The proposal submitted by the Ministry of Finance to increase the Excise Duty received the approval of the Committee on Public Finance.
This approval was granted during the meeting of the Committee on Public Finance held on March 06 in Parliament, chaired by MP Dr. Harsha de Silva
The Committee considered Gazette Extraordinary no. 2418/42 published under the Excise Notification No. 01/2025 (Excise Duty of Liquor) issued under the Section 22 of the Excise Ordinance (Chapter 52), Gazette Extraordinary no. 2418/43 published under the Order under the Section 3 of the Excise Special Provisions) Act, and Gazette Extraordinary no. 2415/79 published under the Regulations under section 112 of the Regulation of Insurance Industry Act No. 43 of 2000 at the Committee meeting held.
Accordingly, the Committee deliberated on the Order under Section 3 of the Excise (Special Provisions) Act, No. 13 of 1989, as well as Excise Notification No. 01/2025 issued under Section 22 of the Excise Ordinance (Chapter 52).
Officials who presented their views on the matter stated that under the Order pursuant to Section 3 of the Excise (Special Provisions) Act, No. 13 of 1989, an increase of 5.9% has been proposed for the excise duty imposed on all items subject to a fixed rupee value-based excise duty, including motor vehicles, cigarettes, aerated beverages, and tobacco products. Furthermore, under the Excise Notification No. 01/2025 issued under Section 22 of the Excise Ordinance (Chapter 52), an increase of 5.9% in the excise duty on liquor products has also been proposed, the officials said.
Expressing his views, the Committee Chair stated that the increase in the excise duty on cigarettes cannot be approved without concrete data and emphasized the need for justification regarding the steps taken to increase the excise duty on cigarettes. Furthermore, he pointed out that studies conducted on excise revenue from cigarettes indicate that this calculation method has led to a decline in government revenue while increasing the profits of particular manufacturing companies. Therefore, he stressed the importance of ensuring that this tax revision would indeed be beneficial to government revenue. Consequently, the Chair decided to reconsider the Order issued under Section 3 of the Excise (Special Provisions) Act, No. 13 of 1989 at the next Committee meeting following further clarifications from officials of the Ministry of Finance, regarding the excise duty increase.
Moreover, the proposal to increase the excise duty on liquor under Excise Notification No. 01/2025 issued under Section 22 of the Excise Ordinance (Chapter 52) was considered and approved by the Committee. During the discussions, Members of Parliament raised concerns that such tax increases could potentially drive individuals towards the consumption and production of illicit liquor. In response, officials stated that raids against illicit liquor operations are being conducted systematically. Additionally, they mentioned that within the past two months, the production of liquor in the country had increased by 22%, while revenue had grown by 23%. Furthermore, it was stated that plans are underway to introduce a new category of liquor with the aim of minimizing the consumption of illicit liquor.
Additionally, the Regulations issued under Section 112 of the Regulation of Insurance Industry Act No. 43 of 2000, published in Gazette Extraordinary No. 2415/79, were considered and approved by the Committee. Under this regulation, the annual levy payable by insurance companies to the Insurance Regulatory Commission of Sri Lanka (IRCSL) has been proposed to be increased from 0.125% to 0.2% of the gross written premium in order to cover the increased expenditure of the Commission.
During the discussions, the Chair informed the Committee of certain instances where the Insurance Regulatory Commission of Sri Lanka (IRCSL) had not carried out regulatory functions effectively. He further expressed his dissatisfaction regarding the delayed actions taken by the Commission under the prevailing law concerning the situation at MBSL Insurance. He instructed officials to keep the Committee informed of future measures to be taken in this regard. Moreover, the Committee emphasized the necessity for the Insurance Regulatory Commission of Sri Lanka to develop and present a strategic plan to enhance the insurance sector as an industry in the country.
The Committee also held an extensive discussion on the complexities involved in obtaining claims under third-party insurance. It was highlighted that there is a need for simplified regulations to ensure that claimants can access third-party insurance funds more easily in the event of an accident. The Committee directed the Insurance Regulatory Commission of Sri Lanka to address this matter.
Additionally, the Chair drew the attention of the Committee to the possibility of utilizing funds deposited in insurance reserves through banking mechanisms for development purposes. Consequently, the Director General of the Insurance Regulatory Commission of Sri Lanka was instructed to formulate and submit a regulatory framework for this purpose after engaging in discussions with industry stakeholders.
The Committee also discussed taxation related to casinos. The Chair pointed out that while taxes are imposed on physically established casino establishments, a large number of online casinos operate without any taxation. He stressed the need to address this issue and bring these online casinos under a regulatory framework. Furthermore, he reiterated that the Committee had been working for years to establish a Casino Regulatory Authority and stated that steps would be taken to inform the Attorney General’s Department to expedite the drafting of the necessary legislation.
