The tax revenue myth

There is a notion that has been propagated time and again by the Tobacco industry that the tax revenue it brings to the government through the sale of cigarettes plays a pivotal role in the country’s economy. The notion that is being propagated goes onto suggest that it is cigarettes which either fund education, salaries and other such activities that benefit the populace.

Nothing can be further from the truth. A publication titled “Economic and Social Indicators of Sri Lanka 2013”, indicates that Total Revenue (Taxes and Grants) Rs. 1,003,915 million (Approx 1004 billion) out of which taxes have been calculated to bring in a revenue of Rs. 987,844 million (Approx

The notion that the Tobacco tax pays the wages of the state sector is also a myth that has been propounded and propagated in order to further the agenda of the industry

988 billion). However, remains that through the excise tax on tobacco and cigarettes what the government receives, is a meager Rs. 53,563 million (approx 53.5 billion).

Accordingly, the tobacco tax comprises 5.3% or total government revenue with close to 95% of government revenue being solicited from various other sources.

The notion that the Tobacco tax pays the wages of the state sector is also a myth that has been propounded and propagated in order to further the agenda of the industry. According to the above publication the total expenditure on Salaries and Wages Rs. 347,717 million (Approx 348 billion), and even in the unlikely event that the Tobacco tax is used exclusively to pay the wages of the state sector, even then, the tax only provides enough revenue to cover 15% of the total amount. The government has to rely for the other 85% from various other sources.