Finance Ministry allows liquor company to operate without paying taxes: Ways and Means Committee

By Shamindra Ferdinando

Chairman of the Committee on Ways and Means Patali Champika Ranawaka on Tuesday (12) alleged that the Finance Ministry had allowed the operation of a distillery in spite of that company failing to pay taxes.

The former minister said that the country lost millions for want of political will to recover what that company owed the Treasury.

Addressing the media at the Thalakotuwa office of Eksath Janaraja Peramuna, its leader Ranawaka questioned the failure on the part of the Finance Ministry to cancel the license issued to that company. In spite of specific instructions issued in that regard, the Finance Ministry and the Excise Department were yet to take expected action. Lawmaker Ranawaka estimated the weekly loss of revenue at approximately Rs 100 mn.

Pointing out that President Ranil Wickremesinghe held the finance portfolio, MP Ranawaka said that SLPPers Shehan Semasinghe and Ranjith Siyambalapitiya functioned as State Finance Ministers. They should pay immediate attention to the issue at hand, the former JHU stalwart said.

Responding to The Island queries, MP Ranawaka said that parliamentary committees that had been tasked with streamlining the operations didn’t receive the cooperation of relevant government institutions responsible for revenue collection.

The ex-minister also found fault with two major state banks for withholding data pertaining to non-performing loans. However, the National Savings Bank (NSB) has complied with the instructions issued by Parliament, MP Ranawaka said, drawing the attention of the Finance Ministry to the developing situation.

The bone of contention is whether certain influential persons undermined their efforts to streamline revenue collection at a time the people were up in arms over increasing of the Value-Added Tax (VAT) from 15% to 18% and imposing it on nearly 100 items that had been hitherto exempted from the same.

MP Ranawaka said that the IMF has told the Wickremesinghe-Rajapaksa government to achieve revenue targets that weren’t feasible at all. In comparison with 2022, the IMF wanted the government to increase revenue to 6.5% of the Gross Domestic Product (GDP) by 2025, the MP said, declaring that no country experiencing a severe difficult economic crisis could achieve such targets. According to him, the expected revenue was approximately Rs 2,000 bn whereas the government intended to collect an additional Rs 600 bn by way of VAT.

But certain companies and individuals had been allowed to operate outside the law and their sordid operations were being facilitated, the ex-minister said, pointing out the inordinate delay in amending what he called the tax appeal process. The Parliament as the institution accountable for public finance should be held responsible for this situation, MP Ranawaka said.

For want of a clear system in place, profit-making state enterprises refrained from paying relevant taxes to the Treasury. Referring to the latest available statistics, MP Ranawaka questioned why the CPC that had earned a profit of Rs 88 bn was yet to be taxed. The ex-minister said that though 52 state enterprises obtained a profit of Rs 303 bn they weren’t taxed.

The CEB made quite significant profits in November and this month but the government seemed not interested in taxing that institution, he said. The parliamentarian said that the possibility of some 100 rural hospitals facing closure for want of proper attention at every level should be examined against the backdrop of successive governments failing to streamline revenue collection.

Commenting on the sharp increase in the number of Sri Lankans migrating to Australia and other countries, particularly for education, the MP said that it was a very heavy burden on the economy.

Alleging that the government lacked a proper strategy to meet the daunting challenges, the former minister said that if 18% VAT was slapped on fuel with effect from January 01, 2024 a liter of petrol (92 Octane) would go up by Rs 38 and diesel by Rs 34.