With the new government through its interim budget proposing to impose a monthly tax of Rs. 200 million on each local distillery, they would be forced to close down, says the Medium Scale Distillery Employees’ Union.

According to them, paying this tax would not be an issue for four large companies active in Sri Lanka’s liquor market but at least eight smaller companies in the market would not be able to pay this tax.

Hence, the small scale distilleries would have to close down by April when this tax comes into force and that some 4,000 families would lose their livelihoods, the union says.

These eight smaller distillery companies enjoy some 10 per cent of the liquor market in Sri Lanka and they function under licenses issued by the Excise Department.

While nearly 80 per cent of Sri Lanka’s liquor market is now enjoyed by large scale companies like Distilleries Company of Sri Lanka (DCSL), International Distillers Lanka (IDL), Rockland and Mendis, some of them are already paying taxes exceeding Rs. 200 million to the government.

Hence, the international credit rating agency Fitch Ratings recently stated that though there are likelihoods of smaller companies facing closure due to this new tax, four large companies could benefit from this.

Fitch Ratings added that when these smaller distillery companies close the four large companies would be able to attract those market shares towards them.