- CID relaunches investigation
- Initial complaint filed with CID on 21 July 2022
- New complaint lodged on 9 Oct.
Two years after the first complaint was lodged with the Criminal Investigation Department (CID) regarding an alleged sugar tax fraud, CID Director SSP Mangala Dehideniya has requested the handing over of personal mobile phone and official permanent phone numbers of the President’s secretaries up to 13 October 2022.
Accordingly, the CID has requested that the mobile numbers be handed over to the Financial and Commercial Crime Investigation Division of the CID as the department seeks to gather more evidence and clarify the roles of key individuals involved in the alleged fraud.
The first complaint regarding the alleged sugar tax fraud was lodged on 21 July 2022, prompting initial investigations.
The second complaint was lodged under the new Anura Kumara Dissanayake Government on 9 October.
When contacted by The Sunday Morning, a high-profile official attached to the CID who wished to remain anonymous said that while investigations had been conducted for some time, some had been put on hold.
However, he added that a fresh probe had been launched to conduct a comprehensive investigation following the new complaint.
“We should investigate whether the official responsible for the revision of the tax had received any sort of benefit from the respective supplier. That’s why the CID requested a probe on mobile phones of the previous President’s secretaries up to 13 October 2022,” the official said.
In October 2020, the Government eliminated import duty on several essential items, including sugar, aiming to reduce prices to Rs. 85 per kg. However, prices did not decrease, prompting calls for the Government to establish wholesale and retail prices for sugar.
On 10 November 2020, the Consumer Affairs Authority (CAA) set the Maximum Retail Price (MRP) for white sugar at Rs. 90 per kg. Despite this, consumers found that sugar was not available at the set prices.
A Special Audit Report by the National Audit Office (NAO) revealed that by July 2021, the market price of sugar had skyrocketed to Rs. 130.52 and later to Rs. 133.24. This led to the reimposition of controlled prices on 2 September 2021.
The report highlighted that the tax reduction had caused significant financial losses to the Government while benefiting a few major importers, who had imported 277,715 MT of sugar from October 2020 to February 2021. The Government had been compelled to forgo an estimated Rs. 13.82 billion in tax revenue due to the duty reduction.
Among the major importers, one company had imported 125,207 MT, representing 45% of total imports during that period, enjoying a tax benefit of approximately Rs. 6.23 billion. Other importers had not significantly increased their imports.
Despite efforts to provide relief through tax reductions, the market price of sugar continued to rise, with no Government inquiry into the alleged sugar scam.
Following tax hikes in November 2021, a sugar shortage occurred, which some allege was artificially created. The CAA initially set new MRPs but later revoked them due to the market shortage after the Special Commodity Levy (SCL) on imported sugar was raised.
Sri Lanka’s annual sugar production is approximately 52,308 MT, accounting for only 9% of total consumption, with the majority of sugar imported from countries like India, Turkey, China, and Vietnam. The private sector exclusively manages sugar imports in the country.
Again, on 2 November 2023 the SCL imposed on imported sugar was increased by order of the Finance Minister. Accordingly, the SCL of 25 LKR cents imposed per kilogramme of imported sugar was increased to Rs. 50.
The prices were revised for the first time after the sudden reduction of the taxes in 2020.