Cigarette sales drop cuts tobacco tax revenue by half
The tobacco tax revenue for government coffers has declined significantly due to a drop in sales of cigarettes manufactured in Sri Lanka by Ceylon Tobacco Company(CTC) during the months of October and November this year due to consecutive tax hikes that led to price increases twice, official data showed.
The Ceylon Tobacco Company’s contribution to the Government through its value chain during the nine months ended 30th September 2016, in the form of Excise Tax, Corporate Tax and other levies, increased by 20 per cent over the same period last year to Rs.75 billion, driven primarily by relatively stable volumes during the first nine months of 2016, according to the published results of the company available on the Colombo Stock Exchange website.
Top line growth for the nine months ended 30th September 2016 was spearheaded by mainstream and premium segments in the company’s brand portfolio, CTC performance report revealed.
Accordingly the CTC has made a contribution of Rs.75 billion during the first nine months at an average of Rs. 8.3 billion per month, CTC summery of performance revealed.
However its contribution to the Treasury coffers has come down drastically to Rs.4.2 billion during the period of October 1st to November 1st, Finance Ministry data revealed.
Tobacco tax revenue for this month has dropped to 51 per cent when compared to the CTC’s first nine months contribution at an average of Rs.8.3 billion per month.
The CTC has increased the price of cigarette by Rs.7 on October 4 and it then went up further as of November 1, with the enforcement of 15 per cent VAT, to Rs. 50 per cigarette.
The company expects a further drop in sales affecting sustainability of its business, a CTC official who wished to remain anonymous, said.
The targeted revenue from cigarette taxes this year has now been revised to approximately Rs. 88 billion from the previous target of Rs. 99.6 billion under these changes, Treasury sources said.
Almost 4 billion cigarettes are sold in the country per annum and consumers pay over Rs. 100 billion for purchasing cigarettes, official data showed.
The latest report, issued by the World Health Organisation states that Sri Lanka has the distinction of selling the highest priced packet of 20 cigarettes in South Asia. Based on market prices for 2016, the price of a packet of cigarettes sold in Sri Lanka is Rs. 700.
Meanwhile a controversial budget proposal requesting the tobacco company to donate Rs. 500 million to the Presidential Fund to be utilised by the Presidential Task Force for the antismoking campaign, is unlikely to be approved.
The issue was first raised in a Sunday Times story on November 13 saying the proposal was a direct violation of Article 13 of the WHO Framework Convention on Tobacco Control. Sri Lanka is one of the key signatories to this convention. Later Health Minister Rajitha Senaratne also said it cannot be accepted as it contravened the WHO pact on tobacco control.