ECONOMYNEXT – Sri Lanka’s legal cigarette sales fell 20.9 percent and alcohol 13.4 percent but revenues were up after two tax hikes on smokers and tipplers, the Finance Ministry said.
Those who object to value added tax as being regressive usually do not object to taxing alcohol and cigarettes with drinkers and smokers being considered ‘sinners’, observers say.
Alcohol in large quantities is considered harmful to health and cigarettes in any quantity may be harmful to health due to impurities contained in smoke.
Cigarette sales fell to 1,743 million sticks in the first nine months of 2023, from 2,203.9 million sticks last year, amid an economic downturn, a Finance Ministry report said.
There was no information available on ‘beedi’ to which some low income users have reportedly shifted to over the years, but there were reports of extra detections of wrapping paper.
Legal alcohol sales fell 13.4 percent to 27 million absolute litres in the first nine months, from 31 million litres last year, the Finance Ministry said.
Some licensed distillers were found to have been underpaying taxes by selling non-tax paid arrack in particular by pasting fake revenue stickes.
“The Security Features and Security Features Management System was fully implemented by licensed manufacturers and importers commencing from January 03, 2022 as a revenue administration measure to enhance tax revenue from liquor and liquor-based products, the report said.
“However, fake/ counterfeit stickers were found in many areas of the country eroding the expected revenue. Hence, strict enforcement of the system is important to secure due revenue from the liquor.”
Alcohol and cigarettes taxes were hiked twice January the July 2023.
Sri Lanka’s taxes from all sources, including value added tax, were up 50.7 percent to 1.933 billion rupees in the nine months to September.
Sri Lanka sees cyclical falls in consumption and also increases in debt each time the central bank cuts rates to boost growth and triggers a currency crisis.
In the latest currency crisis which ended in sovereign default, the rupee collapsed from 184 to 360 and has since appreciated to 330 to the US dollar. (Colombo/Nov14/2023)