In Kerala, where the Congress-led UDF Government is preparing to implement total liquor ban over the next ten years, boozers are victims of “official extortion” in the name of taxes: When a boozer drinks alcohol worth Rs15, he is required to pay Rs59 in taxes to the Government.
Economists say that such a taxation system cannot perhaps be seen anywhere else in the world while volunteers engaged in anti-liquor campaigns point out that that it can lead to the flourishing of illicit liquor trade. However, the boozer does not care. He just drinks as he likes making Kerala the topper in the list of the country’s States in per-capita liquor consumption.
That the boozer does not care how much money the Kerala Government is extorting from him in the name of taxes is seen as an excuse or justification for raising the taxes on alcohol whenever there is a funds crunch in the State. This policy is being pursued without any change even after the Government decided to impose ban on liquor.
For example, Rs1,230 crore of the total Rs2,049 crore the Government is intending to raise additionally through the tax hikes announced yesterday is to come from the sale of hard liquor, wine and beer. The State Government tax on alcohol after Wednesday’s hike is 135 per cent and that on wine and beer is 70 percent.
According to official sources, the Government makes Rs58.64 whenever liquor worth Rs100 is sold in the State. Of this, Rs55.85 comes as taxes at the rate of 135 per cent and Rs2.79 as five-per cent cess on that meant for formulation of a fund for the rehabilitation of the thousands of employees who may lose their jobs once the liquor ban is implemented.
The Rs41.36 remaining after the Rs58.64 due to the Government in every Rs100 made through liquor sales includes the cost of the bottle, label, packing, distribution, etc and the seller’s commission. “So, the actual cost of alcohol in this Rs100 could be Rs15 or Rs16,” said a top official of State-run monopoly liquor distributor Kerala State Beverages Corporation (Bevco).
“In short, what we see here is a very rare financial phenomenon, perhaps non-existent anywhere else in the world,” said a Kochi-based tax consultant. “As per this structure, only 15 per cent of the price is the product’s cost while the taxing authority takes away 60 per cent of the total price. If someone calls this extortion, he can’t be faulted,” he said.
liquor sector has remained an essential revenue generator for the Kerala Government for the past one decade. Bevco’s contribution to the Exchequer in 2003-04 as taxes on sold liquor was Rs1,622.30 crore. This grew to Rs7,240 crore in 2012-13, accounting for almost 20 percent of the total annual tax revenues of the State.
The Government’s revenue from liquor sales is expected to cross the Rs8,000-crore mark this fiscal despite the Government decision to close down the 710 bars in the State and 40 of the total 384 retail liquor outlets of Bevco and ConsumerFed, another State agency, as part of the liquor ban.
“Though Bevco is making a huge profit out of liquor sales and the Government is making so much money in taxes, the provider of all that, the boozer, is considered as a wretched being and not as an honourable customer. He is made to stand in queue in sun and rain for long hours in front of the retail liquor shop. It is bad,” says Nandakumar, a regular boozer in Kochi.