Business

Taxing Tobacco: Why the 2023 Budget Should Increase Tobacco Taxes

Published

4 years ago

2022/11/11

By an IPS Research Team

Sri Lanka’s economy is at a critical juncture where urgent steps are needed to improve the country’s fiscal position. The Institute of Policy Studies of Sri Lanka (IPS) has maintained that increasing tobacco taxation has undeniable health and fiscal benefits. In this context, policy solutions, such as taxing tobacco which can be leveraged to boost government revenue without threatening economic growth, are essential. This blog argues that the 2023 Budget should introduce a model of indexation which automatically links tobacco taxation rises with the size of the economy and inflation. This would raise substantial additional revenue from the excise tax on cigarettes.

The Right Time to Raise Taxes

The current economic crisis and the intense pressure on the health system mean there is no better time to raise tobacco taxes in Sri Lanka. Among the benefits of increasing tobacco taxes are the generation of additional revenue for the government, widespread support among the public for an increase in tobacco taxation, and the reduced burden on Sri Lanka’s struggling health system.

A tax targeting a ‘sin product’ like tobacco will contribute to the government’s ongoing efforts to help raise revenue without increasing the costs of essential goods at a critical time for the economy. According to a poll conducted by the Alcohol and Drug Information Centre (ADIC) in September 2021, 91.5% of respondents said they would support increasing tobacco taxation to boost government revenue. Accordingly, this is a tax move the government can introduce, which will have a near-universal public endorsement. Further, driving down tobacco consumption by increasing prices, particularly of the most harmful cigarettes, will reduce tobacco-caused illnesses and ease pressure on the health system when Sri Lanka’s healthcare system is facing severe medical shortages due to the economic crisis.

A Complex Tobacco Taxation System

Taxation is internationally recognised as the most cost-effective means to reduce tobacco consumption, given the revenue generated by tobacco taxation. The World Health Organization Framework Convention on Tobacco Control (WHO FCTC) recommends simple, inflation-adjusted taxes to reduce tobacco use and prevalence. In the past, in line with these global best practices, Sri Lanka has taken several positive measures to control tobacco use, including tax increases leading to significant revenue boosts for the government as public health benefits for the population.

Sri Lanka, however, has complex tobacco taxation practices in place. Cigarettes in Sri Lanka are taxed at five different excise duty rates based on the length of the cigarette. Moreover, in Sri Lanka, tobacco taxation has not kept pace with inflation and per capita income, which has made cigarettes more affordable. This has resulted in adverse health outcomes and deprived the government of considerable revenue, which could have been invested in key priorities.

Introduce a Single Tax for Cigarettes

To help mitigate the current fiscal difficulties, an ongoing IPS study recommends the introduction of a single tax for cigarettes of all lengths (along with regulation restricting the length of cigarettes to 84 mm the longest cigarette sold in the market at present), which is adjusted annually according to inflation and GDP growth of introducing a single tax for cigarettes, irrespective of their length, will make cigarettes less affordable to youth and the poor (See Figure 1 for further information). For example, if a single tax were implemented in 2021, all cigarettes would have cost at least LKR 57, reducing the affordability of all cigarettes. Thus, the formula would ensure that taxes are raised consistently and that cigarettes remain unaffordable to the most vulnerable, namely the young and the poor.

The risk of substitution to beedi is a common argument used to oppose increasing cigarette taxes. An ongoing IPS study, however, provides a counterargument through a cross-price elasticity analysis, which reveals that if cigarette prices rise, tobacco smokers are unlikely to substitute cigarettes with beedi.

Benefits of Introducing a Taxation Formula for Cigarettes

Revenue gains: IPS estimates that the government could have earned close to LKR 23.6 billion in additional excise tax revenue if a single excise tax for cigarettes of all lengths was introduced according to the formula in 2021.

Health benefits: Increasing taxes is the most effective way to reduce tobacco consumption. This will help to reduce adverse health outcomes of smoking, ease pressures on the health system, lower health costs associated with tobacco use, and reduce the unfavourable effects on household incomes from tobacco consumption. IPS estimates that had a single tax for all cigarettes had been in place since 2018, the number of cigarettes sold would have fallen by almost 157 million sticks. Further, the current price is highly affordable and could incentivise the youth to start smoking, leading to additional burdens on the health system. As such, introducing regulations to restrict the length of cigarettes to 84 mm would ensure cigarettes remain unaffordable.

Public support: A tax increase targeting a ‘sin product’ helps to generate revenue without increasing the costs of essential goods. As such, this tax increase is likely to be widely supported by the public.

Way Forward

Given the current economic crisis and considering that cigarette taxes have not been revised systematically over time, the government could use this opportunity to introduce a simple formula to raise taxes to attain the twin benefits of improved health and fiscal outcomes.

Link to original blog: https://www.ips.lk/talkingeconomics/2022/11/10/taxing-tobacco-why-the-2023-budget-should-increase-tobacco-taxes/

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Business

BOC Maldives Celebrates 45 Years of Banking Excellence and Unveils New Digital Banking Initiative

Published

6 hours ago

2026/07/5

Thilina Walpola

Established in 1981, BOC Maldives has grown steadily over the years, building a reputation as a trusted banking partner. BOC Maldives forms an important part of Bank of Ceylon’s international network, connecting the bank’s operations in London, Chennai, Seychelles, Malé and Hulhumalé. Within this network, BOC Maldives occupies a unique position due to its presence in a tourism-driven economy and its role in facilitating banking relationships associated with trade, investment, foreign currency transactions, and broader regional business activities.

Bank of Ceylon (BOC) Maldives recently celebrated its 45th anniversary, marking a significant milestone in the bank’s longstanding contribution to the Maldivian banking sector and its commitment to fostering economic growth and financial inclusion in the Maldives. A special customer felicitation ceremony was held to recognise long standing relationships with key customers and business partners with the participation of Bank of Ceylon’s Chairman Mr. Kavinda de Zoysa, General Manager/CEO Mr. Y.A. Jayathilaka, Acting Senior Deputy General Manager/Head of Global Markets Mr. G.A. Jayashantha, and Chief Manager of the Overseas Branches Division, Mr. Harischandra Hewage together with Country Manager Ms. Manjula Herath and the staff of BOC, Maldives.

The ceremony reflected the bank’s appreciation for the trust and confidence placed in BOC Maldives over the years and underscored the importance of maintaining strong and mutually beneficial partnerships. Addressing the gathering, senior representatives of the bank highlighted the institution’s journey over the past 45 years and emphasized the branch’s contribution towards strengthening economic ties between Sri Lanka and the Maldives. They also acknowledged the invaluable support extended by customers, stakeholders, regulatory authorities, and employees who have contributed to the branch’s success throughout the years.

One of the key highlights of the event was the announcement of the upcoming launch of Internet Banking services in the Maldives. This initiative represents another significant step in the bank’s digital transformation journey and its ongoing efforts to enhance customer convenience and accessibility. The branch has consistently embraced advancements in banking technology to improve customer service and operational efficiency. Notably, BOC was the first bank in the Maldives to introduce Automated Teller Machines (ATMs), demonstrating its pioneering approach to banking innovation within the country.

The anniversary also offered an opportunity to reflect on the legacy built by BOC Maldives since its establishment. Over the years, the bank has been associated with financing and supporting projects in government, infrastructure, tourism, resort development, construction, real estate, wholesale and retail trade, housing, fisheries, and aviation. Earlier milestones in the bank’s Maldivian operations have also recognized its role in supporting major national and sectoral projects, including airport-related development, government sector financing, and the Hulhumalé Reclamation Project Phase II.

Business

Blue Lanka Tours launches employee mental health and wellness programme

Published

6 hours ago

2026/07/5

Thilina Walpola

Participants of the event

Blue Lanka Tours recently launched a mental health and wellness initiative aimed at promoting employee wellbeing and fostering a healthier workplace culture.

The programme, titled Compass, was held at the ITC Ratnadeepa in Colombo, bringing together employees for a series of sessions focused on mental health awareness, healthy living and personal development.

Addressing the event, Blue Lanka Tours Founder and Managing Director Dinesh N. Perera said the company’s responsibility extended beyond serving international visitors to ensuring the wellbeing of its employees.

“When we say we are a responsible company, it also means we are a responsible employer who recognises workplace pressures, personal responsibilities and the demands of modern life,” he said.

Wellness Facilitator and Mindset Coach Tanuja Perera Raymond conducted a session on building confidence, emotional balance and workplace performance through practical daily habits. Counselling Psychologist and Mind Leap Counselling Services Founder Dulari Ranasinghe discussed strategies for managing stress, overcoming emotional challenges and developing healthier personal relationships.

Fitness and Nutrition Coach Shane Ramenaden led the final session, highlighting the relationship between physical health and workplace productivity through posture improvement, mindful decompression, nutrition and healthy lifestyle practices.

Business

ICAO Asia-Pacific Director joins NGAP aviation awareness programme in Kandalama

Published

6 hours ago

2026/07/5

Thilina Walpola

A winner of the art competition receiving her certificate

The Civil Aviation Authority of Sri Lanka (CAASL) conducted the Next Generation of Aviation Professionals (NGAP) Sri Lanka Programme at D.S. Senanayake Maha Vidyalaya, Kandalama, recently bringing together around 400 school students to promote awareness of aviation-related careers.

The programme, organised through the CAASL Civil Aviation Promotion Unit under the leadership of Director General of Civil Aviation and Chief Executive Officer Captain Daminda Rambukwella, aimed to inspire students to explore opportunities in the aviation sector.

ICAO Asia and Pacific Regional Director Tao Ma attended the event as chief guest, reaffirming the International Civil Aviation Organization’s support for initiatives that encourage youth participation in aviation and contribute to the sustainable growth of the global industry.

Students from D.S. Senanayake Maha Vidyalaya and several schools in the Galewela Education Zone participated in the programme, which featured interactive sessions, presentations by aviation professionals, and educational activities designed to enhance knowledge of the sector.

The programme commenced with a model aircraft flying display, which drew significant interest from students while demonstrating basic principles of flight and aircraft operations.

An aviation-themed art competition was also held, with ICAO officials and CAASL representatives reviewing student artwork and commending their creativity and enthusiasm.

Speaking at the event, Tao Ma praised Sri Lanka’s efforts to promote aviation awareness among youth, noting the importance of developing the next generation of aviation professionals.

Director General of Civil Aviation and Chief Executive Officer of the Civil Aviation Authority of Sri Lanka, Captain Daminda Rambukwella highlighted the role of the NGAP initiative in building a future-ready aviation workforce and encouraged students to consider careers in the expanding sector.