Cigarette Tax Indexation in Budget 2019

Abstract

The presentation discusses the cigarette tax indexation that was implemented by Sri Lanka’s Budget for 2019 (released in March). This indexation solved 2 problems of cigarette tax revisions in Sri Lanka—they were both too slow and too low. However, the indexation has significant weaknesses and its implementation is also weak. First, the cheapest cigarette category in the market is excluded from the tax indexation – and hence did not find any increase in excise tax (or price) since 2016. Second, the excise taxes applied are too low even relative to the premium cigarette category considering applicable cigarette lengths.