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Sugar tax scam takes shocking turn: Parliament directive to recover Rs 16 bn disregarded

The controversy surrounding the Sri Lankan Finance Ministry and the Inland Revenue Department's (IRD) failure to recover taxes from a significant sugar tax scam in 2020 has escalated. The Department of Trade and Investment Policy, under the Finance Ministry, claimed there was no loss of revenue from the scam. This statement was made despite allegations that the government lost over Rs 16 billion due to a reduction in the Special Commodity Levy (SCL) on sugar imports, a move that benefited several major sugar importers at the consumers' expense. The reduction of SCL from Rs 50 to 25 cents per kg in October 2020 was criticized for allowing importers to exploit consumers without corresponding benefits.

The Auditor General recommended a criminal investigation into the scam, which occurred during Mahinda Rajapaksa's tenure as Finance Minister. Despite these findings, the IRD has been passive in making recoveries from the implicated sugar importers. Questions about the scam's investigation and efforts to recoup losses were dismissed by the Finance Ministry's Information Officer, citing no estimated losses. This stance persists even amid inquiries into a potential subsequent sugar tax scam in November following a government change, which has yet to be proven fraudulent by ongoing investigations.

The Public Finance Commission criticized the Finance Ministry for not preventing exploitation by importers and questioned the reversal of the SCL in November, aimed at collecting Rs 30 billion from consumers. The Ministry's lack of response to inquiries about IMF recommendations on revenue collection and consultations with the Attorney General about addressing corruption highlights a significant gap in accountability and transparency within the government's handling of the sugar tax controversy.