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Cigarette Taxation Formula – The Cost of Forgetting

In 2019 the government introduced a policy where taxes and prices on cigarettes would be based on an indexation formula. Forgetting to implement the policy is costly: it has resulted in a foregone revenue of 85 billion from 2020-2022 and will cost a further 45 billion in 2023.

Sri Lanka is presently facing the most severe economic crisis in its history. The main problem is that Sri Lanka’s debt has become unsustainable. One of the critical adjustments required for economic recovery is to substantially increase government revenue. However, presently there has been forgetfulness in terms of another pricing formula that has been presented in previous budgets. That is the formula on the pricing and taxation of cigarettes.

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