The latest revelations that the country loss revenue over Rs 16 billion over the importation of sugar by a Rajapaksa loyalist using a noticeably short tax break has been compounded by the expose that the same businessman was involved in an even greater scam importing coconut oil during a strange tax window in 2020.
At the centre of the Sugar Scandal is Sajaad Mohmmaed Mawzoon, the proprietor of Shangri-La Hotels. Mawzoon’s company Pyramid Wilmar Trading has imported nearly 2 lakh metric tonnes of sugar between November 2020 – February 2021 about one third of the country’s consumption for the year after President Gotabaya Rajapaksa decided to slash taxes on the commodity to 25 cents LKR per kilogram in October last year. Mawzoon’s company accounted for 39.6% of total imports of sugar during the three month “tax window”.
Ironically, Wilmar trading and other sugar importers continued to sell sugar to government wholesalers at the original price of 120 rupees per kilo of sugar while paying next to nothing in tax. The Finance Ministry in a report to the Committee on Public Enterprises revealed that the loss of revenue from the three month import levy slash amounted to Rs 15.9 billion.
For purposes of comparison, the Auditor General of Sri Lanka estimated a cumulative loss of Rs 1.6 billion to the Treasury of Sri Lanka from the 2015 Bond Scam that then SLPP opposition exploited as a corruption scandal by the Yahapalanaya administration. A forensic audit of treasury bond auctions from 2005-2015 by KPMG and other international auditing firms, when current capital markets minister Ajith Nivaard Cabraal was Central Bank Governor, amounted to Rs 10 billion.
The 2020-2021 sugar scam corruption exceeds those figures by an order of magnitude.
On 10 October 2020, the government abruptly reduced the tax on a kilo of sugar from Rs. 50 to Rs. 0.25 (cents) only to increase it back to Rs. 40 after an extraordinary large amount of sugar was imported by one company during this period.
The local agent of Pyramid Wilmar, Sajad Mowzoon, made the Shangri-La hotel available to President Nandasena Rajapaksa during his election campaign hosting numerous Viyath Maga events free of charge.
The reduction in the tax was not passed on to the consumer and was instead pocketed by the Rajapaksa loyalist. The JVP alleges that Lanka Sathosa – also run by a Viyathmaga “professional” Nushad Perera, had continued to purchase sugar from companies like Pyramid Wilmar trading at the cost of Rs 120 per kilo. On the instructions of the Government, Sathosa provided sugar at Rs 85 per kilogram but limited the supply to one kilo per customer. In addition to the loss in tax revenue to the Government, Lanka Sathosa has also massive losses by purchasing sugar at higher wholesale prices than the cooperative could sell at retail. Once more, the sole beneficiary was Mawzoon and his Wilmar trading. The JVP has filed action in the Supreme Court regarding the corrupt tax scam.
Coconut oil imports also increased by an astonishing 270 % during the 2019 -2020 period, through imports by Pyramid Wilmar. Sri Lanka had imported USD 25 million worth of coconut oil in 2019 which increased to USD 107 million for the year 2020. A vast majority of these imports had happened in the month of July 2020, when just like in the case of the sugar tax, the tax on coconut oil imports were suddenly removed. The massive amounts of coconut oil imported during this short lived ‘tax break’ is in the range of Rs. 20 billion, SJB MP Patali Champika Ranawaka recently revealed.
Meanwhile, despite the Finance Ministry’s report to the COPE, Treasury Secretary S.R. Attygalle made a desperate attempt to whitewash the sugar corruption case claiming that the Government has not incurred a loss of Rs. 15 billion by reducing the duty on imported sugar from Rs.50 to 25 cents per kilogram. Government’s have the right to set tax policy, he said. Atygalle implied that the Rs 15.9 billion loss as accounted for by his own Ministry was only a ‘mirage’ because that money had never been in government coffers for the state to “lose”.
Attygalle does not explain the opportunity lost to strengthen much-needed State revenue and the opportunity lost by consumers to benefit.
Experts point out that there is a direct application of the offence of Corruption as per Section 70 of the Bribery Act which states that “ any public servant who, with intent, to cause wrongful or unlawful loss to the Government, or to confer a wrongful or unlawful benefit, favour or advantage on himself or any person, or with knowledge, that any wrongful or unlawful loss will be caused to any person or to the Government, or that any wrongful or unlawful benefit, favour or advantage will be conferred on any person- (a) does, or forbears to do, any act, which he is empowered to do by virtue of his office as a public servant; (b) induces any other public servant to perform, or refrain from performing, any act, which such other public servant is empowered to do by virtue of his office as a public servant; (c) uses any information coming to his knowledge by virtue of his office as a public servant; (d) participates in the making of any decision by virtue of his office as a public servant; (e) induces any other person, by the use, whether directly or indirectly, of his office as such public servant to perform, or refrain from performing, any act, shall be guilty of the offence of corruption and shall upon summary trial and conviction by a Magistrate be liable to imprisonment for a term not exceeding ten years or to a fine not exceeding one hundred thousand rupees or to both such imprisonment and fine.
Mawzoon’s tentacles run deep across multiple sectors. India’s Adani Group, now embroiled in the Colombo port terminal deals is also in partnership with Pyramid Wilmar in Sri Lanka. It will be recalled that the Nandasena Government unilaterally suspended the East Container Terminal deal it struck with the Indian Government (which was also promoting the Adani Group), and then equally suddenly decided that the Adani Group of India would be leased the Colombo West Container Terminal (WCT). The Rajapaksa Government claimed it had reached agreement with the Indian Government on WCT, but the Indian Government later denied the claim saying it had no such discussions with GoSL. Mawzoon’s involvement explains how the Rajapaksa Government conducted negotiations on the WCT independent of the Government of India which was previously incredibly involved in the port contract.
Watch JVP Leader Anura Kumara Dissanayake’s breakdown of the Sugar tax scam: