CTC’s first half impacted by booming illicit trade

Tuesday, 15 August 2017 01:07 - - {{hitsCtrl.values.hits}}

Ceylon Tobacco Company PLC’s first half results have been impacted by booming illicit trade with CTC’s after tax profit down 3% to Rs. 2.95 billion.

A CTC’s spokesperson said: “During the first six months of the year, excise revenues declined by 3.7% to Rs. 43 billion compared to the same period last year. The total tax revenue to the Government during the first six months amounted to Rs. 52 billion, falling short of Rs. 8 billion of the potential of Rs. 60 billion the GTovernment could have received from legal cigarettes. The dip in Government revenue is attributed to the 25% reduction of CTC’s volumes, driven by the significant price hikes of legal cigarettes during the fourth quarter of 2016 driven by the excise increase in October and the introduction of 15% VAT in November.”

In it release, the company stated that it anticipates the Government tax increases to continue to impact volumes for the remainder of 2017.

The spokesperson further added that this dip in volumes had been captured by alternate tobacco products such as illicit cigarettes and beedi, which grew significantly since the fourth quarter of 2016.

“Following the 45% hike in the price of cigarettes last year, smuggling has become a booming business in Sri Lanka, with 40 m illicit cigarettes being detected and confiscated during the period. With only one in 10 smuggled cigarettes being detected by law enforcement agencies, we estimate around 360 million illicit cigarettes to have infiltrated the market, causing a Rs. 16 billion dent to Government coffers,” he added.

In addition to this, under-regulated and low taxed products such as beedi remained a key threat to Government revenue from the tobacco industry due to the widening price gap between the cheapest legally-manufactured cigarette (Capstan) and beedi.

Law enforcement agencies continued to work towards curtailing the spread of unauthorised and illicit tobacco products in the country, carrying out a total of 1,190 raids.