The Institute of Policy Studies of Sri Lanka (IPS) conducted a tobacco control research study ‘‘Elasticity Estimates for Cigarettes in Sri Lanka’ – the findings inform  that although cigarette prices have gone up over time, cigarettes are still affordable for smokers as tax increases have not kept up with inflation and income increases. Further, the tax structure is not streamlined, and tax policy changes have been implemented in an ad-hoc manner. This has kept the cheaper cigarettes affordable – particularly to the youth and the poor.

A simulation exercise shows that when cigarette taxes are raised in line with inflation and streamlined between 2020-2023, Government Excise Tax revenue will increase by Rs. 37 billion by 2023, and 140,000 premature deaths from cigarette consumption can be prevented.  Inflation-adjusted tax systems are also backed by WHO recommendations that inform, significant increases in tobacco taxes are the best means of controlling tobacco consumption. High taxes are an incentive for quitting tobacco, reducing consumption, and not initiating smoking.

The upcoming National Budget is an opportunity to introduce a streamlined tobacco tax policy which will drive down tobacco consumption and reduce the harms and health costs that tobacco use causes. It will also increase revenues to government, at a time when these are much needed, due to the severe ongoing economic impacts of COVID-19.

Whilst acknowledging the many challenges in preparing the national budget in difficult circumstances, we would also like to request you to please consider taking the IPS recommendation to implement inflation-adjusted excise tax increases on all cigarettes, and gradually move towards collapsing the 5-tier cigarette tax rates to a uniform specific excise tax rate. The IPS is always available should you need any further information or support in taking the recommendations forward.

Recommendations:

• Supporting IPS’s proposals to reform tobacco taxation at the Budget, making tobacco less affordable, through the introduction of an inflation-adjusted uniform excise tax rate on cigarettes.
• Support the National Authority on Tobacco and Alcohol (NATA) draft legislation to ban the sale of single stick cigarettes – young people almost always start smoking through single stick purchases and the majority of smokers purchase their cigarettes as single sticks.
• Supporting tougher regulation to prevent continued marketing to young people by the tobacco industry.