Sharp Increase in Price of Tobacco Products Results Drop in Revenue

In October 2016, the then Minister of Finance imposed a 43% increase on the price of a stick, significantly impacting sales. It adds that the drop in the sale of legal cigarettes due to the high price was compensated by smuggled illicit products entering the market; estimating that over 500 million illicit sticks entered Sri Lanka in 2017 amounting to a loss of over Rs. 20 billion to the Government.

End result is the Government’s excise earnings from tobacco dipped by Rs. 2.7 billion in 2017. As per revenue report from the Department of Excise a revenue drop of 3.1% was recorded last year. Comparative revenue of Rs. 86 billion was recorded in 2017 over the figure of Rs. 88.7 billion in 2016.Company sources attribute the reduction in government revenue to the unprecedented 40% drop in volumes last year, following the sharp increase in prices during the last quarter of 2016.