By Sri Lanka has been rocked by yet another financial scandal, this time revolving around a massive tax evasion scheme in the coconut oil industry. The fraudulent activities, which date back to the administration of former President Ranil Wickremesinghe, have led to the loss of over Rs. 6 billion in unpaid taxes, exposing a troubling nexus between powerful businessmen and political figures.
A History of Manipulation
As Sri Lanka gears up for two major elections in 2024, influential businessmen have allegedly leveraged their wealth to secure fraudulent tax advantages, using their financial clout to back key political candidates. This pattern of economic manipulation has long been a concern, with past instances of similar fraudulent schemes involving essential commodities and alcohol excise duties.
Under Wickremesinghe’s tenure, the country faced significant economic distress, leading to increased taxation on essential goods such as dhal, sprats, and grains. In January 2023, the Ministry of Finance introduced new tax regulations on the import, refining, and marketing of crude coconut oil, subjecting importers to an 18% VAT and a 2% Nation Building Tax. However, investigations reveal that three large-scale companies imported vast quantities of unrefined coconut oil under six different business names and failed to comply with these tax obligations.
The Silent Authorities and Unpaid Taxes
Despite the blatant tax violations occurring from January to October 2023, neither the Ministry of Finance nor the Inland Revenue Department (IRD) took any concrete action to recover the outstanding revenue. The failure to act has raised suspicions about potential collusion between government agencies and the coconut oil importers.
When confronted, authorities appeared reluctant to engage. The Commissioner General of the IRD initially ignored media inquiries before eventually acknowledging the issue. She later stated that an independent committee had been formed to investigate the matter, but subsequent follow-ups revealed little progress. IRD officials, including Commissioner Napana, admitted that they were still awaiting guidance from the Ministry of Finance to proceed with tax collection—an excuse that only fueled further skepticism.
Political Apathy and Media Silence
Despite the gravity of the issue, mainstream media and opposition parties remained largely silent. While economic experts had previously been vocal about corruption scandals such as the garlic scam and the sugar tax scandal, they failed to address the coconut oil tax fraud. Only a lone opposition MP, S.M. Marikkar of the Samagi Jana Balawegaya (SJB), dared to challenge the government in Parliament. His questioning prompted Minister of Trade Wasantha Samarasinghe to promise an immediate investigation and response within two hours—a promise that remains unfulfilled months later.
In a further display of political disregard, Marikkar’s attempts to escalate the issue to Prime Minister Harini Amarasuriya were blocked on the grounds that the matter lacked “national importance.” This decision came despite Sri Lanka’s ongoing economic crisis and the government’s struggle to generate revenue.
A Turning Point?
Facing persistent pressure, Prime Minister Amarasuriya finally addressed the scandal in Parliament, acknowledging that unrefined coconut oil imports should have been taxed from January 1, 2024. She thanked Marikkar for raising the issue and requested additional documentation to aid the investigation. However, as of now, no official tax collection measures have been implemented by the IRD.
The refusal to act has led to growing speculation that the missing tax revenue—now surpassing Rs. 6 billion—was funneled elsewhere, possibly for political campaign financing. With an election on the horizon, concerns are mounting that vested interests within the political and business elite are working to suppress further inquiries.
