Government Revenue Loss due to the Sugar Tax Cut

Abstract

The Special Commodity Levy (SCL) on imported sugar was reduced from LKR 50/kg to LKR 0.25/kg on the 13th of October 2020. This was intended to reduce the price of sugar in the domestic market. The cumulative loss of government revenue was over LKR 59 Bn as of December 2022 as a result of the sugar tax change. However, the reduction in the levy did not have the desired effect on the domestic market price as domestic market prices have been on the rise even after the levy reduction. The reduction in the levy did however result in substantial tax revenue being lost.