By:Staff WriterColombo (LNW): Having the highest annual revenue target in 2023 of Rs.217 billion in history, the Department of Excise has experienced a tax revenue drop of 12.2%, to Rs. 25.1 billion in the first two months this year from Rs. 28.6 billion in revenue during the same period last year.
This was recorded despite a 20% increase in liquor tax. Compared to the income received during the first two months of the previous year.
In accordance with the annual revenue target of Rs.217 billion for the year 2023, which is the highest in the department’s history, the Excise tax revenue has dropped by 35% during January and February.
Department’s spokesperson, Excise Commissioner Kapila Kumarasinghe said several reasons would have affected this figure, including three recent price hikes of alcoholic beverages, owing to the excessive expenses on raw materials and also increasing of the Excise tax imposed by the government.
The decrease in the excise revenue, he said, was not due to a drop in the liquor consumption. Instead, the sale of illicit liquor had increased, he said
Finance State Minister Ranjith Siyambalapitiya had recently told Parliament that the consumption of illicit liquor had increased by 300 percent in Sri Lanka quoting WHO survey reports.
He noted that despite projections the Government would fall short of its excise revenue target by 30% there will be revision to the tax on alcohol products.
Siyambalapitiya told the house that following the price increase in January with new excise tax by over 20%, excise revenue from alcohol sales had dropped 7.4%. in March, which is usually a high volume month, had seen a dip in production this year of almost 40%.
He also noted that whilst it is good to reduce alcohol consumption, it has been observed that consumers have turned to cheaper illegal alternatives, and therefore a discussion has begun on finding ways to tackle this problem, without reducing prices.
He noted that in the current situation the Government has lost revenue, but consumers continue to drink unregulated products that can pose further burdens to the economy.
The Minister said prices of all goods have increased according to inflation and the Government has no intention to provide any exceptions to the alcohol industry.
Sri Lanka will hike taxes on alcohol and tobacco taxes again in June 2023, and will slap drinkers and smokers with taxes linked to inflation from January 2024, according to intentions declared in an International Monetary Fund program.
“The first increase was implemented on January 1 for tobacco and on January 3 for alcohol; the second increase to be implemented before the end of June 2023,” the IMF program said.
Sri Lanka will then move to “automatic indexation of exercises to inflation” from January 01, 2024. Sri Lanka plans to raise tax revenues to 15 percent of GDP by 2025.