The Sri Lankan government’s tax revenue target for the first quarter of 2024 exceeded expectations by Rs. 47 billion. This is following two tax increases of 20% implemented in 2023.

Revenue Collection Exceeds Target for First Quarter by More Than Rs. 45 Billion

In 2023, the Sri Lankan government implemented two tax increases on alcohol products as part of its economic reform plan. This improvement in alcohol policy has yielded results beyond the government’s expectations.

New data show that the government’s revenue targets have been exceeded by about 6% in the first quarter alone.

According to the State Minister of Finance Ranjith Siyambalapitiya, the government expected to collect Rs. 4,106 in 2024. This aligns with the government’s target of matching at least 14% of GDP in state revenue.

In the first quarter of this year, the government collected Rs. 834 billion in tax revenue. The target had been collecting Rs. 787 billion. This is despite attempts of alcohol companies to evade paying the taxes owed to the public.

Rs. 834 Bn
Increase in state revenue in 1st quarter of 2024
This is a 6% increase compared to the forecasted state tax revenue for the period. The increase is augmented by the two alcohol tax increases of 20% that was enacted in 2023.

The government collects taxes through three institutions: Sri Lanka Customs, the Excise Department, and the Inland Revenue Department. The Excise Department collects alcohol taxes on behalf of the State.

Under International Monetary Fund-backed reforms, Sri Lanka has raised its value-added tax, imposed new taxes, and increased personal income taxes to boost revenue.

Alcohol companies attempt to cheat their way out of tax obligations

In late 2022, Movendi International reported about the suspension of alcohol licenses for five Sri Lankan alcohol companies. The Excise Department suspended the licenses of these companies for failing to settle the taxes they owed the government. The five companies lost their licenses on October 31, 2023, the date when the grace period to settle tax arrears ended.

The suspension of licenses prohibited these companies from producing and distributing their harmful products within the country. The companies resumed operations only after paying out the back taxes owed. These taxes are crucial in ensuring that the alcohol industry compensates, at least in part for the healthcare, social, and economic burden that their operations put on Sri Lankan society.

Evidence-based alcohol tax policies also have the potential of acting as a catalyst for economic development.

Experts and communities united in calls for better alcohol taxation

Alcohol taxation is the single most cost-effective alcohol policy solution to prevent and reduce alcohol harm. It helps reduce overall alcohol use and related harm, as well as high-risk alcohol use. Alcohol taxation does this by reducing alcohol affordability – which impacts high-risk alcohol users the most. The WHO Global Alcohol Strategy also recommends that Member States establish scientific taxation systems to prevent alcohol harm and related costs.

In addition to considering the alcohol content of the product, it should also be accompanied by an effective enforcement system. It also encourages countries to review prices regularly in relation to inflation and income levels and establish minimum prices where applicable.

The majority of the Sri Lankan public also supports alcohol taxation as a policy tool to prevent alcohol harm. Timely research conducted by the Alcohol and Drug Information Center (ADIC) and Vital Strategies as part of the RESET Alcohol Initiative provides a snapshot into how the public views alcohol harm and alcohol policy responses, including alcohol taxation.

The survey showed:

  • 97% of Sri Lankans believe that alcohol is a problem in the country. 
    • The largest concern is the link to domestic violence.
  • 64% of respondents don’t believe current laws provide sufficient protection against alcohol harm.
    • 39% of people say they have been exposed to alcohol advertising despite existing advertising bans.
Vast support for alcohol taxation
More than three quarters of respondents favour alcohol taxation, while 60% believe that the industry interferes with getting protective policies approved.
  • 75% of survey respondents believe that taxation is an effective way of reducing alcohol consumption and harm.

In April, 2024, a community of experts also used the platform provided by the Policy Dialogue on Alcohol Control for a Healthier Sri Lanka’ to call for a better alcohol taxation scheme.

The RESET Alcohol Initiative

RESET Alcohol is the result of a collaboration of six prominent global entities: Vital Strategies, which spearheads the initiative, Movendi International, the Johns Hopkins University, the Global Alcohol Policy Alliance, the NCD Alliance, and the World Health Organisation (WHO). The initiative is currently underway across seven countries in Latin America, Africa, and South-East Asia. The initiative is aimed at enhancing the public health policies to prevent alcohol harm. RESET Alcohol is supported by a $15 million philanthropic award, which is an important element in the global resources dedicated to alcohol prevention.

RESET Alcohol provides an important platform for global leaders, national governments, civil society groups, and research institutions to drive public health and alcohol policy. It focuses on developing and implementing evidence-based alcohol policies drawn from the WHO’s SAFER technical package.

A landmark study from May 2023 underlined the potential of alcohol taxation and the other alcohol policy best buys that RESET Alcohol promotes.

The study reviewed evidence put forth by a total of 36 studies published since January 2000. The greatest reduction in alcohol consumption was seen following the introduction of pricing policies, particularly for the most affordable alcohol. The researchers found that following the introduction of pricing policies, alcohol consumption reduced the most among low-income groups.

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Source Website: Sunday Island Online