Sugar scam costs Sri Lanka massive loss of Rs. 15.9 bln in taxes

Sri Lanka has incurred a massive loss of Rs. 15.9 billion in taxes as a result of the sugar scam which shocked the nation during the last few months following the tax reduction to 25 cents from Rs.50 per kg by the government for the benefit of consumers.

This was revealed by the Finance Ministry in a special report tabled at the Parliamentary Committee on Public Accounts on Tuesday.

According to this report, a small group of individuals have benefited by gaining a sum of Rs. 15.9 billion in total or a portion of it.

The report said the reduction of taxes on sugar did not benefit the public as a small group had control of prices in the market. “The Treasury lost almost Rs. 16 billion from the sugar tax reduction,” a senior official said.

He noted that there are serious concerns with regard to the allegations on importation of a large quantity of sugar ahead of reducing the taxes.

Sri Lanka sugar prices have been increased in unexpected proportions following the action of unscrupulous traders and some importers to hide their current stocks recently.

Several sugar importers and wholesale traders are holding on to their sugar stocks in bonded warehouses and private stores after the government slashed the commodity levy to 25 cents from Rs. 50 per kg recently, informed market sources said.

The Consumer Affairs Authority (CAA) of Sri Lanka fixed the maximum retail price for white sugar at Rs. 100/kg for non-packaged and Rs. 105/kg for packaged sugar. The maximum retail price for wholesale sugar was fixed at Rs. 92/kg.

It has been revealed that several billionaire businessmen in the sugar import sector and wholesale dealers have persuaded official authorities to increase the commodity levy to Rs. 40 once again and thereafter they were holding onto their stocks to gain maximum profits after the price hike.

The wholesale price of sugar in the Pettah market has increased to Rs.130 suddenly as a result of this action.   

"The landed cost of sugar in Sri Lanka was between Rs. 85-90/kg [after tax reduction] so there was still a margin to be made with the maximum retail price in place," the official said.

Sri Lanka has an estimated demand of 790,000 mt of white sugar for the current season, with a domestic production of 55,000 mt and expected imports of 565,000 mt, Finance Ministry Analytics data showed.

The tax on sugar was brought down from Rs. 50 per kg to 25 cents and then jacked to Rs.40 per kg. It was in the period between the tax rate of 25 cents and Rs.40 that unscrupulous sugar dealers imported quantities and sold after the sugar price rose with the tax rate rising to Rs. 40 per kg. (BG)