Budget 2018 presents toast to effective long-term policy

BY Lal Gunatunga

The coalition government’s fourth budget presentation and the first by incumbent Finance Minister Mangala Samaraweera, was a clear and progressive step to liberalise Sri Lanka’s economy, and provides impetus for growth and sustainability in several sectors. 

The proposals to revive agricultural sectors via supportive tax and protection measures, and the helping hand extended to the Small and Medium Enterprise sector via financing schemes targeting women entrepreneurs, exports, IT and tea small holders will provide much needed vigor to flagging sections. 

Long-term policy

What was most encouraging was the effort made in the budget to set long-term policy in a number of areas which included transportation, excise and the conservation of the environment. 

It was high-time Sri Lanka made better and concerted efforts to address the issue of environment conservation and sustainability, and measures such as the carbon tax will not only boost revenue but will also generate awareness amongst the public on reducing the carbon footprint. Once again, sound implementation of all its policies is key and this is where successive governments have faltered and would provide a proving ground for the incumbent as well. 

The government and the minister must be commended for its bold and decisive move with respect to its proposal on excise on the alcohol industry. With decades of experience in the plantation sector and subsequent engagement with humanitarian agencies, I have had firsthand opportunity to observe the destruction wreaked by kasippu and spirits abuse amongst all segments of society, in particular, the lower income segments. 

Consumers in Sri Lanka are drawn towards harmful spirits consumption due to their low cost – resulting from a disproportionate system of tax that had rendered safer softer products more expensive. The proposal by the Finance Minister to impose excise tax based on the volume of alcohol and type of liquor will help us balance consumption, and push Sri Lanka’s alcohol policy on par with that of the developed world. 

In developed markets an effective system of volume-based pricing promotes the consumption of softer safer alcohols such as beer and wine, plus, effective systems of governance to combat the abuse of spirits. 

Perennial problem

In Sri Lanka, kasippu has been a perennial problem, and as confirmed by the World Health Organization, over 45 percent of total consumption in the country is illicit. 

Furthermore, in a previous article using published government data, we established that Sri Lanka boasts the uncanny record of an average 12 raids on illicit liquor outlets every hour over the past five years. These records by established global and government institutions underscore the urgency of effective policy and action to curb the growth of illicit, which has grown unabated for decades. 
Accordingly, the minister’s proposal to impose tax on non-potable alcohol at Rs. 15 per kilogramme and on raw materials used to produce ethanol will provide an additional framework to discourage and disrupt the production of illicit liquor. The loss incurred by government in terms of revenue due to the illegal liquor trade in Sri Lanka is well over Rs. 40 billion annually, plus, the health and social costs of the trade heap further inestimable burdens. 

 

 

The loss incurred by government in terms of revenue due to the illegal liquor trade in Sri Lanka is well over Rs. 40 billion annually

Much has been said and written about the imposition of the Special Provision Tax on canned beer products two years ago. This was an unnecessary measure, and an obstacle to a country espousing tourist-friendly policy. The removal of this Special Provision Tax on canned beer will make products more appealing and accessible especially for tourists, which will add value to the industry in the longer-term. 

In addition, it could also help remove local stigmas with respect the transportation of alcoholic beverages in traditional bottled form as consumers are often seen scurrying to conceal purchased products in their clothing or other forms. 

Anti-alcohol lobby

There is no denying the existence and the length and breadth of Sri Lanka’s kasippu or illicit alcohol industry. As alluded to in a previous report, it is remarkable that the country’s anti-alcohol lobby has never accepted and acted against the illicit menace despite its very visible presence and official findings. The illicit industry has thrived with no opposition from the anti-alcohol lobby, as it is in effect a ‘dark market’ operated by criminal elements often with political patronage – elements that lobby groups and NGOs lack the courage and will to oppose.

With these measures the government and the Finance Minister are laying the foundation for an effective alcohol policy to emerge in Sri Lanka. One that will encourage consumers to shift from harmful illicit and spirits consumption to safer products. Implementation is key, and the process would take time and the concentrated efforts with particular attention required to educate enforcement authorities and the trade.

Educating consumers

Educating consumers is also extremely important to prevent or minimize the irresponsible consumption of alcohol. Such efforts have yielded exceptional results in developed markets by successfully reducing harm and bringing down the per capita consumption of alcohol. It is important that we establish and realise that this proposal by the government is not a measure to increase the consumption of alcohol in the country, but an application and endeavor to better manage it and reduce alcohol-related harm nationally.This is an effective step by the government todesign constructive long-term policy that offers better safeguards to consumer health and state revenues. 

 

 

Much has been said and written about the imposition of the Special Provision Tax on canned beer products two years ago

Once again, to reiterate, there will never be a world free of alcohol as it is an integral part of cultures and human interaction. We must desist from baseless action to deny its existence in society. What must be done is promote its safe and responsible consumption, and minimize every possible aspect of harm. Education and effective policy holds the key to a better future, and this budget has taken a bold and progressive step in that direction. 

(Lionel Gunatunga is a retired superintendent of government and private plantations with over 30 years of experience in the Central and Southern Provinces, engaged in plantation administration and operations. He can be reached at [email protected])