine the number of people who get ill because they consume vinegar made of artificial toddy,” the MP said.

“The artificial toddy industry is well-rooted in coastal areas in the south. If one checks the number of trees tapped and the number of liters of toddy being sold, it is a very simple calculation to understand how much artificial toddy is being consumed. Only around one and a half litres of toddy could be tapped from a single coconut palm. As per reports of coconut researchers, the amount could vary slightly due to factors such as climate, humidity and season. The amount being sold by license holders varies from the actual amount extracted from palms. A difference is in the region of 60,000-70,000 litres. So, it is obvious that toddy comes from other sources”, he noted.

There have been raids by police and STF but toddy businessmen continue to ply their trade because the police cannot take the culprits before courts as per Sections 49, 50 and 52 of the Excise Ordinance. They have to hand over the suspects and the equipment to excise officers, who most of the time do not produce the suspects in courts but release them after filing a Technical Crime Report (TCR), the parliamentarian further said.

“Under the TCR, the racketeers only have to pay a small sum by way of a composition fee. The TCR is actually one of the loopholes these businessmen get out so easily. I pointed out all these to the government. I hope Minister Cabraal will act as promised. I also pointed out to him that there are not only excise officers but some finance ministry officials who benefit from the artificial toddy business. I hope and pray that the minister will be able to remedy this situation,” Pathirana added.

President of the Nawa Sinhala Rawaya, Ven Magalkande Sudattha Thera said the illicit toddy industry is thriving despite isolated raids. The police and the STF conducted successful raids in many areas in the recent past. Thereafter, the police hand over the suspects and equipment to the Excise Department for legal action. Excise Department officials file a TCR and release them on a composition fee.

Many illicit toddy producers have licences for toddy tapping. So finding sugar, ammonia, yeast, batteries in toddy amounts to only a technical error; it becomes a technical crime if they suspect that the manufacturer had purposefully mixed them with toddy or produced toddy using them as ingredients. During a recent raid, the police found three bags containing 25 kilos of ammonia to be used to produce toddy. How could the government ensure public safety when poison is being sold in bottles in the name of toddy, the prelate asked.

President of the consumer watchdog National Movement for Consumer Rights Protection, Ranjith Withanage said that old mobile phone batteries were also being used in the fermentation process of artificial toddy.

He said a countrywide survey conducted by his organisation revealed that discarded mobile phone batteries and power banks and chemicals such as urea were used to produce artificial toddy.

 “We have information that such toddy is being sold to produce coconut arrack and vinegar.  Arrack and vinegar made from artificial toddy were sold in the market while those responsible for preventing consumers from such harmful products have done nothing so far to raid shops and places that sold them”, he asserted.

Withanage said that local arrack and vinegar made from artificial toddy have been identified as one of the main causes of chronic kidney diseases.

He further said the government loses over Rs 180 billion a year due to the illicit liquor and tobacco (Rs. 100 billion on illicit liquor and tobacco and Rs. 80 billion on illicit toddy).

“We expected the government to present budget proposals to counter the loss of revenue, but there was none”, he added.

Excise Department spokesman, Deputy Commissioner, Kapila Kumarasinghe said there were instances where toddy manufacturers were caught for using illegal methods to increase the volume of alcohol. Water, sugar, urea, yeast and salt are being used to get a high content of ammonia in toddy.

He said that toddy is being sold in taverns as fresh toddy and bottled toddy after pasteurizing so that they could be kept for one to two weeks. Toddy is also being sold for the production of vinegar. If toddy with additives are used to distill arrack, the machines extract only the alcohol and the additives are discarded as ‘spent-wash’. The distilling machines are calibrated only to extract alcohol, and not other elements in the raw materials.

In the most popular brands of arrack sold in the market, there is only three percent toddy and 97 percent water, ethanol and rectified spirits. Adding alien items during production is illegal,” he warned, adding that the Excise Department with its available resources is fighting hard not only against the artificial toddy industry but also other narcotics and drugs, he said.

Excise Commissioner General Bodaragama acknowledged there was a significant loss of excise revenue due to various tactics used by toddy manufacturers.

He said that there is a leakage of tax revenue but assured that he was certain that it could not be Rs. 80 billion.

State Minister of Money & Capital Market and State Enterprise Reforms Ajith Nivard Cabraal told The Sunday Island that Pathirana had raised this issue several times in Parliament and he had already instructed Secretary to the Ministry of Finance and the Excise Department officers to submit a comprehensive report to him on the matter.

The toddy industry extends from Kalutara, Gampaha, Puttalam, Badulla, Moneragala, Hambantota, Anuradhapura to the Northern and Eastern provinces. As at Dec. 31, 2019, there were 3,094 licensed toddy tappers and 32 licensed toddy producers in the country.

“There could be many more engaged in supportive services for their livelihood but we have no exact details on them”, he noted.

“Pathirana made constructive suggestions and we took note of them. We are thankful to his efforts and are determined to remedy the situation. I intend to study this matter first with my officials. I assure you that this would be studied properly and necessary action initiated”, the Minister assured.



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Pakistan Navy ship arrives in Colombo

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Pakistan Navy Ship (PNS) Taimur arrived, at the port of Colombo, on a formal visit, yesterday morning (12). The visiting ship was welcomed by the Sri Lanka Navy, in compliance with naval traditions.The 134m-long ship is commanded by Captain M. Yasir Tahir and it is manned by 169 as the ship’s complement.

The Commanding Officer of PNS Taimur is scheduled to call on Commander Western Naval Area, at the Western Naval Command Headquarters, today. The ship is expected to remain in the island, until 15th August, and the crew of the ship will take part in several programmes, organized by the Sri Lanka Navy, to promote cooperation and goodwill between the two navies.

PNS Taimur is also expected to conduct a naval exercise with the Sri Lanka Navy in western seas on its departure on 15th August.

Meanwhile, PNS Tughril, an identical warship belonging to the Pakistan Navy, arrived in Sri Lanka on an official visit on 13th December 2021 and conducted a successful naval exercise with SLNS Sindurala off the western coast on 16th December. Naval exercises of this nature with regional navies will enable each partner to overcome common maritime challenges in the future, through enhanced cooperation.

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Stalin reads riot act to govt. over proposal to allow schoolchildren to work part time

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By Rathindra Kuruwita

The Alliance of Trade Unions and Mass Organisations yesterday warned that the government’s decision to allow schoolchildren, between the ages of 16 and 20, to work part time, would have disastrous consequences.Addressing the media on 11 Aug., General Secretary of the Ceylon Teachers’ Union, Joseph Stalin, said that the government was planning to amend laws, allowing schoolchildren to work in the private sector for 20 hours a week.

“Now, this may look like a progressive idea. A lot of families are

struggling and if another family member can chip in, it would be a great help. I am sure a lot of children feel the same way. It is also true that there may be children who will find great jobs and horn their skills,” he said.However, these proposals have come at a time when education is in crisis and the schools are on the verge of collapse.

“During the last two and a half years, most children have learnt nothing. But children who go to elite schools are doing better. These schools have systems in place, but most others don’t. Children who do not go to tier one schools have suffered and most children who do not go to such elite schools will not find part time work that will prepare them for the jobs of the future,” he said. “It’s not easy to balance school work with vocation training, especially physically intensive work. Most people will drop out and social mobility will further stagnate. Fix the education system first and create a more level playing field,” Stalin said.

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Harsha: Will RW use Emergency to steamroller his economic reforms?

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By Saman Indrajith

SJB MP Harsha de Silva yesterday asked President Ranil Wickremesinghe whether the latter was planning to use Emergency powers to suppress the people who might oppose his economic reform agenda.

“It is being asked why the government wants to continue the State of Emergency. The anti-government protesters have gone home. There is no unrest. There are those who say that the President wants to keep the Emergency laws to carry out economic reforms. Does that mean the President will use these laws to scare people into submission if they do not accept his economic reforms? I don’t think people can be intimidated. I want the President to answer this question,” he said.

MP de Silva said that the government did not have public support and that it was obvious that the spectre of the Rajapaksas was haunting the government.

“I agree that Wickremesinghe was appointed constitutionally. We have to work within the Constitution. However, the 134 votes he received on 20 July were not realistic. They have managed to manipulate the Constitution, but the government doesn’t have the support of the people. The problem is can the government win the support of the people,” he said.The SJB lawmaker added that Sri Lanka needed to restructure its debt. However, the country had not even started the process.

“One of the consultants we hired, Lazard, says that we have to start with China because it is new to debt restructuring. But we have not done so. Not only that, we have in fact started a diplomatic issue with China. What’s the front page news today? Can this government solve this sensitive international issue? Can it carry out the necessary economic reforms?” he asked.

MP de Silva said that the government had to work with the people and that it had to be honest with them. The government needed to present a common programme on which an all party government could be established.

“In 2020, we said that the government was on the wrong path and that we needed to seek IMF assistance. The government didn’t listen. We need an all-party programme to go before the IMF and get a decent deal. Today, I present to Parliament an economic recovery plan we have prepared. When we decided to throw our weight behind SLPP MP Dullas Alahapperuma, I was entrusted with the task of making an economic plan. We have run it through experts too. I ask the MPs to look at this and suggest improvements.”

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