Excise duty collection enhances to give big boost to revenue kitty
Sri Lankan government facing a cash crunch for implementing its budgetary programmes will be focused on collecting maximum revenue from excise duty much more than the budget estimate this year.
The Finance Ministry has issued directives to revenue collection authorities including the Excise Department, Sri Lanka Customs and Inland Revenue Department to double their efforts and motivate tax collection officials to collect at least 30 per cent of total tax revenue in 2019, Treasury sources said.
Treasury officials have pointed out that revenue from excise duty is a sizable source of funds that has helped the government tackle the fiscal deficit and also increase revenue collection.
The strong financial ability of the tobacco and liquor sector, and the fact that both industries are used by the government to bridge its fiscal deficit were implemented during the previous Rajapaksa regime.
These efforts have continued as part of the policy of the present government, which is also promoting a complete tobacco cultivation ban by 2020.
Upward price revisions made by liquor production companies for both soft and hard alcohol as a result of the excise duty hike is expected to result in a downward trend in overall consumption, especially in the legal alcohol sector.
This will bring down the expected tax revenue from the sales of soft and hard alcohol making it difficult for tax officials to meet the set revenue target, they said.
Linkages of excise duty revisions to annual inflation and GDP growth is likely to result in more predictability in excise duty revisions between soft and hard liquor in the long run, a senior Treasury official told the Business Times.
The Ministry has planned to gain additional revenue between Rs. 20-25 billion as a result of increasing excise duty on liquor.
Parliament recently passed the Excise (Amendment) Bill with new amendments including a decision to introduce a sticker for every bottle of arrack that was produced legally.
According to Ministry sources this initiative would lead to a reduction in illicit liquor from hitting the market while increasing Government revenue through excise duty.
Senior officials of the Excise Department pointed out at a recent meeting that there was no point in blaming the officers or the department for the loss in the revenue due to economic difficulties.
However a top official of the Ministry has severely reprimanded excise officers blaming them for their inefficiency in tax collection at the meeting publicly, a senior Excise officer said.
Excise Department officials have brought to the notice of the Ministry official that poor and middle class people tend to consume illicit liquor such as moonshine as they cannot afford the present increased price for liquor including arrack.
Revenue from Excise duty continued to be the leading contributor to the government tax revenue, accounting for 28.3 per cent of total tax revenue in 2018.
However, revenue collected from Excise duty as a percentage of GDP declined to 3.4 per cent in 2018, compared 3.5 per cent in 2017, official data showed.
In nominal terms, revenue from Excise duty increased moderately by 3.2 per cent to Rs. 484 billion in 2018, compared to Rs. 470 billion collected in 2017 as a result of the increase in the revenue collected from Excise duty on motor vehicles, tobacco, cigarettes and liquor.
Revenue collected from Excise duty on petroleum products declined by 10.4 per cent to Rs. 66.3 billion in 2018.
Revenue from Excise duty on motor vehicles increased by 7.6 per cent to Rs. 204.1 billion in 2018 from Rs. 189.7 billion in 2017.
Revenue from tobacco and cigarettes increased by 7.3 per cent to Rs. 92.2 billion in 2018, compared to Rs. 86 billion in 2017 as a result of the increased duty on cigarettes with length more than 72 mm, Ministry statistics revealed.
Meanwhile, revenue from Excise duty on other products such as sugar-sweetened beverages, plastic resin and palm oil fatty acids increased by 26.4 per cent to Rs. 7.7 billion in 2018 from Rs. 6.1 billion in 2017.
However, revenue from petroleum products declined by 10.4 per cent to Rs. 66.3 billion in 2018 from Rs. 74 billion in 2017 due to the auto fuels effective from May 2018.
The reduction of importation of diesel together with the revision of duty rate on diesel from Rs. 13 per litre to Rs. 6.00 per litre in the latter part of 2018 also contributed to this performance.
Revenue generated from Excise duty on liquor remained nearly unchanged in 2018 to the tune of Rs. 114 billion due to the continuation of the existing tax structure in 2018 amidst the increase in malt liquor production in 2018.