Treasury recommends to cancel liquor license of distributors who have not paid tax

The Treasury informed a Parliament Oversight Committee this week that it had recommended the Excise Department to cancel the liquor license of distributors who have not paid tax.

The matter came before the Committee of Public Finance meeting held on Wednesday where three Orders under the Excise (Special Provisions) Act, as detailed in Gazette No. 2364/36, Gazette No. 2361/44, and Gazette No. 2364/35 were considered. 

These Orders, effective from January 1, 2024, amend business hours for liquor-licensed establishments and revise excise duties on various tabocco and alcoholic products.  The approval came following extensive discussions during a meeting of the Committee on Public Finance, chaired by Dr Harsha de Silva held recently (24).

During the session, the committee examined the effectiveness of recent tax increases on tobacco and liquor, aimed at discouraging consumption and boosting government revenue. 

The attention was drawn to the Laffer curve in taxation where the Committee observed a decline in government revenue over the past two months compared to the same period last year, linking it to higher taxes that have led to increased smuggling and the adoption of alternative measures, the Committee said in a statement. 

They recommended a thorough analysis of the inflation index to guide tax adjustments and research into existing tax systems to prevent revenue loss.

The Committee also raised concerns about the failure of the Excise Department to address issues such as non-payment of taxes and the use of fake stickers by liquor license holders, despite instructions from the Ministry of Finance. 

Expressing dissatisfaction over the lack of action, the Committee emphasized the urgency of implementing recommendations to safeguard the government revenue.

Questions were also raised regarding the Ministry of Finance’s decision-making process on taxing essential goods, given inefficiencies in revenue collection from liquor license holders. 

It was revealed that the Excise Department continues to operate manually, hindering efficient revenue collection and enforcement against illegal activities. 

The Committee also emphasized the need for digitalization to address these challenges, expressing surprise at delays attributed to cost concerns. They urged immediate measures to solicit quotations for digital software to prevent corruption within the Excise Department.