Counterfeit liquor bottle stickers: Excise boss responds

Excise Commissioner General MJ Gunasiri says that there is no other industry which can match the magnitude of frauds and corruption as the liquor industry.

“There are reasons for that. For example, the actual cost of a bottle of liquor priced at Rs 2,500 is around Rs 600-700. The balance is taxes payable to the government. Imagine the profit of a liquor producer if he could sell his product for the present market price without paying the due taxes.

“Every single bottle priced at Rs 2,500 would fetch over Rs 1,800 to that producer. There had been a time when the liquor producers were selling their products through the networks of bars and restaurants without paying taxes. They bribed excise officers who maintained that network.

“Former Finance Minister Mangala Samaraweera wanted to dismantle this network and get the due tax revenue to the Treasury. For that purpose, he introduced the fool-proof sticker project which was given cabinet approval in 2017. It was implemented in 2019 but the stickers could be affixed only on foreign liquor bottles owing to various obstacles thrown by excise officers and businessmen. The project was fully implemented starting from Jan 3, this year.

Gunasiri said there was a history of liquor producers cheating the government since colonial times. “Tax evading in this manner is a centuries old problem as State Finance Minister Ranjith Siyambalapitiya recently said at the Annual General Meeting of the Sri Lanka Excise Officers’ Association, in Colombo.

“The minister explained how the century-old practice of tax evasion by liquor producers by submitting false figures continued. Do not mix-up this untaxed liquor production with distilling moonshine by villagers in shrub jungles and near streams.

“The untaxed liquor production is done by rich businessmen in three-piece suits. They have liquor producing licences and submit false figures. They pay taxes only for the figures they maintain in their books and thereby cheat tax collectors. They produce much more liquor than the amounts permitted by the permits they hold.

“This is a century-old problem. The British, who controlled the Maritime Provinces, received around 7.6 percent of their total revenue from excise taxes and duties. In 1810, the British government had received revenue of 268,700 Rix-dollars from the Maritime Provinces under their control. Of that amount, 20,500 Rix-dollars were from excise taxes.

“The actual excise revenue should be more than this, as per the then Revenue Commissioner. The then British Revenue Commissioner too had stated that local liquor producers produced much more than the amount they stated in their books and cheated the government. It is with this century-old problem that we are fighting,” Gunasiri said.

Asked to comment on the recent allegations on supposedly fool-proof stickers, he said: There are 25 distilleries in the country and of them two produces beer while the rest produces hard liquor. Among these companies the large-scale producers such as DCSL and Ceylon Brewery produces around 40,000- 60,000 bottles per hour. There were no machines to fix stickers on bottles at such speed. Later we imported machines for that purpose but because of COVID-19 lockdowns and Aragalaya disruptions it took time to install them.

Asked to comment on allegations against employing Madras Security Printers Pvt Ltd (MSP) which is said to be an internationally blacklisted company, Gunasiri said that the Excise Department did not have a role in selecting the company to print stickers. “It is primarily the task of the Finance Ministry who calls for tenders and selects the company. The Excise Department is only the implementing agency.

“MSP is said to have submitted the lowest bid. It had been selected after two tender called in 2017. As per the contract with the ministry, MSP has to supply 1,000 stickers for UDS 5.59. I assumed duties on Dec 15, 2020 and I checked the allegations.. The black-listed allegation was found fake by the Finance Ministry as documents to prove that had been submitted through the Indian High Commission.

“A black listed company is not entitled to compete for a tender. When MSP was selected several parties had gone before court challenging the award. Later the plaintiffs themselves withdrew their action as they could not prove it.”

Commenting on recent allegations made in Parliament and elsewhere against excise officers working hand-in-glove with producers to fix counterfeit stickers on liquor bottles, Gunasiri said that there had been instances that may give credibility to such allegations.

“Many distilleries had been amassing enormous undue profit by using artificial toddy or ethanol to produce liquor and then selling them through their own liquor shops. This surely had been done with the connivance of the excise officers. There are 1,689 excise officers in the department and I do not think that anyone could give a blanket certificate that all those officers are not corrupt.

“In the same way none could say that there is no way of introducing counterfeit stickers. I can vouch that 98 percent of stickers and digital codes on the liquor bottles are genuine and consumers could buy them without fear. I leave a margin of two percent for any possibility for wrong doings.

“I state that with the present system, we have ensured 98 percent of due excise revenue is now collected. For this year the target set for us is Rs.180 billion. We have been able to collect Rs 150 billion. During this period from Jan 03, this year to now the production has increased by 11 percent and excise revenue by 19 percent. As at now, QR codes could be checked by any consumer by using a QR code scanning app.

“This is a task which is easier said than done. At the time I assumed duties in 2020, the excise revenue was at Rs 121 billion. In 2015, the revenue was at Rs 115 billion. It shows that during the five year period from 2015 to 2020, the revenue had increased only by six billion rupees. I increased the revenue by Rs. 19 billion to total Rs 140 billion in 2021.

“The task was not easy because I stopped issuing ethanol to many suspected buyers who got ethanol in the guise of producing sanitizers, surgical spirit and incense sticks and later sold stocks to liquor manufacturers. There was huge opposition. I was threatened with death. Yet we worked with determination to dismantle the networks of ethanol importers, liquor producers, those who produce ethanol from artificial toddy, distributors, middlemen, corrupt officers and sellers.”

Asked to comment on consumers failing to read the QR Code on stickers affixed on bottles, the Commissioner said that a sticker has three features, namely, overt, covert and forensic. “We introduced this project of fixing the stickers without the required equipment because the political leadership was insisting on implementing it.

“At the start some codes could not be entered into our system. There had been instances of finding it difficult to read them through QR scanning apps in mobile phones. Now this technical glitch has been sorted out. Any consumer who has a problem can contact us and complain so that we could follow-up.

“There are 58 excise units deployed for this purpose with sophisticated equipment and they are able to check and take action. There are allegations by various parties. We did not have complaints from the large scale liquor producers. At the moment the DCSL produces 55 percent of liquor, beer producers 26 percent, and three other companies 10 percent while the rest of producers amount to only seven percent.

“The biggest opposition came from that seven per cent. It is they who are actually responsible for the media and political interest with regard to this issue,” the Commissioner General said.

“We are entrusted with three main tasks – to earn revenue for the government, to prevent the improper use of illegal liquor, dangerous drugs and psychotropic substance abuse and to regulate the tobacco and liquor manufacturing industry. The excise revenue surpasses 11 percent of public revenue. In regulatory functions we still operate understaffed. It needs around 1,600 excise officers and we have a shortage of around 325 officers,” he said.