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Govt. revenue from cigarettes dips by Rs. 18 b in 2017

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Ceylon Tobacco Company PLC (CTC) said yesterday s that its contribution to government revenue, through excise, taxes and levies, fell to Rs. 117.3 billion during the year ending 31 December 2017, compared with the Rs. 135 billion targeted.

The Company also noted that the dip in its contribution to the state’s coffers is the result of the legal cigarette prices shooting up by 43% following the tobacco excise hike and introduction of 15% VAT during the last quarter of 2016.

In the past, the Government had successfully increased its excise revenue from cigarettes, on average, by around 20% year on year, but in 2017 it experienced only a marginal increase of 1.6% over 2016 to Rs. 88.9 billion. The Company’s volumes declined by 18% when compared to 2016, while net turnover for the year also declined by 0.2% when compared to the same period last year.

Legally manufactured cigarettes becoming unaffordable to average consumers also led to a booming illicit trade in the country. Smuggled cigarettes entering the country increased over 10-fold in 2017, with 450 million sticks infiltrating the market during the year. Smuggled cigarettes are now estimated to be in the region of 15% of the legal cigarette industry in Sri Lanka, causing a revenue loss of about Rs. 20 billion to the Government. The gap between the price of legal and illicit products available in the market coupled together with the current macroeconomic factors impacting consumer spending power have pushed smokers towards such cheaper alternatives, defeating the Government’s public health objectives.

The Company’s financial results also indicated that profit after tax stood at Rs. 14.58 billion for the year ended 31 December 2017. The Directors have recommended a final dividend of Rs. 11.80 per share for 2017.

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