Sri Lanka loses Rs. 9.4bn in tobacco tax revenue amid shifting market trends - report

By Poojathmi Rivithma

Colombo, June 17 (Daily Mirror) -Sri Lanka has recorded an estimated loss of Rs. 9.4 billion in tobacco tax revenue in 2024 due to changes in cigarette brand market shares following a 20% tax increase introduced in 2023, recent data cited by researchers at Verité Research said.

The Alcohol and Drug Information Center (ADIC) said the country’s current tobacco taxation structure has led to significant revenue losses for the State while enabling tobacco companies to maintain or increase profits.

Despite a sharp decline in cigarette consumption, sales dropped by 521.5 million sticks, an 18% decrease compared to 2022, government revenue from tobacco taxation still rose by Rs. 7.7 billion.

However, health experts noted that the tiered tax structure allowed consumers to switch to cheaper cigarette brands, limiting the overall impact of the tax policy on reducing tobacco use.

The World Health Organization (WHO), under its Framework Convention on Tobacco Control (FCTC), recommends a uniform tobacco tax system to discourage brand switching and reduce affordability.

Globally, higher tobacco taxation is recognised as one of the most effective measures for reducing smoking-related harm while increasing government revenue.

Researchers also highlighted concerns over slower tax adjustments in 2025, noting that while prices of many essential goods rose sharply, cigarette taxes did not increase at a similar pace. As a result, cigarette production reportedly rose by 5% in 2025, reversing a previous downward trend.

Between 2017 and 2024, government revenue from cigarette taxation increased by only 27.5%, while net-of-tax revenue of the Ceylon Tobacco Company rose by 92.4%, indicating a widening gap between state revenue and industry earnings, according to Verité Research.

The WHO recommends that tobacco taxes account for at least 75% of the retail price of cigarettes. In Sri Lanka, the share of tax in the most popular cigarette category fell from 74% in 2023 to 68.8% in 2024 and remained unchanged in 2025.

Health authorities warn that tobacco use remains a major public health concern, with non-communicable diseases (NCDs) accounting for 83% of all deaths in Sri Lanka, according to the WHO NCD Country Profile.

Officials estimate that smoking contributes to around 50 preventable deaths daily, nearly 20,000 annually.

Experts are urging policymakers to strengthen tobacco taxation policies in line with WHO recommendations to curb smoking prevalence, improve public health outcomes, and protect state revenue.