CTC warns Govt of increased revenue loss
By Mario Andree
Ceylon Tobacco Company continued to stress on the importance of curbing the illicit cigarette trade, highlighting that it not only deprives the Government of revenue but also hampers the delivery of the States public health commitments.
It has been estimated that the Government loses around Rs 38 billion annually due to the trading of illicit cigarettes in the market.
In Sri Lanka, the consumption of legal cigarettes has declined significantly.
On the other hand, the illicit market, as well as the underregulated and under-taxed beedi industry, have recorded accelerated growth.
The decline in the legal cigarette market has been driven by the widening price disparity between legal and illegal products, as frequent excise-led price increases have resulted in price hikes of legal products.
Ceylon Tobacco Company Chairman Suresh (Kumar) Shah says that the trade in smuggled cigarettes added to the challenges faced by the Company during 2020.
“The growth in Sri Lanka’s illicit cigarette market continues to pose significant risks to CTC’s ability to generate shared value to stakeholders,” he said.
Since taxes do not add to their costs, smuggled cigarettes provide a cheaper alternative to price pressured consumers, he said.
According to him this leads to severe losses in revenue to the Government.
As the illicit segment operates outside the law, smugglers circumvent the stringent regulatory framework that governs the tobacco industry in Sri Lanka. They avoid compliance with laws such as the display of health warnings and often target the youth, he said.
“Therefore, allowing the illicit trade to continue unchecked will not only threaten the Government’s ability to generate sustainable revenue, but also hamper the delivery of its public health commitments,” he said.
“Whilst commending the Government for strengthening its efforts to combat the influx of illicit products during the year, CTC continues to stress the necessity for a more stringent policy and regulatory framework to fight this disturbing phenomenon,” he said.
“Since an illegal trade has a far reaching impact on the Country, greater public awareness on the issue, effective enforcement and increased penalties are needed to curb its spread,” he said.
“It is CTC’s firm belief that restricting illicit trade is essential for the sustainable growth of State revenue and for protecting the rights of the legitimate industry,” he said.