Small retail liquor business hit by high taxation
Despite regulatory and operational issues and high taxes, small retail liquor businesses are finding ways to survive and thrive in the face of adversity amidst non- constant policy on liquor production and marketing.
According to Finance Ministry sources, there are currently 4910 licensed liquor shops and of them 1100 are retailers, 1,567 hoteliers and 554 restaurateurs while the Excise Department has issued licences for 368 wine and beer outlets, as well as, 200 toddy taverns.
The present fee for renewal varies from Rs. 4,800 to Rs. 24,000 depending on the size of the business, small or large.
Obtaining and renewing liquor licences, stamp duty and high taxation were some of the main critical and crucial issues currently confronting the industry, a spokesman of the Sri Lanka Liquor Licensees Association said.
Despite these difficulties, smaller retail businesses are finding ways to survive and thrive in the face of adversity, he pointed out. Any person can obtain a liquor license by following the terms and conditions imposed by the Excise Department, the Ministry of Finance announced.
The prevailing 106 year-old archaic Excise Ordinance of 1913 will be modernised as it was no longer suitable to facilitate and regulate modern businesses.
As the regulator, the Department of Excise has not taken any initiative to change the Ordinance due to lack of capability or for other reason resulting in loss of revenue to the Government.
The outdated Ordinance and its implications have been highlighted by the leading manufacturers over the years but no action has been taken by the department resulting in a poor state of affairs in this industry at present.
The Association has urged the government to enact the bill to repeal 40 per cent corporate income tax on the retail sale of liquor as liquor shop owners cannot bear it.
This bill has been devised and submitted to parliament but it was not enacted by the previous regime before the presidential elections.
This tax has been proposed to large scale liquor manufacturers but not for all liquor licencees, a spokesman of the Association said adding that even some of their members found it difficult to pay 8 per cent VAT.
The price of arrack and imported hard liquor could increase as the new liquor taxes are based on the alcohol strength, he said.
The relevant gazette notification has already been issued and the tax increase would affect brandy, gin, rum, tequila, vodka, and whisky, as well as other spirits, containing more alcohol percentage.
The rate structure of liquor license fee has been simplified with effect from January 2018 and the issuance of new liquor license will also be simplified to promote tourism.
The previous government has proposed limiting the number of liquor licenses to three per person with licenses up for renewal annually through an open tender process.
It has planned to double license fees, pending implementation of the tendering process. The proposals also include a one-off special levy of Rs. 250,000 on each tavern/liquor sales outlet