Local breweries last week said that beer sales had dropped by 51 percent from November to January this year compared to the corresponding period a year before.

Analysts stated that the high tax imposed on soft liquor had increased the consumption of hard liquor and moonshine.

Overall sales of soft liquor had experienced a massive hit owing to the government’s decision to implement higher taxes on beer, wine and cyder.

The fall in sales has been attributed to the taxes on soft alcohol that were raised in quick succession late last year.

According to officials, the industry as a whole had sold 25 million litres of beer from November 2015 to January 2016 whereas a mere 12 million litres were sold from November 2016 to January this year. An official attached to a brewery in Colombo said the move to impose high taxes on soft liquor would have already resulted in encouraging people to opt for hard alcohol.  Accordingly, in October last year, the tax on mild beer (4.8% alcohol) was raised by 27 percent and strong beer (8.8% alcohol) by 32 percent. In November taxes on strong beer was raised by another 29 percent.

However, a reduction in tax on mild beer was announced in November, but was reversed again taking the total tax increase up to 70 percent.

Currently a tax of Rs.315 has been imposed per litre for strong bear while a tax of Rs.190 per litre was imposed on mild beer. Accordingly a bottle of strong beer (625mls) is sold at Rs.350 of which Rs.197 is tax while a can (500mls) is sold at Rs. 34 of which Rs.158 is tax.

As far as the mild beer is concerned a bottle (625mls) is sold at Rs.230 of which Rs.119 is tax while a can (500mls) is sold at Rs.250 of which Rs.90 is tax.  The official said that while excise tax on strong beer was raised 70 percent, tax on hard liquor such as arrack was increased by a mere 24 percent. “Tax policy that encourages hard liquor is unusual and defies rationality,” he said.

Lion Brewery had earlier told its shareholders that Sri Lanka is in a unique position meaning the tax per millilitre of alcohol is inversely proportionate to the alcohol content in the beverage.

However, the Presidential Task Force on Drug Prevention countered allegations that the number of alcohol consumers in the country had gone up.

Director of the Task Force, Dr. Samantha Kumara Kithalawaarachchi said that it was not that the number of liquor consumers had increased but that the revenue earned via taxation had risen.

Taxes are imposed on the raw material, the production and sales. Apart from this, companies previously engaged in releasing only a certain amount of the production to the market through the Department of Excise and resorted to releasing the bulk through unofficial and unlawful means with the sale thereby not being taxed.  It is reported that almost 90% of such activities have been curbed and the companies responsible reigned in and taxed.

It is also understood that there has been a drop in the local market for beer and companies with competing business and commercial interests are at loggerheads over the matter and were recruiting certain politicians to lobby for their causes.

“The income increase is misread by some that the consumption has increased to a new level. It is not the case. It is merely that all aspects of the process are being taxed heavily in certain cases,” Dr. Kithalawaarachchi said.