- Saturation could lead to oversupply and tax evasion
By Darshana Abayasingha
The Government is considering four new applications for licences to produce alcoholic products.
Reports have emerged that two applications are from existing large-scale hard liquor manufacturers to expand their portfolio, whilst others are fresh applications to the market.
The applications have now been received by the Finance Ministry for consideration and evaluation work has commenced. Details surrounding the applications were also brought to light by SJB MP Buddhika Pathirana in the House recently. Sri Lanka currently has 27 licenced alcoholic beverage licences in operation, with the Excise Department in 2019 earning Rs. 115 billion from taxes on alcohol, despite a market dominated by illicit.
With 27 producers in the market, new licences will add further product into an already-burgeoning market that boasts one of the highest per capita consumption of alcohol annually. These new applications come despite a Government-backed program to reduce intoxication via controlling consumption.
The additional volume could lead to a saturation of products and compel some producers to look for ways to evade tax to remain profitable, industry experts observed. Prices on alcohol products in Sri Lanka are administered by the State.
In the event producers look to evade taxes by resorting to bribery and other measures, as has been observed before, there will be erosion of tax income to the Government alongside serious consequences to law and order, it was observed.