SL cigarette prices highest in Asia-report

Prices of cigarettes in Sri Lanka are the highest in the Asia Pacific region and the second highest in the world with the island rapidly turning into a cigarette smugglers ‘paradise’.
These comments were made by Roshan Madawala, Managing Director, Research Intelligence Unit (RIU) at Tuesday’s launch of the “Research Report on Taxation in Sri Lanka – a case study on the Tobacco Industry by the RIU” at the Galadari Hotel in Colombo. 
RIU has prepared the report in collaboration with the Big Issue Magazine.
Quoting the report, he observed that the fiscal and taxation policy of a country is a major determinant of the economic policy of that country, particularly in areas such as revenue, public debt as well as resource allocation and economic stability.
He said the policy on tobacco should focus on achieving two important objectives – reduce the negative health impact of tobacco consumption while securing government taxation revenue with the tobacco industry being one of the largest contributors.
According to the report, other ancillary issues that are interwoven to this critical industry also impacted it such as the beedi manufacturing and tobacco growing.  In the case of beedi manufacturing, the rural poor use it because of its price and also it has now become a cottage industry and also government earns revenue by way of taxation.
The Chairman, All Island Tobacco Cultivators Association at the launch suggested to be an intervenient party to the discussion and said that there are about 20,000 farms and around 300,000 directly and indirectly dependent on the growing of tobacco.
He pointed out that the total industry is adversely affected due to the smuggling of cigarettes as, according to information, only one in 10 of smuggled containers having undeclared cigarettes is detected while the other nine would invariably be merchandised in the country. This affects cigarette sales and due to this fact they are unable to sell their tobacco cultivation to the company. He pointed out that one smuggled container would fetch around Rs. 1 billion in income. 
The report noted that consistent tax hikes on cigarettes from 2009 to 2015 have since given way to a large and unprecedented hike in 2016 which hampered the objectives of both the Ministry of Health and the Ministry of Finance. It noted that over recent years, Sri Lanka has introduced unpredictable and seemingly ad-hoc increases in the rate of taxation on cigarettes which has partly caused current market distortions that have triggered a massive inflow of illicit products. (QP)