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Tobacco and Customs


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With news this week of a ban on cigarette sales within 500 metres of any school, it seems an appropriate time as any to take a closer look at President Maithripala Sirisena’s war on tobacco. President Sirisena has long been an advocate of increased regulation on tobacco, with most of his time as Health Minister – a period in which he bemoaned the lack of Government support when going toe to toe with tobacco industry lobbyists – spent on this vital issue.

It was no surprise therefore that one of his first moves as President was to back Health Minister Rajitha Senaratne in implementing sterner regulation on cigarette import and sales. Under their stewardship, legislation was introduced to ensure that 80% of the surface area of a cigarette packet was covered with public health warnings, while the tax on tobacco was also increased to 90%. Additionally, the Health Minister has shown a keen interest in banning the sale of loose tobacco, another step towards deterring the easy purchase of tobacco.

These steps along with the ban on cigarette sales in the vicinity of schools are undoubtedly steps in the right direction, but questions need to be asked of what the Government is doing in addressing some of the unintended consequences of this progressive legislation.

It has been reported that the smuggling of illicit tobacco products into the country has increased by over 1,500% in the last six months, resulting in Rs. 15.3 billion loss in revenue from the legal tobacco industry in the first three months of 2017. These numbers can be explained to an extent by the reasoning that in the long run it would be for the betterment of society as a whole, while any potential losses in tobacco-related revenue could be offset by tax revenue. 

This argument though fails to take in to account that Sri Lanka now boasts the second most expensive prices for cigarettes in the Asia-Pacific region, making it essentially a smugglers’ paradise as consumers invariably prefer illicit over high-priced legal products – thereby, firmly bringing into question whether tax revenue is realistically capable of offsetting these losses.

The solution to this problem is not an easy one, in fact, it’s one so complicated that there’s not a country in the world that has resolved it adequately. Calls to reduce taxation in order to curb the sale and illegal importation of cigarettes is short-sighted and a step backwards, however continuing on the present path is counterproductive both in the medium and long term.

Despite Sri Lanka Customs’ best efforts, an estimated 150 million illicit sticks are believed to have made it to the market, with two out of 10 cigarettes in the market deemed illicit. Therefore it stands to reason that the only logical path forward is to come to an understanding as to why Customs is not more effective when dealing with smugglers.

Whether this ineffectiveness is down to systemic flaws or other nefarious undertakings, the Government, and President Sirisena in particular, clearly have a battle on their hands. A battle that they can only win by taking a cold, hard look at the inner workings of Sri Lanka Customs instead of being side-tracked by arguments on tobacco legislation.


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