Tobacco tax raised 20% after delay in VAT hike

REUTERS: Sri Lanka has increased its tobacco tax by about 20 percent, the Finance Minister said yesterday, in a move expected to raise Rs.22 billion for the government each year, as an increase in a Value-Added Tax (VAT) faces delay.

Tax hikes are part of the government’s commitment to meet a condition set by the International Monetary Fund (IMF) for a loan of US $1.5 billion approved in May.

Finance Minister Ravi Karunanayake said the price of a cigarette would rise by Rs.7, with immediate effect.
Total government revenue in the first eight months was Rs.1.01 trillion or 51.6 percent of the year’s estimated total, government data showed.

Sri Lanka’s tax collection is usually higher in the second half of the year than the first half.
The VAT was increased to 15 percent from 11 percent from May 2, but two Supreme Court rulings forced the government to suspend the measure temporarily and amend it. Small businesses have voiced strong opposition to the VAT hike. The debate and vote on the amended VAT bill presented in parliament yesterday are set for October 26.