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ECONOMYNEXT – Sri Lanka’s mid night sugar tax controversy took a new turn Friday with the Trade Minister promising to deploy Consumer Affairs Authority (CAA) officials to monitor the stocks and enforce price controls.

Sri Lanka raised the import tax from 25 cents to 50 rupees on sugar overnight with effect from November 4, without a type of pre-parliamentary sovereign prerogative delegated to the minister in charge.

Sri Lanka’s ad-hoc tax policies have created more hardships for consumers as sellers have an undue advantage of choosing either to implement the government’s tax revision immediately or delay it.

When the government raises tax overnight, importers and traders immediately raise the price of existing stocks which were bought at a lower price to raise working capital to import the next stock.

However importers and traders maintain the same price when the government announces tax hike citing that the stocks were bought at a higher price.

“We found out some sugar sellers have been supplying less to the market to get a higher profit,” Trade Minister Nalin Fernando told reporters on Thursday (09) at a media briefing.

Soon after the tax hike, the government slapped price control over sugar to limit profits to sugar importers.

Sri Lanka’s CAA ordered a price control of 275 rupees on white sugar and 330 rupees on brown sugar per kilogram.

If they are in plastic packets, white sugar can be sold at 275 rupees and brown sugar at 350 rupees a kilo.

The government has found 12 out of 14 large sugar importers already have stocks and a recent 8,000-ton sugar shipment, which could earn the importers an exorbitant profit at the expense of consumers.

“I have already taken the amount of those stocks as well. From today onwards, I have deployed one Consumer Affairs Authority (CAA) official permanently at their warehouses to monitor them,” the Minister said.

“This Consumer Affairs Authority official will have to stay at the stores from 9 am to 5 pm every day and record how much they (importers) sold, to whom they sold and for which lorries they loaded sugar. They will have to send a report on all the movements to the main office.”

The latest tax hike came as the government is desperate to boost its revenue to prove its commitment to an International Monetary Fund (IMF) deal and the move expects to boost the government revenue by 27 billion rupees.

The Minister acknowledged that the move to stop traders taking undue advantage and preventing sugar being sold at higher price is a “difficult task”, even with CAA raids.

“I have deployed these CAA officials at all sugar warehouses until the current stocks are finished. So, they should supply at the controlled price,” he said.

“Even retail sugar sellers are hiding stocks to get a higher profit when the sugar price goes up. But, I have ordered to increase Consumer Affairs Authority raids island wide. This is a difficult task.” (Colombo/Nov 10/2023)

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