Rs. 15.9 b sugar tax cut is “revenue foregone”, not fraud: Cabraal

• Says tax reduction done to benefit public and no fraud committed
• Govt. revenue losses due to tax reductions since 2020 amount to Rs. 235 b
• Tax reductions done conscious of revenue losses but meant to benefit publicRs. 283 b saved from interest rate cuts

By Chandani Kirinde

State Minister of Money and Capital Market and State Enterprise Reforms Ajith Nivard Cabraal

State Minister of Money and Capital Market and State Enterprise Reforms Ajith Nivard Cabraal yesterday told Parliament that Rs. 15.9 billion in revenue was forgone due to the reduction in the

Special Commodity Levy on sugar from Rs. 50 to Rs. 0.25 last October but the measure was taken for the benefit of the public.

“The levy was reduced in order to reduce the price of sugar so as to benefit the public. 

The Government was aware it would lead to a revenue loss. It was not a fraud. We knew what we were doing,” Cabraal said in a special statement to the House.

He said that along with the reduction on the sugar levy, the Government had reduced taxes on several essential items and the foregone revenue amounted to Rs. 235 billion in total since 2020.

He said the previous Government used to increase taxes and show that revenue had gone up but that was not the policy of this Government. “When State revenue goes up by way of hiking taxes, then the wallets of people get empty. The Opposition must understand our policies,” he said.

Answering Opposition allegations that the public had not received the benefit of the tax cuts on sugar, Cabraal said price reductions were not transmitted immediately unlike price increases but by now the people were getting the benefit of the price reduction.

Cabraal gave details of the revenue losses incurred due to cuts in taxes since last year. These include cuts in taxes on import of big onions (Rs. 5.2 billion), dhal (Rs. 400 million), canned fish (Rs. 172 million), diesel (Rs. 6.5 billion) and petrol (Rs. 11.6 billion).

The other revenue losses incurred were from the reduction in the Nation Building Tax (Rs. 52 billion), Value Added Tax (Rs. 34 billion), tax reduction for vehicle permit holders (Rs. 20 billion) and interest rate change (Rs. 88 billion), totalling Rs. 235 billion.

Cabraal however said that the Government had managed to save Rs. 283 billion as a result of cutting interest rates.

“A government changes its economic policy from time to time. The previous Government increased VAT and we reduced it. When it comes to the reduction of import duty for sugar from Rs. 50 to Rs. 0.25, it was done to provide a concession to the public. Import duty of sugar and a number of other essential commodities were reduced to provide concessions to the people,” he added.

Cabraal said that the Government had also allocated Rs. 50 billion to purchase the COVID-19 vaccine.