The Committee on Public Finance (COPF) convened last week to address critical matters pertaining to the importation of ‘soap noodles’ for soap production and to consider the Order under the Excise (Special Provisions) Act No. 13 of 1989. The meeting was held under the chairmanship of Dr. Harsha de Silva, Member of Parliament, and saw significant developments and approvals.
The Committee on Public Finance deliberated on the Order under the Excise (Special Provisions) Act No. 13 of 1989, and after a comprehensive discussion on the report submitted by the Ministry of Finance (MoF), approved the proposed measures to be implemented under the said order.
In previous discussions, concerns were raised about the importation of ‘soap noodles’ for soap production. It was revealed that some companies have been importing palm oil fatty acids, which, due to recent changes in customs duty, are now subject to a 24% tax. In response to this, certain multinational companies have turned to import palmitic and lauric acids, enjoying lower tax rates, as substitutes for soap noodle production. The report by the Industrial Technology Institute of Sri Lanka (ITISL) outlines, and as stated by MoF officials, there isn’t a major technological investment or difference in producing soap from palmitic and lauric acids compared to ‘soap noodles’. Thus, the question arose whether these multinational companies were committing fraud by importing these acids at cheaper rates or exploiting a loophole in the system, allowing them to import the acids at a significantly lower cost than importing soap noodles directly.
Consequently, the Committee has suggested that the MoF verify the report by ITISL and provide their verifications. Furthermore, with the addition of the new tax approved by the Committee, the COPF has requested the MoF to monitor monthly revenue generated through this tax and assess the extent of price fluctuations in the soap market. These measures aim to ensure transparency, fairness, and accountability in the soap production sector.