More bitter truths surface regarding sugar scam

• When the scam surfaced opposition parties charged that the sugar stocks of a certain businessman had been sold to Lanka Sathosa at the wholesale price of 120 rupees a kilo
• Even though the sugar tax was slashed, the consumer didn’t receive a benefit
• Lanka Sathosa had also suffered a loss of 102 million rupees due to this sugar scam
• 18 traders imported 101,527 metric tons of sugar sans licenses during the period when the duty on sugar was reduced 

The sugar scam amounting up to 16 billion rupees has again become a hot topic for discussion. Those involved in this scam were accused of evading paying government tax. Businessmen with close links to the government were accused of stealing public money. After the Covid, the price of sugar in the market increased several times. 

Against such a backdrop, the former government suddenly took steps to reduce the levy imposed on the import of sugar from 50 rupees to 25 cents per kilo with effect from October 10 2020. According to economic analysts the tax reduction is 900% 

Another incident that took place was the reduction of the fine imposed on import licenses from 5 to 2 percent by the Controller General of Imports and Exports. But the Auditor General stated in his report that the Import and Export Controller General does not have the powers to reduce the fines. Due to this reduction in fine the government had lost 433,120,147 rupees

A few sugar importers benefitted from this massive tax reduction. There was one particular businessman who benefited the most from this tax cut. He had the upper hand in this deal. He had stockpiled huge stocks of sugar surpassing all other businessmen. This businessman had paid the revised tax of 25 cents for those stocks. Under the guise of this tax concession he had large volumes of sugar imported from November 2020 to February 2021. When he finished storing this stock within 3 months, the government raised the sugar import tax to 40 rupees, according to Opposition sources in parliament.

The said businessman’s company profited largely through this while the sugar scam cost the state 16 billion rupees in terms of taxes. All these matters relating to tax were strongly criticised by the opposition. During this period sugar was sold at higher prices without offering any relief to the public. At that time Opposition parties charged that the sugar stocks of the said businessman had been sold to Lanka Sathosa at the wholesale price of 120 rupees. Much wanted information relating to this businessman surfaced after that. His name was mentioned in and outside parliament. The media also reported the name of this individual. Accordingly, the businessman was identified as Mohamed Sajad Mawzoon, the owner of Pyramid Wilmar Private Company. 

With the special statement made by the State Minister of Finance Ranjith Siyambalapitiya in Parliament, the sugar scam was back under the spotlight. Siyambalapitiya said that although the loss resulting from the sugar scam was about 16 billion rupees, only 30 percent of that can be recovered and it can be levied as income tax on sugar importers. 
He also said that under the present law, 24 percent can be collected as income tax from the companies concerned and that it is possible to increase that amount to 30 percent. Even though the sugar tax was slashed, the consumer didn’t receive a benefit. The Auditor General, in a report, pointed out that those who committed the tax fraud should be identified and that relief be given to consumers. According to the report, it is possible to recover the loss of revenue. 

According to the report, it is possible to recover the loss of revenue. However it is uncertain as to why the state minister is trying to obtain a 30 percent tax. If all the money cannot be recovered as per the powers of the Commissioner of Inland Revenue, the laws should be amended to help recover the loss, the opposition voiced in Parliament recently

However it is uncertain as to why the state minister is trying to obtain a 30 percent tax. If all the money cannot be recovered as per the powers of the Commissioner of Inland Revenue, the laws should be amended to help recover the loss, the opposition voiced in Parliament recently. But silence maintained by the minister and the government shows both parties are unwilling to listen to criticism. 

After the reduction of sugar tax the government lost about 16 billion rupees during a period of 4 months and 14 days. Its adverse effects are now visible. The data at that time confirmed that Lanka Sathosa had also suffered a loss of 102 million rupees due to this sugar scam. After reducing the tax a stock of 227,715 metric tons of sugar was brought to Sri Lanka out of which Pyramid Wilma Private Limited has imported 125,207 metric tons. 

The audit also revealed that it is 45 percent of the total amount of sugar imported. The company’s sugar imports had increased by 1222 percent when the tax was reduced. Thereby, the company got a tax benefit of 622,925,820 rupees. During that time, the other sugar importing companies had imported a quantity of sugar that did not even exceed ten percent of the total sugar import. That quantity was about 71,366 metric tons of sugar. According to this, Pyramid Wilmar Company owns the majority of the sugar supply in the current market. Meanwhile, other companies are importing sugar in small quantities. However, the audit has revealed that before the tax relief, Pyramid Wilma Company’s import of sugar stocks was at a very low percentage.

The Ministry of Finance has submitted a special report to the Parliament’s Public Finance Committee stating that the government had lost about 16 billion rupees in revenue due to this sugar tax scam. The report also pointed out that the total or part of the lost revenue belongs to a few people who import sugar into Sri Lanka. 18 traders imported 101,527 metric tons of sugar sans licenses during the sugar duty reduction period. Another incident that took place was the reduction of the fine imposed on import licenses from 5 to 2 percent by the Controller General of Imports and Exports. But the Auditor General stated in his report that the Import and Export Controller General does not have the powers to reduce the fines. Due to this reduction in fine the government had lost 433,120,147 rupees. 
According to the audit report, the importers had imported more sugar due to the reduction of this fine.

After reducing the tax a stock of 227,715 metric tons of sugar was brought to Sri Lanka out of which Pyramid Wilma Private Limited has imported 125,207 metric tons. The audit also revealed that it is 45 percent of the total amount of sugar imported. The company’s sugar imports had increased by 1222 percent when the tax was reduced

During that period, 59234 metric tons of brown sugar was imported. The audit report stated that the import of brown sugar has increased in an unusual manner after the tax reduction. Pyramid Wilmar Pvt Ltd has earned a profit of 378 million rupees per day through the tax relief.  Somehow, one exporter has increased the importation of sugar by about six percent. According to the report, the import of sugar has increased because there was no control price for sugar at that time. That is why the Import and Export Control Department introduced a licensing system to control the import of sugar. But because that system was not implemented properly, the import of sugar continued without a license.

Meanwhile, the Consumer Affairs Authority set a control price to regulate sugar prices in the market. But there was no sugar to be sold at that control price. There was no change in price. The importers had taken the advantage that should go to the consumer. The report also revealed that the CAA had neglected to investigate the matter. Also, during the tax reduction for sugar, Lanka Sathosa had 919.4 metric tons of sugar purchased at 125.41 rupees per kilo. But that stock of sugar was sold for eighty five rupees a kilo. As a result, Sathosa had incurred a loss of 37,159,974 rupees. Following the tax cut Sathosa had purchased 2050 metric tons of sugar spending 92,112 rupees. Sathosa purchased a kilo of sugar at 121.50 rupees and sold sugar at 85 rupees a kilo. The audit revealed that Sathosa had suffered a loss of 47,000,000 rupees.

The Daily Mirror inquired from the Inland Revenue Department to see whether it is possible to recover only 30 percent of the total lost revenue and about the legal situation associated with this issue. But there was no one to provide answers to our questions.
We also inquired from the Auditor General’s Department and a spokesperson there said that the Auditor General’s report shows that the government can recover all the lost taxes. “But I don’t know on what basis the minister made that statement. According to the report, all the money is recoverable. That is why the Auditor General stated that in the report. 
If it is not possible to recover the money, the report would not include such details. I do not know on what basis the minister made his statement,” the spokesperson added.