Legal liquor consumption down by 9.5% in first ten months of 2024 amid tax

Sri Lanka’s legal liquor consumption declined by 9.5 percent Year-on-Year (YoY) in the first ten months of 2024, driven by a significant drop in hard liquor consumption following tax increases, according to the Ministry of Finance.

Total legal liquor consumption fell to 27.2 million absolute litres during the period, down from 28.2 million absolute litres in the same period of 2023. Hard liquor consumption saw an 8.9 percent decline to 15.5 million absolute litres, while beer consumption experienced a marginal increase of 3.6 percent, reaching 11.5 million absolute litres.

The decline in consumption comes as the government raised excise duties on liquor by 14 percent effective from 1st of January in 2024, as part of its annual inflation-adjusted indexation policy.

Despite the drop in consumption, revenue from excise duty on liquor rose by 20.8 percent YoY to Rs. 167.7 billion in the first ten months of 2024, compared to Rs. 138.8 billion in the same period of 2023. Liquor taxes contributed 34.4 percent to the total excise duty revenue during this period.

Sri Lanka’s legal liquor consumption declined by 9.5 percent Year-on-Year (YoY) in the first ten months of 2024, driven by a significant drop in hard liquor consumption following tax increases, according to the Ministry of Finance.

Total legal liquor consumption fell to 27.2 million absolute litres during the period, down from 28.2 million absolute litres in the same period of 2023. Hard liquor consumption saw an 8.9 percent decline to 15.5 million absolute litres, while beer consumption experienced a marginal increase of 3.6 percent, reaching 11.5 million absolute litres.

The decline in consumption comes as the government raised excise duties on liquor by 14 percent effective from 1st of January in 2024, as part of its annual inflation-adjusted indexation policy.

Despite the drop in consumption, revenue from excise duty on liquor rose by 20.8 percent YoY to Rs. 167.7 billion in the first ten months of 2024, compared to Rs. 138.8 billion in the same period of 2023. Liquor taxes contributed 34.4 percent to the total excise duty revenue during this period.

However, the realisation of revenue from liquor taxes in the first ten months of 2024 stood at 72.9 percent of the annual estimate, falling short of the 89.3 percent realisation in overall excise tax revenue.

The Ministry of Finance attributed this shortfall to widespread reports of counterfeit stickers found in many areas of the country, despite the full implementation of Security Features and Security Features Management System by licensed manufacturers and importers since January 3, 2022. In addition, there is also a presence of an illicit liquor industry. In Sri Lanka, locally manufactured liquor is taxed at Rs. 7,969 per litre/kg, while beer is taxed in the range of Rs. 5,735-6,015 per litre/kg. Additionally, raw materials used for ethanol production are taxed separately. The government aims to collect Rs. 240 billion from liquor taxes in 2024.

By Nishel Fernando

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