The government stands to lose Rs. 150 billion in annual excise income due to the fake stickers on liquor bottles.
Large numbers of bottles with fake stickers to claim quality of the liquor and payment of excise taxes have been found from several areas during ongoing raids by the Excise Department.
State minister of finance Ranjith Siyambalapitiya had already ordered the department to carry out a forensic test and submit a report within a day.
In the meantime, the CID has been asked to take over the investigation.
Reliable sources said these steps are unlikely to have an effect on the racket due to several reasons.
Outdated, weak technology
One of them is that the safety sticker in question has been printed with the use of an outdated, very primary and undeveloped technology.
Experts believe that replacing them with fakes is easy, and further note the Indian company given the task of the printing has been blacklisted in several countries.
According to experts, it should be investigated immediately if the fake stickers are being issued to liquor manufacturers or a third party, or if a company wanting to defraud taxes is fraudulently taking the stickers out of the printing company.
The tender for the printing of the sticker was awarded during the presidency of Gotabaya Rajapaksa, under Mahinda Rajapaksa as the finance minister.
Previous attempts, since 2016, to introduce such a sticker failed despite a decision taken by the finance ministry to do so.
Finance ministers of the good governance regime Ravi Karunanayake and the late Mangala Samaraweera had sought expert advice on the matter, while many companies came forward with bids for the tender.
Immediately after Gotabaya Rajapaksa took office, a tender was called without carrying out any preliminary study and awarded under very basic conditions with the price getting the main consideration.
The Indian company that set an original rate of Rs. 5.00 per sticker, later amended it to Rs. 3.00 each.
According to reliable sources, the son of a rich businessman with political connections had mediated to get the tender awarded to the Indian company, also with the involvement of a politician in the alcohol trade and aided by a young family member of the rulers at the time. Assisting them in the racket were a former top excise official and another from the finance ministry.
The term of the tender ends very soon, but attempts are afoot to retain the Indian company without any tender calling, with the abovementioned official still in the finance ministry could be aiding and abetting it.
Therefore, preventing fake stickers from reaching the market is no simple task due to the involvement of corrupt politicians and officials, said the sources.
A vast majority of these liquor bottles with fake stickers have come through the liquor business owned by the politician already mentioned.
The fake stickers are being mostly used on counterfeit liquor bottles similar to the product by a popular brand of arrack in high demand.
This is causing grave injustice to the producers who duly pay their taxes and creates an uneven competition to leave them disheartened and excise revenue of the state gets thinner.
Economists as well as market analysts call for the digitalization of the entire process involved in this safety sticker for liquor bottles after making a close study of the similar mechanisms in countries like New Zealand and Australia. They also want the government to understand the futility of same levels of taxes being imposed on low-alcohol beer products and liquors with higher alcohol contents.
Economic difficulties and high taxes force most consumers to turn to illicit liquor, which will make the government spend much more on public health than what it earns as excise duty.
A similar situation prevails in the cigarette and Beedi sales, with the reversal of the ratio of 60 per cent to 40 pc between the two.
Beedi has a higher health risk than cigarettes and also adversely impacts state revenue with losses that could be as high as Rs. 200 billion, they stress.
CID to probe fake stickers on liquor bottles
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