Finance Minister says no 100% tax waiver given to Lion

Finance Minister Ravi Karunanayake yesterday defended tax concessions given to beer company Lion Brewery after floods in May, rejecting allegations that it had caused an estimated Rs. 6 billion loss to the State..

 “There is no truth in the reports that were spread that this manufacturing company has been given concession for imports which would making a revenue loss of Rs. 6 billion to the State,” he told media. 

Karunanayake also stressed that the same concession was given to the Coca-Cola Company that was also in the vicinity of Lion Brewery and affected by floods, insisting that the tax waiver was to protect local producers. However, both Coca-Cola and Lion Brewery were insured and the insurance covers loss of revenue experienced due to suspended production, independent analysts have pointed out. 

“The manufacturing plant and machineries of the M/s Lion Brewery Company at Biyagama was completely damaged due to the recent flood in the area. This company which pays excise and other levies of over Rs. 25 billion annually to the Government had made a request to the Treasury for a tax concession for up to a period of three months until the new plant and machineries are installed for it to commence its normal production,” a statement released by the Ministry following the news conference said.

It went on to explain that Lion was manufacturing beer locally which was subject to an excise duty of Rs. 190 per litre for alcohol volume less than 5% and Rs. 315 per litre for alcohol volume more than 5%. Their annual production exceeds 106 million litres and the amount of taxes paid to the Treasury in 2015 was Rs. 25.7 billion.

“Since their manufacturing plant was fully destroyed they were unable to manufacture beer locally and they could not afford to import and sell the goods at the current market price given the fact that the import duties alone exceed the market price. The company had made a request for a waiver on excise duty and other levies to import a consignment required for a period of three months. As of now the all inclusive levies for the import of beer exceeds Rs. 700 per litre in addition to the CIF cost of Rs. 100 per litre.”

“Accordingly, the import cost will exceed the market price, compelling the company to give up the production. This will also make revenue loss to the Government to the tune of over Rs. 5 billion within the period of three months if the company is unable to maintain its market share,” the statement argued.

“Therefore considering all these facets, the Government in order to match the market price, permitted the company to import beer, required for a period of three months and impose taxes and other levies equal to that of locally manufactured beer at the point of importation instead of import taxes and other levies. Therefore there is no truth in the news to the effect that the company has been given import concessions and a loss of revenue incurred to the Government.”