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New tax likely to drive small-scale brewers out of business

24 February 2015 06:16 am - 0     - {{hitsCtrl.values.hits}}


By Chandeepa Wettasinghe
The government is attempting to create an oligopolistic market dominated by a handful of companies in alcohol production by implementing the ad-hoc Rs.200 million monthly tax, which will drive small-scale producers out of business, rendering over 4,000 unemployed.

“Out of the 28 manufactories, only three or four can afford to pay the proposed amount of Rs.200 million a month. The average payment by the rest of the companies, as of now, is around Rs.20 million per month,” a collection of the small-scale alcoholic manufacturers said in a statement.

The tax could result in the whole market being controlled by a handful of companies that could manipulate the prices. “The result is a loss of confidence in the rule of law. The very nature of rule of law is predictability. With this proposal, the rule of law is deliberately violated in order to further enrich two to four business giants to become richer by depriving 4,000 people of their livelihood,” they said.

They stated that the tax was based on Finance Minister Ravi Karunanayake’s suspicions that small-scale manufacturers are involved in revenue manipulations.

“…creates a perception that all small manufactories are revenue manipulators and the big shots never resort to those things. On the other hand, the biggest frauds in respect of bribery and corruption in Sri Lanka have taken place with the participation of the big guns in industries.” They asked Karunanayake to rectify government processes if such infractions exist, as excise officers are stationed at factories oversee every aspect of production, storage and distribution.
They displayed repugnance towards such ad-hoc as well as the retrospective taxes implemented in the interim budget.

Recently Policy Planning and Economic Affairs Deputy Minister Dr. Harsha de Silva too stated that government intervention almost always fails.

In a separate scenario, Karunanayake had said that the reduction of taxes on wheat flour was to provide citizens with a greater set of alternatives to choose from. The reduction of alcohol manufacturers seems to go against this ideology.

However, a set of eminent economists recently said the mismatching policies reflected in the interim budget were a result of the ideological clashes between the united government.   


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