Tax stamps for local liquor taste foul, alleges Pathirana in Parliament

SJB MP Buddhika Pathirana on Tuesday said in Parliament officials at the Ministry of Finance and the Department of Excise would cause over Rs. 1.2 billion in losses to State coffers by misleading the Minister of Finance and State Minister of Money and Capital Markets with regard to tax stamps on alcohol products. 

Pathirana claimed that if tax stamps were introduced to locally-manufactured alcohol products, over 32 million stamps needed to be affixed every month. These will be procured from an Indian company that is blacklisted in India and many other countries due to irregularities committed, sometimes in collusion with officials. 

He pointed out that stamps were introduced in 2016 to indicate tax paid for locally-manufactured products, but was scrapped due to operational difficulties. Officials are now once again recommending affixing stamps at a cost of Rs. 2 per unit, when previously this had only cost 25 cents per unit. Pathirana also queried if accepted tender procedure had been followed in this process. 

The SJB MP pointed out that senior officials at the Kenyan arm of the company in question had been arrested for malpractice and similar incidents and investigations were currently underway in relation to their conduct in Sudan and Liberia. 

The Daily FT spoke to several local alcohol manufacturers who stated the Government had previously indicated the option of digital stamps, which were preferred by larger producers due to ease of application and costs for high-speed operations and efficiency. The cost of digital stamps is reportedly less that 20 cents per unit. 

They added that whilst the Government through its agencies would procure physical stamps, the costs of the stamps would likely be passed on to the industry. However, with the private sector – which includes listed companies – not allowed to engage their procurement processes, and the State placing this responsibility on an individual or department, there is a high possibility of malpractice and unnecessary costs, they charged. 

Tax stamps are popular in developed markets for products such as high-alcohol spirits due to volumes and greater focus by contrabandists.