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

Pan Asia Bank’s Rs. 5 b debenture issue oversubscribed

Published

11 hours ago

2026/10/3

Thilina Walpola

B D A Perera, Chairman and Naleen Edirisinghe Director/CEO of Pan Asia Bank

Pan Asia Banking Corporation PLC’s Senior Listed Rated Unsecured Redeemable Debenture issue of up to Rs. 5 billion was oversubscribed following its opening reflecting strong investor interest.

The debentures, with a par value of Rs. 100 each, will be listed on the Colombo Stock Exchange (CSE). The three-year debentures offer an interest rate of 12.75% interest payable annually, while the five-year debentures offer 13.50% interest payable annually.

The issue has been assigned a BBB+ (Stable) rating by Lanka Rating Agency.

The debenture issue was managed by the Investment Banking Unit of Commercial Bank of Ceylon PLC, with SSP Corporate Services (Private) Limited serving as the Registrar to the Issue.

The Bank said the strong investor response demonstrates continued confidence in Pan Asia Bank and its approach to creating long-term value for its stakeholders.

Pan Asia Bank, which positions itself as ‘The Truly Sri Lankan Bank’, continues to strengthen its role in supporting the financial requirements of individuals and businesses while contributing to the development of Sri Lanka’s economy.

Business

SLIIT International and Liverpool John Moores University inaugurate dedicated international learning facility

Published

11 hours ago

2026/10/3

Thilina Walpola

Andrew Patrick

The Sri Lanka Institute of Information Technology (SLIIT) and Liverpool John Moores University (LJMU), United Kingdom, recently inaugurated SLIIT International in Collaboration with LJMU, a dedicated international learning facility located at No. 17, Dickmans Road, Colombo 04, marking a significant milestone in a partnership spanning more than a decade and reinforcing their commitment to providing Sri Lankan students with access to internationally recognised UK higher education qualifications.

The Grand Opening Ceremony was attended by Andrew Patrick, British High Commissioner to Sri Lanka, who graced the occasion as Chief Guest, alongside senior representatives from SLIIT, Liverpool John Moores University, the British Council, academia, industry and other stakeholders, marking the next chapter of the longstanding SLIIT–LJMU collaboration. The new facility is particularly significant as Sri Lanka’s first academic facility dedicated exclusively to the delivery of LJMU degree programmes, reflecting the strength, maturity and long-term commitment of the partnership.

Over the past decade, the SLIIT–LJMU partnership has established a growing network of more than 1,500 alumni, while providing Sri Lankan students with opportunities to gain internationally recognised UK qualifications locally. The new dedicated facility has been designed to provide a world-class learning environment exclusively for LJMU programmes, supporting future programme expansion, strengthening the student experience and creating opportunities for deeper academic collaboration, innovation, research and student engagement.

Commenting on the milestone, Prof. Lalith Gamage – Vice-Chancellor, Managing Director and Chief Executive Officer, SLIIT, stated, “The launch of SLIIT International in Collaboration with Liverpool John Moores University represents an important new chapter in our longstanding partnership with Liverpool John Moores University. Our vision is to provide Sri Lankan students with a world-class education and student experience right here in Sri Lanka, while equipping them with the global outlook, critical thinking, professional capabilities and career readiness required to succeed in an increasingly interconnected world. This dedicated facility strengthens the student experience while providing a strong foundation for the continued growth of our collaboration with LJMU.”

Prof. Timothy Nichol, Pro-Vice-Chancellor, Faculty of Society and Culture, Liverpool John Moores University, said, “The opening of Sri Lanka’s first facility dedicated exclusively to LJMU degree programmes represents a significant milestone for the University and our partnership with SLIIT. It reflects the strength of our collaboration and our shared commitment to delivering a high-quality LJMU educational experience in Sri Lanka. The new facility also creates exciting opportunities for deeper academic collaboration, innovation, research and student engagement as we look towards the next phase of our partnership.”

A key highlight of the Grand Opening Ceremony was the panel discussion titled “Beyond Borders: The Role of British Higher Education in Developing Globally Competitive Graduates.” The discussion examined the growth of international educational opportunities in Sri Lanka, the future expansion of UK degree programmes, maintaining the quality and integrity of UK qualifications, developing future-ready graduates with global competencies, and the role of international higher education in strengthening graduate employability. The panel brought together Prof. Lalith Gamage; Prof. Timothy Nichol; Mr. Sajeewa Meepage, Representative of the British Council; and Dr. Harsha Cabral, Board Member of SLIIT.

The panelists further emphasized on emerging trends in areas including law, business, psychology and artificial intelligence, as well as the contribution of UK higher education to Sri Lanka through internationally recognised qualifications that uphold global academic standards.

The discussion explored the history and future of the SLIIT–LJMU partnership, the strategic significance of the new SLIIT International facility, academic quality, graduate employability and the long-term growth of LJMU programmes in Sri Lanka.

The ceremony also featured a special address by Andrew Patrick, British High Commissioner to Sri Lanka, followed by an address by Mrs. Clare Sears, Country Director, British Council Sri Lanka. The evening also included the ceremonial exchange of the partnership document between SLIIT International and Liverpool John Moores University, symbolising the continued commitment of both institutions to strengthening their collaboration and expanding international educational opportunities for Sri Lankan students.

Business

Dijital Team and WinSYS City University launch two-year partnership

Published

11 hours ago

2026/10/3

Thilina Walpola

Ziyam Abdeen, Chairman of WinSYS, and Peter Ward, Managing Director of Dijital Team, at the signing ceremony for the two-year partnership

Dijital Team has signed a two-year partnership with Winsys City University, strengthening the skills and capabilities of its team members to support Managed Service Providers and IT service providers while elevating tech talent to immediate industry-readiness. With a Memorandum of Understanding (MOU) signed recently, the partnership was formally launched on 9 September 2026 at Dijital Team’s office premises, Colombo.

Combining Dijital Teams’ international employer network and understanding of the capability requirements of MSPs and IT service providers across Australia, New Zealand and the United Kingdom with Winsys City University’s training heritage of 21 years, the joint programmes create legitimate classroom-to-international-career pathways, offering structured learning and certification avenues that support deeper capability across cloud, cybersecurity, automation, AI and emerging technologies.