Sri Lanka : Overview of Tobacco Use, Tobacco Control Legislation and Taxation
Sri Lanka ratified the Framework Convention on Tobacco Control in 2003 and implemented some comprehensive tobacco control policies. From June 1, 2015, health warnings on cigarette packages in Sri Lanka have to cover 80 percent of the large sides. I...
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| Format: | Report |
| Language: | English |
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World Bank, Washington, DC
2019
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| Online Access: | http://documents.worldbank.org/curated/en/478361561398136333/Sri-Lanka-Overview-of-Tobacco-Use-Tobacco-Control-Legislation-and-Taxation http://hdl.handle.net/10986/32069 |
| Summary: | Sri Lanka ratified the Framework
Convention on Tobacco Control in 2003 and implemented some
comprehensive tobacco control policies. From June 1, 2015,
health warnings on cigarette packages in Sri Lanka have to
cover 80 percent of the large sides. In 2005-2006, about
38.0 percent of men and less than 1 percent of women were
current tobacco smokers in Sri Lanka. The prevalence smoking
among men was about 40 percent in 2005-2006 and decreased to
about 32 percent in 2009-2014. The volumes of cigarette
production in Sri Lanka were fairly steady at the level of
5.2 billion sticks in the late 1990s, and then the
production gradually decreased to about 4 billion cigarettes
in 2013-2016. The government has the power to change excise
tax rates several times a year. The taxation system used for
cigarettes is 5-tier specific. In 2005-2015, excise rates
for most tiers were increased by more than 300 percent;
however, the inflation rate for those eleven years combined
was 260 percent; so, real cigarette prices did not change
much. In late 2014, the VAT liability on cigarettes was
temporarily removed. For two years, excise was the only tax
levied on cigarettes in Sri Lanka. While the excise rates
were increased in 2014, the overall tax burden almost did
not change. Such a shift between VAT and excise tax was the
main factor of the excise revenue increase by 40 percent in
2015 as excise revenue mainly replaced VAT revenue. The
largest changes in cigarette taxation in Sri Lanka took
place in October-November 2016: (1) Excise rates were
increased by 26-28 percent for two higher tiers, by 37-40
percent for two middle ties, and by 67 percent for the
lowest tier; (2) The VAT rate was increased from 12 percent
to 15 percent, and cigarettes were again made liable for
VAT. However, after the increase in cigarette tax burden in
late 2016, in the first four months of 2017, the excise
revenue from cigarettes and tobacco products declined by 17
percent, and cigarette production decreased by 31 percent.
The VAT-excise reverse shift was the main factor of excise
revenue reduction in early 2017. The VAT revenue increased,
and its increase was larger than the reduction in the excise
revenue. Another factor of revenue decline in early 2017 was
forestalling: tobacco industry overproduced cigarettes to
pay taxes before tax increases. Another factor behind
cigarette sales reduction in Sri Lanka was the pricing
policy of the tobacco industry. |
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