The sharp rise in tax on alcoholic beverages is disproportionate to the increase in income level of daily wage earners, fishermen and plantation workers, thereby compelling them to shift their demand towards illicit liquor, according to the Distilleries ompany of Sri Lanka (DCSL) annual report for 2012/13. “This is a notable change that has taken [...]

The Sundaytimes Sri Lanka

High taxes, unethical business practices shift demand towards illicit liquor – Harry J

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The sharp rise in tax on alcoholic beverages is disproportionate to the increase in income level of daily wage earners, fishermen and plantation workers, thereby compelling them to shift their demand towards illicit liquor, according to the Distilleries ompany of Sri Lanka (DCSL) annual report for 2012/13.

“This is a notable change that has taken place in consumer demand, entirely due to issues related to affordability. Therefore, I take this opportunity to place on record, as I have done previously, my concerns regarding the overall adverse impact on society, the economy at large and the Government revenue, due to excessive taxation on the legal alcohol industry,” Harry Jayawardena, Chairman DCSL has said in his statement.

“As an ethical business that is responsible to the state and its people, and accountable for its action, we strictly adhere to the NATA Act and follow this Act to the very letter,” he has said, adding that DCSL doesn’t directly or indirectly induce young people into alcoholism, and never, under any circumstance, target children. “Any form of promotional campaign undermines the NATA Act. However, certain industry players circumvent the Act and resort to various subtle, tactical and innovative campaigns. Yet, quite often authorities turn a deaf ear and a blind eye to such actions,” Mr. Jayawardena has asserted.

DCSL and Periceyl have contributed Rs. 40 billion in taxes to the state during the year under review. “Yet, there is much negative attention focused upon our business, whereas taxes that go unpaid and the ill-effects of the thriving illicit alcohol industry continue to go unheeded,” Mr. Jayawardena has further said.

During the said financial year the gross revenue of the group increased to Rs. 65.8 billion, while the company recorded Rs. 51.5 billion. Group post-tax profi for the year was Rs. 5.3 billion, while the company’s normalized profit was at Rs. 3.2 billion (without the Intra-group capital gain of Rs. 3.7 billion included in the company’s results). With this capital gain included, the company’s post-tax profit was Rs. 6.9 billion.

Mr. Jayawardena has said that the uncertainties surrounding the status of DCSL subsidiary Pelwatte Sugar Industries continued to weigh upon the company during the financial year.

“Following the expropriation of the factory by the state, the ownership of this property remains unresolved. The company has not changed its advocated position of being the legal owner of the property since the occurrence of this unfortunate incident, and as such, we have communicated our views to the Treasury. However, as a precautionary measure, the company has also lodged an official claim with the Compensation Tribunal appointed by the state. We hope that some clarity regarding this untoward situation would be forthcoming within the new financial year.”

Meanwhile gross turnover of the beverage sector at DCSL increased by 6.8 per cent to Rs. 56.5 billion during the said financial year.

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