Beedi license renewal drops after tax increase: Parliamentary Committee reveals

Colombo, July 29 (Daily Mirror) - The renewal of beedi licenses of beedi manufacturers has dropped remarkably after the increase in tobacco tax on beedi sticks, which has resulted in a revenue loss, a Parliamentary Committee has revealed.

This was revealed at the Committee on Public Finance Chaired by MP Harsha de Silva held at the Parliamentary complex recently.

The Commissioner General of the Excise Department reported that while 1,140 licenses were issued to beedi manufacturers last year, only 840 have renewed their licenses this year following the tax increase. 

It was also revealed that revenue collection has also fallen short of expectations, with only Rs. 1,055 million collected last year against a target of Rs. 2 billion, and just Rs. 469 million collected so far this year. 

The Commissioner General attributed these shortfalls to large-scale beedi smuggling and insufficient enforcement actions.

The committee members questioned whether the declining license renewals and shift toward illicit markets resulted from the increased tax burden, citing economic principles that suggest higher taxes may drive legitimate businesses underground. 

They proposed that reducing beedi taxes could potentially increase legal manufacturer participation and boost overall revenue collection. The committee requested that any future tax adjustments be supported by scientific evidence to demonstrate their effectiveness in meeting revenue targets.