By: Staff Writer
October 20, Colombo (LNW): The Criminal Investigation Department (CID) has reopened the investigation into a massive sugar tax fraud that allegedly took place during the regime of former President Gotabaya Rajapaksa.
The scam, which reportedly involved manipulating import taxation in 2021, resulted in losses amounting to millions of rupees. The investigation was ordered to resume by the current President, Anura Kumara Dissanayake, following his government’s commitment to addressing this case.
The initial complaint regarding the sugar tax fraud was lodged on 21 July 2022, and the investigation started soon after. A second complaint was filed under President Dissanayake’s administration on 9 October 2023, leading to a renewed and more comprehensive investigation.
CID Director SSP Mangala Dehideniya has recently asked for the personal and official phone numbers of the President’s secretaries up to 13 October 2022, to be handed over to the Financial and Commercial Crime Investigation Division of the CID. This request aims to gather additional evidence to clarify the involvement of key individuals in the alleged fraud.
According to a high-profile CID official, who spoke to The Sunday Morning on condition of anonymity, investigations into the scam had been ongoing but faced delays.
However, a fresh probe has been launched to conduct a thorough investigation following the new complaint. The focus is to determine whether officials responsible for revising the tax rates had received any benefits from the suppliers involved.
The controversy began in October 2020 when the government eliminated import duties on several essential items, including sugar, with the intention of lowering the price to Rs. 85 per kg. Despite this move, sugar prices in the market did not drop as expected, leading to public pressure on the government to regulate wholesale and retail sugar prices.
Subsequently, the Consumer Affairs Authority (CAA) set the Maximum Retail Price (MRP) for white sugar at Rs. 90 per kg on 10 November 2020, but sugar remained unavailable at that price.
A Special Audit Report by the National Audit Office (NAO) revealed that by July 2021, sugar prices had soared to Rs. 130.52, and later to Rs. 133.24, prompting the government to reimpose price controls in September 2021.
The report highlighted that the tax reduction had caused significant financial losses to the government while benefiting a few major importers.
During the period from October 2020 to February 2021, a total of 277,715 metric tons of sugar was imported, with one company alone importing 45% of that amount, enjoying a tax benefit of around Rs. 6.23 billion.
Despite the intended relief through tax reductions, the market price of sugar continued to rise, with no government action to address the alleged sugar scam. In November 2021, tax hikes led to a sugar shortage, which some speculated was artificially created.
The CAA’s efforts to regulate prices were short-lived due to the ongoing market issues after the Special Commodity Levy (SCL) on imported sugar was raised.
Sri Lanka’s annual sugar production accounts for only 9% of its total consumption, with the majority of sugar being imported. The private sector manages sugar imports from countries like India, Turkey, China, and Vietnam.
Recently, on 2 November 2023, the Finance Minister ordered an increase in the SCL on imported sugar from 25 LKR cents per kilogram to Rs. 50, marking the first price revision since the tax reductions in 2020.
The reopening of the investigation signals a renewed focus by the government to identify the individuals responsible for the manipulation of sugar import taxes and to address the economic losses suffered due to the scam.
