Despite the several social and economic hindrance to the illegal alcohol industry growth, the country’s tax policy in fact encourages it which causes the legal, regulated and responsible sector to shrink, charged a top official of a listed distiller.
According to the Distilleries Company of Sri Lanka PLC (DCSL) Chairman/Managing Director, Harry Jayawardena, the sharp rise in tax on alcoholic beverages is disproportionate to the increase in income level of daily wage earners, fishermen and plantation workers and thereby compels them to shift their demand towards illicit liquor.
“In this context, I would like to raise a ‘red flag’ on the emerging trend of legal entities understating their output, in order to pay lower taxes and thereby placing lower priced products on to the market,” he cautioned.
He further pointed out that the paint industry and cologne industry are increasingly becoming a façade for the importation of spirits in order to pass through customs.
“This is also becoming a front for the illegal manufacture and sale of liquor, which naturally comes on the shelves cheaper than those that are heavily taxed,” Jayawardena noted.
He raised further concerns over the overall adverse impact on society, the economy at large and government revenue, by the excessive taxation on the legal alcohol industry.
Meanwhile Jayawardena observed that although DCSL strictly adheres to the National Authority on Tobacco and Alcohol Act, certain industry players avoid the Act and resort to various subtle, tactical and innovative campaigns.
“Yet, quite often authorities turn a deaf ear and a blind eye to such actions,” he charged.
He emphasized the need for regulators to enforce the law and contain the widespread corruption that fuels such illicit business activities, in order to ensure a fair playing field within the local market for law-abiding businesses.
“There is much negative attention on our business, whereas taxes that go unpaid and the ill-effects of the thriving illicit alcohol industry continue to go unheeded,” Jayawardena stated in his annual report.
According to him, the thriving underground industry should be the prime focus of authorities in their endeavor to address alcohol abuse and its resultant social problems.