Taxation and tobacco industry in Sri Lanka

It was reported in the media that during the Cabinet discussion on 11th September 2018 on disallowing the sale of loose cigarettes, which was initiated by the Minister of Health, the Minister of Finance had objected to the measure stating that tobacco control measures have resulted in a loss of Rs. 18 billion to the Government.   

We feel that the actual facts relating to this statement should be bought before the public of Sri Lanka who bear the brunt of the enormous health, social and economic costs of tobacco use.  

Contrary to the statement of the alleged loss, the Government income has increased significantly annually from tobacco tax. According to statistics of the Ministry of Finance, there has never been a loss of Rs. 18 billion as reported. The tax collected from tobacco increased by Rs. 26.2 billion between 2015 and 2017 to an all-time high of Rs. 107.4 billion which is a significant and historic increase of 32%.

Decreasing the use and harm of tobacco is a policy that the President has stood for a considerable period of time. We also strongly support the steadfast and proactive role played by the Minister of Health in bringing in new polices and strengthening current policies and laws to address this issue. International technical agencies such as the World Health Organization (WHO) and the World Bank strongly state that tobacco use is a net loss to any economy and recommends measures to prevent its use.   

Taxation is one of the most effective measures to decrease the use of tobacco, especially among the young and the poorer segments of the society.When optimally applied, tobacco taxation can decrease the consumption of tobacco, and at the same time increase government revenue.We should be proud as  a country to see tobacco use decreasing.   

A study conducted by the National Authority on Tobacco and Alcohol and the WHO showed that the loss to Sri Lanka from tobacco use in 2015 was significantly more than the tax collected. The Ministry of Health Estimates that around 20,000 people die each year in Sri Lanka due to tobacco use, which is more than 50 persons per day. The World Health Organization considers tobacco and the single most preventable cause of premature death in the world.  

It is a well-known fact that everywhere in the world, the tobacco industry brings in spurious and blatantly false arguments when tobacco tax increases are discussed. It is the same in Sri Lanka where many false and unsubstantiated statements about cigarette smuggling and increasing use of bidi find their way to the media. All the current claims by the tobacco industry and its proxies on increased tobacco smuggling and increasing bidi use has not been substantiated by any data from an acceptable sources. It is obvious anyone that if the largest selling cigarette brand in Sri Lanka is too expensive as claimed, tobacco users will switch to less expensive, well known and legal brands available in the market without switching to beedi use or unknown “smuggled” brands overnight.  

Pubudu Sumanasekara Excutive Director, ADI