Making legal liquor unaffordable to the poor

Two days ago, Excise Department Commissioner General M.J. Gunasiri was quoted to have remarked that illicit liquor consumption within the country, specifically ‘kasippu,’ has surged significantly from 19% to 30% consequent to the exorbitant hike in the excise tax early this year. Last May, State Minister of Finance Ranjith Siyambalapitiya revealed in Parliament that the production of the most commonly used 180 ml alcohol bottles (popularly referred to as kaaley bothal), which is consumed by lower income earners, decreased by about 14.5% to 15 million from 2022 to 2023.

The increase in excise taxes took place subsequent to the substantial rise in the cost of living during 2022, coupled with the debilitating economic crisis. The enormous surge in the price of legal liquor has made the commodity beyond the reach of the underprivileged, converting lawful spirits into a luxury which only the rich and middle-class could consume. Eradicating the fondness of the poor and downtrodden towards alcohol is a complicated exercise and it is not something which can be done in a straightforward way by preaching sermons or through anti-alcohol campaigns of temperance movements.

There are various sociological and anthropological dimensions associated with the regular intake of alcohol by the low-income segments of the society. Drinking is considered one of the few avenues of leisure and recreation available to the underprivileged communities who undergo unending adversities. For hardworking labourers who are employed in fields like plantations, mines, and construction, it is the famous kaaley arrack bottle which provides the much needed solace after their gruelling daily work routines. 

As a result of legal alcohol becoming highly expensive, the working class is tempted to shift towards moonshine like kasippu, which is highly detrimental towards health as it contains the extremely harmful ingredient Methyl Alcohol. There have been instances of people succumbing to death after drinking illicit liquor. Last May, the media reported that four individuals in Dambulla died after consuming moonshine. There have also been incidents of people becoming blind subsequent to drinking illicit liquor. 

In the context of aforementioned calamities, a sensible taxation policy is required towards liquor. Apart from causing adverse repercussions to the health of the deprived, taxing legal spirits to the fullest has contributed towards a reduction in the production of legal alcohol as well. In 2022, 43.3 million litres of alcohol were produced. However, during 2023, the production of alcohol dropped by 8.2% to 35.1 million litres. Furthermore, the total liquor production declined by 11.1% to 10.7 million absolute litres in the first four months of 2024 compared to 12.1 million absolute litres in the same period of 2023.

The difficulty of accessing spirits in remote areas too is compelling people in villages to go in search of hooch. The Excise Commissioner was reported to have mentioned that no liquor permits had been issued by the Government in certain districts. In these districts, people have to travel at least 30 to 40 kilometres to find a Government-permitted liquor store. Yet, according to the commissioner, individuals selling illicit liquor continue to operate without restriction in these areas.

Numerous social issues are prevalent among low-income families due to high consumption of liquor. Family breakups, poverty, and violence against women are some of the unfavourable conditions observed among poor households whose income earners spend disproportionately on alcohol. A thoughtful strategy is needed to rehabilitate such communities and it cannot be done overnight.

A considerable increase in illicit liquor production could adversely affect the Government’s tax income. If the excise revenue from legal spirits declines substantially, the Government would be forced to hike rates of VAT on essential items, resulting in public anger.

Therefore, a balanced and rational policy (including taxation) on liquor is necessary in consideration of the sensitive social and economic complexities associated with the longstanding human habit.