Will ban on single stick sales discourage smoking?
“The banning of single cigarette sales, even though it is labelled as a move to curb cigarette consumption in the country, could it be a move to curb the income tax the state loses out in billions from the tobacco industry by their own tax hikes? Or is this another attempt to catch up to the losses incurred to the state through illicit cigarettes flooding the market and producers of alternatives who have successfully remained under the Government radar? Who is the real victim here the smokers or the public? the stakeholder involved in the industry questioned in its media release.
“According to latest reports, Sri Lanka has seen a sudden surge in smuggled cigarettes following the price increase in Q4 2016. The first quarter of 2017 alone has seen 35 million sticks confiscated by law enforcement authorities, compared to the 4 million sticks detected during 2016. This indicates a massive influx in illicit cigarettes flooding the local market. This being the prospective income the government is continuing to lose in billions. revenue loss of Rs. 50 billion or more. Are the measures being taken to control this pressing issue enough to ensure that the loss to the government is prevented efficiently? With the majority of sales of these cigarettes being done through small shops and/or “petti kade”, is it possible to track all these outlets and ensure that the law is enforced?” the release queried.
The release added that the primary purpose of the increased tax on cigarettes was to secure tax revenues. “Many studies conducted previously in advanced countries showed that the price elasticity of cigarette demand was inelastic, -0.25 ~ -0.5. (Chaloupka, et. al., 2010). Due to the fact that there are no suitable or effective replacements thus far for this product, cigarettes usually become an object of taxation, as revenues can be made easily by doing same. This has been the primary reason why many countries resort to imposing heavy taxes on this product. With that in mind when we peek into the loss the government made by steep increases within the last year.
Ceylon Tobacco Company PLC (CTC) says that its contribution to Government revenue, through excise tax fell to Rs. 87.4 billion during the year ending 31st December 2016. The company delivered record excise gains for the government of Rs. 72.6 billion during the first 9 months – a 16% increase compared to 2015. However, according to the company’s full year results, government revenue from excise tax in the 4th quarter fell by Rs. 13.2 billion compared to the 3rd quarter of 2016. It is anticipated that this will continue to impact both the company’s and the government’s revenue in 2017” it said.
According to latest reports, Sri Lanka has seen a sudden surge in smuggled cigarettes following the price increase in Q4 2016. The first quarter of 2017 alone has seen 35 million sticks confiscated by law enforcement authorities