Business

Why the Government Should Increase Tobacco Taxation in the Forthcoming Budget

Published

5 years ago

2020/11/15

Sahan Weerasooriya

A Win-Win Strategy:

by Harini Weerasekera

The COVID-19 pandemic has left many economies struggling to revive economic activity and boost growth. Economic stimulus packages of varying sizes, shapes and forms have been disbursed by governments around the world to keep their economies afloat. What this means is that governments of developing countries in particular, face extremely tough fiscal policy choices; in some cases, compelled to spend money that they do not necessarily have.

Sri Lanka is no exception to this. COVID-19 has pushed what was already a high spend-low revenue economy into further fiscal turmoil. IPS has stressed that getting the country’s fiscal house in order is the need of the hour, in order to effectively respond to the pandemic, on top of dealing with an already mounting debt burden.

When government finances are tight, policy solutions that can be leveraged to boost government revenue without threatening growth and which support additional pandemic-related spending in the coming years, are essential. Increasing tobacco taxation is an excellent example.

IPS Study on Tobacco Taxation

A recent study by IPS projects that government tax revenue can be boosted by LKR 37 billion by 2023, if taxes on cigarettes are streamlined and raised in line with inflation. Although the government assumed a policy stance of cutting taxes across the board when they came into power, excise taxation of sin-goods such as cigarettes is one area where it is still politically feasible to raise taxes in order to boost much needed revenue. For example, back in 2019, the government increased excise taxes on tobacco to offset an overall reduction in VAT rates on goods.

This month’s budget is therefore an opportune moment to increase tobacco taxation, which will simultaneously help raise revenue at a critical time for the country, and generate significant and positive health benefits that would flow from reducing smoking.

Why Cigarette Taxation?

Although tax rates on some types of cigarettes in Sri Lanka have been raised in recent years, the most-sold brand of cigarettes in the country remains affordable according to the World Health Organization (WHO) affordability index. Further, the tax structure for cigarettes is not streamlined, and tax policy changes have been implemented in an ad-hoc manner. What this means is that there is further space to reduce cigarette affordability by using appropriate tax policy. This will ease health costs to the government from tobacco related-illness which can then be redirected towards pandemic related health costs, whilst also securing additional tax revenue in these difficult times.

In order to do this, IPS recommends in our latest study, that the government and related institutions deploy an incremental approach to revising cigarette taxes over the next four years (2020-2023). Sri Lanka currently has a five-tier tax structure for cigarettes based on cigarette length, some of which remain affordable and accessible to the young and poor in particular. Adopting a uniform excise tax system that is periodically adjusted for changes in inflation, in line with the WHO Framework Convention for Tobacco Control (FCTC) protocol, will reduce overall affordability of all types of cigarettes.

Implementing these recommendations will result in Sri Lanka’s government revenue from cigarettes increasing by Rs 37 billion by 2023; cigarette consumption reducing from one billion sticks by 2023; and prevention of 140,000 premature deaths from cigarette consumption in the future.

Additionally, a forthcoming study by IPS finds that the net effect of tobacco control policies on national income is positive, as a result of consumers switching their spending from tobacco products to other goods and services.

A Link between Tobacco Taxation and Illicit Trade?

While industry lobbyists, the world over, are resistant to cigarette tax increases, and argue that increased taxes promote illicit tobacco trade and beedi consumption – the evidence shows otherwise. According to WHO FCTC Knowledge Hub research, there is a negative correlation between illicit trade share and cigarette prices, globally (Figure 1). Instead, it is the existence of informal trade channels, easily crossed borders, weak governance, ineffective customs/tax administration, corruption and complicity of producers/importers, among other reasons, that cause large-scale illicit trade of tobacco. Hence, illicit trade should be controlled through organizational changes in tax administration such as more investigations, more tax and customs officers, and technology, rather than by keeping cigarette taxes/prices low.

Similarly, there is concern that beedi consumption has risen due to tax increases on cigarettes. However, the Alcohol and Drug Information Centre (ADIC) trend surveys over the years have found that there is no pattern of switching from cigarettes to beedi in response to cigarette price increases. However, authorities should consider taxing beedis too; avoiding tax increases on cigarettes, on the other hand, will not aid in reducing consumption of either cigarettes or beedis.

Moreover, controlling the consumption of various tobacco products needs to be tackled using different strategies, as outlined by internationally recognized sources such as the WHO.

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Business

Ceylon Chamber partners with members and relief agencies to deliver Cyclone Ditwah relief

Published

20 hours ago

2025/12/12

Thilina Walpola

In response to the devastating impact of Cyclone Ditwah, The Ceylon Chamber of Commerce has been actively supporting national relief and recovery operations in collaboration with the Government of Sri Lanka, key partners, and its members.

As a co-chair of the Sri Lanka Preparedness Partnership (SLPP) alongside the Disaster Management Centre (DMC), the Ceylon Chamber together with Janathakshan, played a central role in coordinating emergency response efforts, ensuring rapid and efficient assistance to affected communities. From 28 November to 6 December 2025, the Chamber mobilised volunteers across the Chamber Secretariat, member companies MAS Capital Pvt. Ltd – Intimates Division, Aitken Spence PLC, and university student groups, contributing more than 190 hours of service and answering over 40,000 emergency assistance requests to support the DMC’s 24-hour Emergency Operations Center.

The Chamber also provided support to the DMC for the Rapid Disaster Needs Assessment (RDNA), assisting with data analysis of calls received and the development of the direct community needs component of the RDNA, which informed government planning and coordination of relief distribution.

With the generous support of its member companies, the Ceylon Chamber facilitated the collection and handing over of financial aid and essential relief items to affected areas. The Chamber is deeply appreciative of Aitken Spence PLC, BASF Lanka (Pvt) Ltd.. CDK Philip Hospital, Central Finance Company PLC, Cinnamon Hotels & Resorts, Devi Trading Company, Eastern Merchants PLC, Emar Pharma Pvt. Ltd., Finagle Lanka Pvt.Ltd., H Connect International Pvt. Ltd., Hemas Manufacturing (Pvt) Ltd., John Keells-Cinnamon Life, John Keells Holdings, John Keells Properties, Lakdhanavi, Lauke Shipping, Oxford College of Business, Perera & Sons, Shanthi Textile, Union Assurance PLC, Union Bank of Colombo PLC, Walkers Tours, Wealthtrust Securities Ltd., and a large number of private donors, both individuals and companies, for heeding the nation’s call, supporting communities and industries hardest hit by Cyclone Ditwah, and contributing to ongoing recovery and rebuilding efforts across the country.

Beyond immediate relief, the Chamber continues to support preparedness initiatives ahead of the North East Monsoon Season 2025, reinforcing resilience and readiness across the country.

“We are deeply grateful to our member companies and volunteers for stepping up in this critical time – demonstrating once again that the private sector has and will continue to play a strong and supportive role in ensuring stability and sustainability for Sri Lanka at all times’, said Krishan Balendra, Chairperson of the Ceylon Chamber.

Business

Fluctuating fortunes for bourse in the wake of selling pressure

Published

20 hours ago

2025/12/12

Thilina Walpola

The CSE kicked off yesterday on a bullish sentiment, but by the middle of the session it turned negative due to heavy selling pressure. Later, though, it returned to positive territory, market analysts said.

There was satisfactory buying pressure latterly, both in retail and institutional entities, following the return to normalcy of economic activities driven by international support for rebuilding the country.

Amid those developments both indices moved upwards. The All Share Price Index went up by 60.33 points while S and P SL20 was up by 11.67 points. Turnover stood at Rs 5.55 billion with nine crossings.

Top seven crossings were: Sunshine Holdings 13.6 million shares crossed to the tune of Rs 462 million and its shares traded at Rs 35, JKH 9.5 million shares crossed for Rs 198 million; its shares traded at Rs 21, Laugfs Gas (Non-Voting) 1.2 million shares crossed for Rs 73.2 million; its shares traded at Rs 61 Tokyo Cement (Non-Voting) 730,000 shares crossed tfor Rs 66.1 million; its shares traded at Rs 87, Commercial Bank 185,000 shares crossed for Rs 37 million and its shares sold at Rs 200, Access Engineering 300,000 shares crossed for Rs 23.1 million; its shares sold at Rs 77 and Laugfs Gas 300,000 shares crossed to the tune of Rs 22.4 million; its shares sold at Rs 73.90.

In the retail market top seven companies that mainly contributed to the turnover were; Colombo Dockyard Rs 485 million (two million shares traded), JKH Rs 468 million (22.4 million shares traded), Dialog Axiata Rs 245 million (8.4 million shares traded), Sunshine Holdings Rs 198 million (5.7 million shares traded), ACL Cables Rs 122 million (481,000 shares traded) and Lanka Credit Business and Finance Rs 108.5 million (11.4 million shares traded). During the day 171 million shares volumes changed hands in 34388 transactions.

It is said that manufacturing sector counters, especially JKH and Sunshine Holdings, led the market while the banking sector also fared reasonably well, especially Commercial Bank. The telecommunication sector, mainly Dialog Axiata, also performed well.

Meanwhile, Cargills Bank is looking to raise Rs 2.5 billion through a rights issue of shares at Rs 8.50 each to support lending activities.

It also will issue 294,200,000 ordinary voting shares at a ratio of 14 new ordinary shares for every 45 existing ordinary shares. The issue is expected to raise Rs 2,500,700,000 in capital, CSE sources said.

Yesterday, the rupee was quoted at Rs 308.95/309/05 to the US dollar in the spot market, weaker from Rs 308.80/90 the previous day, dealers said, while bond yields dropped significantly.

A bond maturing on 15.02.2028 was quoted at 9.05/15 percent, down from 9.15/20 percent.

A bond maturing on 15.09.2029 was quoted at 9.50/52 percent.

A bond maturing on 01.07.2030 was quoted at 9.55/65 percent.

A bond maturing on 15.12.2032 was quoted at 10.20/30 percent, down from 10.25/30 percent.

A bond maturing on 15.06.2035 closed at 10.63/70 percent.

By Hiran H Senewiratne

Business

HNB tops TAB Global Ranking as “Sri Lanka’s Strongest Bank”

Published

20 hours ago

2025/12/12

Thilina Walpola

HNB PLC, the leading private bank in Sri Lanka, has been awarded the title of Strongest Bank in Sri Lanka for 2025 by TAB Global. The recognition was confirmed following the release of the TAB Global World’s 1000 Largest and Strongest Banks Rankings, with the announcement made recently

HNB’s Managing Director / CEO, Damith Pallewatte, stated that the accolade underscores the bank’s unwavering commitment to sustained financial strength and strategic resilience. “This honour shows the resilience and clarity of purpose that guide our institution. Our teams advanced through demanding cycles with discipline and accountability. The recognition confirms the trust placed in us by customers, investors and partners and it reinforces the duty we carry as a leading private bank. We remain fully committed to safeguarding long-term strength while contributing to Sri Lanka’s economic advancement with integrity and resolve.”

HNB achieves a landmark distinction in the 2025 rankings, establishing itself as Sri Lanka’s strongest bank. The assessment highlights HNB’s balance sheet quality, prudent risk discipline and the bank’s consistent ability to maintain stability through varied economic conditions. The ranking places HNB alongside leading global financial institutions acknowledged for sustained strength, institutional reliability and capacity to absorb external shocks.

Foo Boon Ping, President and Managing Editor at TAB Global, stated: “HNB demonstrated strong fundamentals and consistent delivery across multiple stress indicators. The bank’s performance placed it ahead of its domestic peers and aligned it with institutions recognised for structural strength. The ranking reflects measurable outcomes drawn from transparent criteria.”