The Kassippu Conundrum

As a friend quite rightly pointed out, recent increase in taxes in hard liquor will potentially have some crazy socio economic affects mainly as a result of the seemingly ignored existence of locally brewed illicit liquor a.k.a kassippu.

Increasing prices of hard liquor will only drive the poorer consumer towards illicit liquor. Increasing health hazardz in an already not-so-healthy workforce. And as prices in general continue to rise this will only increase. This will cause loss in productivity which will in turn reduce economic growth. Also, growth in the kassippu market will mean an encouragement to crime, which will increse in power thus effectively discouraging honest citizens from contributing to the economy.

The government can have avoided this with more stringent controls on brewing illicit liquor. But they convineitly pass the buck to the cops. And the cops wont do anything about it cos the illiegal breweries are usually in cahoots with a politician or two. Funny place we live eh?

The government seems like its stuck in a mire of sorts. Stuck in quicksand if you may. With no one to pull it out. So it needs to somehow get out of the quicksand all by itself. Now struggling to get out will only make it sink deeper in to the quicksand, but if it doesn't struggle, it wouldn't reach that branch to pull itself out.

Desperate attempts at pulling itself out are translating into badly thought out tax policies that will do more harm than good in the long run.

Sri Lanka has a badly skewed alcohol consumption model. It is absolutely convoluted. When most of the rest of the world is consuming 98% of soft liquor and 2% of hard. We consume 94% of hard liquor and 6% of soft. 64% of that hard liquor is illicit. For more, read this intriguing LMD report here.