Sugar tax scam: National Audit Office estimates Rs 16.7 bn revenue loss

By Shamindra Ferdinando

State Minister of Finance, Economic Stabilisation and National Policies Ranjith Siyambalapitiya has asked for a report from the Inland revenue Department on the income tax returns of sugar importers who have allegedly benefited from an unprecedented reduction of duty on a kilo of sugar on 13 Oct., 2020.

The gazette pertaining to the duty reduction (Special Commodity Levy) from Rs 50 per kilo to 25 cents was issued by the Finance Ministry during the tenure of the then Prime Minister Mahinda Rajapaksa, who also served as the Finance Minister. S. R. Attygalle served as the Finance Secretary at the time.

State Minister Siyambalapitiya revealed his decision to call for a report during a visit to the Inland Revenue head office on Thursday (22).The Ministry spokesperson quoted Minister Siyambalapitiya as having told Inland Revenue Department officials that losses caused by the duty reduction couldn’t be recovered by re-imposing the duty even if a fraud had been perpetrated in the process. The State Minister was further quoted as having said that it wouldn’t be an easy task to punish those responsible for

the duty reduction. Those responsible could claim that their intention was to bring down the price of sugar, the SLFPer has said.The State Minister has intervened in the sugar tax scam in the wake of the National Audit Office recommending the recovery of revenue losses from those sugar importers. The National Audit Office has conducted a special audit to examine whether consumers benefited at all as a result of the sharp reduction of sugar tax.

The special audit revealed that within four months of reducing the tax (14th October 2020 to 8th February 2021) the cash-strapped government was deprived of tax revenue of a whopping Rs. 16.763 Billion.The audit investigation named one of the main sugar importers recorded a massive profit of some 1,222%.

The report underscored that the tax reduction did not provide relief to the people, but greatly benefited the importers and traders.The former Chairman of the Committee on Public Finance SLPP MP Anura Priyadarshana Yapa declared that consumers didn’t benefit from the duty reduction.

The country has lost several hundred thousand jobs to Covid-19. The impact of the agrochemical ban on agriculture, the mismanagement of the exchange rate, a highly accommodative monetary policy, and the use of foreign exchange reserves for debt repayment thwarted the country’s ability to recover from the initial shock of COVID-19, an ILO study titled, ‘The labour market implications of Sri Lanka’s multiple crises,‘ has revealed.

“These policy decisions generated multiple crises which impacted on businesses, workers, and their families, manifesting in shortages of essential consumer goods including food, fuel, power, raw materials, and capital equipment on the one hand, and the disruption of key public services, such as education and health, on the other. The fiscal bind and looming debt crisis have also left Sri Lanka very little room to manoeuvre. The economic crises have, in turn, generated political instability and further constrained timely decision-making about how to deal with the crisis,” the ILO report said.

The multiple crises have intensified long-standing worrisome features of the labour market: they have expanded unemployment, widened gender gaps in labour force participation, and given rise to job insecurity, uncertainty, and hardship, it said.

“Sri Lanka lost more than 200,000 jobs to the pandemic between the fourth quarter 2019 and the second quarter 2021. The employment share of the informal sector increased because formal sector employment contracted more sharply. Although there was some recovery, during the second half of 2021, extensive job losse, among employers, augured ill for the vigorous regeneration of jobs,” the study reveals.

The report added that the pandemic also impacted the skills development sector. Efforts to provide education and training online were constrained, mainly due to problems of infrastructure access, particularly outside of the Western Province. Enrolment and completion of TVET courses in 2020, relative to 2019, declined by 50 and 57 percent respectively. However, the imposition of power cuts, in 2022, are likely to have disrupted even these limited measures.

“The pandemic also saw the emergence of the new poor — those who fell into poverty because of the pandemic – among the more educated and employed in industry and service sectors, particularly in urban areas and Western Province, the latter which accounted for the largest share of the new poor. These negative developments would have worsened in 2022 as the economic crises intensified,” it said.

Sri Lanka is currently in a full-blown debt and balance-of-payments crisis, leading to massive shortages of essentials and severe disruption to economic activity. As the crisis continues to deteriorate and is likely to lead to a deep impact on the labour market, which will require careful monitoring and analysis over the months to come, the ILO said. The severity of the crisis means that policy-makers need to grasp the nettle of structural reforms needed for recovery and job-rich growth, which will require carefully balancing macroeconomic stabilization with longer-term goals of creating decent, sustainable, and productive employment. The report suggests eight areas of policy intervention for the short, medium and long term.

They are; addressing current macroeconomic crisis through fiscal consolidation and debt restructuring, plus improved fiscal space, restoring investor confidence, reformulating investment, industry, and trade policies to support export-led growth, technological transformation, productive efficiency and job creation, especially for SMEs, increasing R&D and infrastructure investments with a clear focus on 3IR and 4IR technologies, promoting demand-driven skills development and adjustment to a post-COVID-19 economy, including remedial education/training, creating a social dialogue and legislative reform to support flexible arrangements while protecting workers, promoting policies that foster women’s entry into the labour market and support other hard-hit groups, and expanding access to adequate social protection to workers and families (including institutional reforms).

The report also said that Sri Lanka needs to work on improving learning outcomes. Even the TVET sector performs no better than the general education system, the ILO said. According to a 2018 ADB study, a sizable proportion of TVET graduates leave training programmes, without the skills that employers require. Tracer studies on the employability of TVET graduates reveal a high rate of unemployment among TVET graduates who had been trained for employment in even the fast-growing ICT, construction, tourism, and light engineering subsectors.

The Supreme Court, yesterday, directed the Controller General of Immigration and Emigration to prevent Don Shamantha Jude Anthony Jayamaha, who was convicted for the murder of a person at Royal Park Apartment Complex, in 2005, from leaving the country, without Court permission.The Court made this decision when taking a case filed by Women and Media Collective seeking the suspension of the Presidential Pardon, granted by former President Maithripala Sirisena to Jayamaha.

The Court also granted leave to proceed with this petition for violating Article 12(1) of the constitution.A three-judge-bench comprising Justices Priyantha Jayawardena, Shiran Goonaratne and Mahinda Samayawardena fixed the petition for argument on 30 March 2023. Previously the Court allowed the petitioners to add former President Maithripala Sirisena as a respondent since he no longer has presidential immunity.

Women and Media Collective had named Attorney General, Jude Anthony Jayamaha, Commissioner General of Prisons, Controller General of Immigration and Emigration, Inspector General of Police, Justice Minister, President of Bar Association of Sri Lanka, as respondents. The petitioners also want the Court to issue guidelines governing the process of granting Presidential pardons.

Jayamaha was indicted at the High Court by Attorney-General for committing the murder of Yvonne Jonsson, on or about 01 July 2005. On 28 July, 2006, the High Court sentenced Jayamaha for 12 years of rigorous imprisonment, and a fine of Rs. 300,000. The Attorney General then filed a case in the Court of Appeal stating that the punishment was inadequate. The Court of Appeal sentenced Jayamaha to death. On 9 November, 2019, Jayamaha was granted a presidential pardon by Maithripala Sirisena during his last week in office.