The Inland Revenue Department (IRD) is to collect taxes from sugar importers who had profited during the ‘sugar scam’ and is to submit a report on the status of the matter to the Committee on Public Finance (COPF), The Sunday Morning learns.
Speaking to The Sunday Morning, IRD Commissioner General W.A.S. Chandrasekara said the IRD was responsible for taxing any additional profits that would have been incurred by importers during the period in which the ‘sugar scam’ occurred.
“We have completed much of the work related to this and we have a little more to do. Our responsibility is to tax their profit – we cannot investigate wrongdoing on their part as that is not our mandate. We have already taxed some importers and we have to do so for a few more. I have requested a report on this and we will be handing that over to COPF soon,” she said.
In October 2020, the then Gotabaya Rajapaksa-led administration reduced the Special Commodity Levy imposed on one kilogramme of sugar to Rs. 0.25 from Rs. 50.
A subsequent Auditor General’s report on the matter noted that this decision had resulted in a loss of Rs. 16,763 million in tax revenue by February 2021 while benefits of the reduced tax had not been passed down to the consumer.
At a COPF meeting held last week, the committee had expressed its displeasure at the Ministry of Finance and the IRD’s failure to collect foregone taxes from importers implicated in the scam.
“They came to us to obtain approval for the increase in the sugar tax and we asked them how much they were expecting to collect from the new sugar tax. They said Rs. 30 billion. Then we told them that there was a report from the Auditor General that showed that when they removed the tax in 2020, the revenue that was not received by the Treasury for the first 12 months was Rs. 16 billion. There was obvious wrongdoing indicated in the Auditor General’s report. The Government continued to tell us that it would collect these taxes. Finally it said that it could not collect these taxes and that it would impose a 30% income tax on the additional revenue,” COPF Chairman Dr. Harsha de Silva told The Sunday Morning.
“They [corporations] got a massive windfall. It is very clear that they made an enormous profit. The State hasn’t collected the foregone taxes but it has now increased the duty on sugar, which imposes new taxes on the people. To me, that sounds very inequitable. They couldn’t give us an answer on whether the foregone taxes were collected and if so, how much was collected. We have given them one week to get back to us with the information,” he further said.
On 4 November 2023, the Government again raised the import tax on a kilogramme of sugar from Rs 0.25 to Rs. 50 through a gazette issued overnight.
Reports from the ‘sugar scam’ period show that one trader with alleged connections to the former Government had imported an unusually large volume of sugar and sold the stocks at a rate higher than the Maximum Retail Price (MRP) at the time.
The audit report reveals that nine major importers had enjoyed the benefit of the tax reduction while Pyramid Wilmar Ltd., in particular, had imported 125,207 MT or 45% of white sugar to Sri Lanka from 14 October 2020 to 28 February 2021.
“Accordingly, the imported quantity of the said company had increased by about 1,222% and it was observed that it had enjoyed a tax benefit of Rs. 6,229,025,820 on that basis at the time of paying taxes,” revealed the report.