Tax inconsistencies on cigarettes over the past five years has resulted in the Government losing nearly Rs.40 billion and as such it is vital to formulate a systematic method of taxation and a comprehensive pricing system for cigarettes, a leading economist said yesterday.

Economist and Researcher Dr. Nishan De Mel said taxes should be increased so that the Government could collect a larger revenue. Although the Govt. has legal authority over taxes, it’s the cigarette company that has the authority to decide on the price structure

“Although the Government has the legal authority to increase or decrease taxes, it’s the cigarette company that has the authority to make the final decision on the price structure. Subsequently the company alone will benefit by a price increase while the government will get no return unless it increases taxes,” he said at a news briefing organised by the Alcohol and Drug Information Centre (ADIC).

Dr. De Mel said a recent study on tobacco taxation and pricing had revealed that the excise tax on cigarettes which was 66 per cent of the price of a cigarette in 2003 had decreased to 59 per cent today regardless of the Government’s ‘Mathata Thitha’ policy introduced in 2004.

He said cigarette prices should be increased in line with the increase in the Gross Domestic Product (GDP) and the per capita income of the country.

Dr. De Mel said price increases had kept pace with the GDP growth from 1980 to 2000 but had not moved any further since then.

He said if t he system had continued the average price of a cigarette would be Rs.44 and not Rs.28 as it is today.

Source: Daily Mirror - Sri Lanka