Five coconut oil importers allegedly evade Rs. 9.7 b in taxes: Marikkar

SJB MP S.M. Marikkar

• Claims Govt. has failed to resolve issue since 1 January 2024
• Suspects unrefined coconut oil may contain poisonous aflatoxin
• Urges Govt. to expedite legal process to recover due taxes
• Economic Development Deputy Minister Nishantha Jayaweera agrees it is unfair for companies to evade taxes
• Says IRD has taken legal measures against tax evaders

Samagi Jana Balawegaya (SJB) MP S.M. Marikkar yesterday alleged in Parliament that five coconut oil importing companies had evaded Rs. 9.7 billion in taxes over the past two and a half years, raising questions over why only a handful of companies continued to avoid paying taxes.

Marikkar said he had raised the question with the Prime Minister, twice with Trade and Commerce Minister Wasantha Samarasinghe, twice with Finance Deputy Minister Dr. Anil Jayantha Fernando, and again yesterday, making it the sixth time he had raised the issue while claiming that it had remained unresolved since 1 January 2024.

He said the Prime Minister had assured Parliament last year that the taxes would be recovered, but claimed that by the end of July this year, the five companies had continued importing coconut oil without paying taxes amounting to Rs. 9.7 billion.

Marikkar said the companies had earlier sought tax concessions from the previous Government, but the Inland Revenue Department (IRD) had refused to grant the request.

He questioned why one company continued to pay taxes while the other companies had been allowed to avoid payment by repeatedly filing appeals.

“The Gazette clearly states that coconut oil production is liable to pay an 18% Value Added Tax (VAT) and a 2.5% Social Security Contribution Levy (SSCL). That is why the other companies pay these taxes. We see people being arrested even for minor tax evasion, but there is reasonable suspicion as to why only these five companies are getting away with it,” he said.

He said there was suspicion that companies claiming exemptions may have imported crude coconut oil without refining it, resulting in coconut oil containing poisonous aflatoxin entering the market.

Marikkar urged the Government to expedite the legal process and recover the outstanding taxes without further delay.

Responding to the allegations, Deputy Finance, Planning and Economic Development Minister Nishantha Jayaweera said the IRD had already determined that the companies were liable to pay VAT and SSCL, but the tax recovery process had been delayed due to legal appeals filed by the companies.

“Only one company has paid the taxes in full, while the remaining companies have argued that they are not engaged in production activities and are therefore not liable for VAT and SSCL. The IRD rejected those claims and issued tax assessments after determining that the production and sale of coconut oil constitute a production process liable for both taxes,” he said.

Jayaweera said the IRD had clearly stated that the production and sale of coconut oil were subjected to VAT and SSCL.

Explaining that taxpayers had the legal right to challenge tax assessments, he said one of the companies had already lodged an appeal and, under the law, the IRD could not recover the taxes until the appeal process had been concluded.

Jayaweera said taxpayers could subsequently appeal to the Tax Appeals Commission, the Court of Appeal, and ultimately the Supreme Court, resulting in delays in recovering the outstanding taxes.

Jayaweera emphasised that the Government would not interfere with the tax administration process and insisted that the IRD remained committed to recovering the taxes.

“We do not need to grant tax concessions to any particular company. As MP Marikkar pointed out, it is clearly unfair when one company pays taxes while others evade them. The IRD has already taken the maximum measures possible within the existing legal framework,” he said. (SS)