The Excise Department of Sri Lanka anticipates that tobacco revenue collected on beedi will increase in the forthcoming period this year as cigarette consumers would shift to beedi due to the recent price increase from the recently imposed excise duty, The Daily Morning Business learnt.
Speaking to The Daily Morning Business yesterday, (3), Additional Commissioner General of Excise (Revenue and Law Enforcement) Dr. Kapila Kumarasinghe stated: “Excise Department taxes are determined only on two basic sources: excise revenue collected on liquor and tobacco revenue collected on beedi. For beedi, there will be an increase in that (consumption).”
A Gazette issued by the President Rani Wickremesinghe in his capacity as the Minister of Finance, Economic Stabilisation and National Policies, announced that alcohol and cigarettes are to be subjected to an approximate 20% increase in excise duty with effect from 1 July 2023. Accordingly, under four categories, cigarette prices were increased by Rs. 5, Rs. 15, Rs. 20, and Rs. 25 while prices of arrack increased by Rs. 300 per bottle and beer by Rs. 50.
When The Daily Morning Business inquired on the expected amount of tax income from the said tax hike, Dr. Kumarasinghe said that the Excise Department is to reevaluate on the trends generated due to the tax hike and the approximate amount of collectable revenue for the forthcoming period and therefore, such cannot be disclosed yet.
“At the beginning of the year 2023, it was Rs. 214 billion that we expected in terms of excise revenue from liquor while another Rs. 3 billion from beedi tax,” noted Dr. Kumarasinghe.
However, along with the tax hikes, the consumers seem to be at a “dilemma” to spend as it could be observed as the tax revenue of the Excise Department decreased around 20% in the first five months of 2023.
He added that excise duty is an elective tax, which people ponder prior to purchasing such a product, depending on the price. As a result, there would be a continuous drop in sales and decreasing tax revenue of the Excise Department simultaneously.
At the same time, a potential clientele would be adjusted to the new price gradually bringing the consumption to pre-tax levels.
“But it will depend on the economy as well since there are daily wage earners who depend on their cash flow, ” he explained.
The objectives of the Excise Department of Sri Lanka are to collect and protect revenue from liquor and tobacco, enforcement of the Excise Ordinance and the Tobacco Tax Act and the enforcement of the Poisons, Opium and Dangerous Drugs Ordinance.