Tobacco and alcohol are currently charged an excise tax and value-added-tax (VAT) by the government.

To check this claim, FactCheck.lk consulted the Central Bank of Sri Lanka’s Annual Report for 2021 to obtain the excise tax on cigarettes and alcohol (liquor) and the Ceylon Tobacco Company’s Annual Report to obtain the VAT paid on cigarettes. 

VAT revenue collected on alcohol was available only until 2018 in the Inland Revenue Department’s Annual Report. Therefore, the revenue for 2021 was estimated based on the growth in the total sales value of the industry and after adjusting for a cut in the VAT rate from 15% to 8%. 

Accordingly, the tax revenue collected from excise taxes on cigarettes and liquor amounts to LKR 88.6 billion and LKR 138.6 billion, respectively, in 2021. The estimated VAT collected from cigarettes and liquor amount to LKR 22.4 billion in 2021, which increases the overall consumption tax on these products to LKR 249.6 billion

The total taxes collected by the government in 2021 was LKR 1,298 billion. As such the overall consumption taxes collected from tobacco and alcohol amounts to 19.2% of the total tax collected in 2021. This is in line with the MP’s claim.

Therefore, we classify the MP’s statement as TRUE.  

Note: The share of tax revenue collected from tobacco and alcohol has increased from 14.2% in 2017 to 19.2% in 2021. However, actual taxes on tobacco and alcohol increased only about 5.3%. The increase in share is due to total tax revenue of government decreasing by 22%.  The data shows that the tax collected from tobacco and alcohol decreased relative to GDP and relative to consumption cost of tobacco and alcohol. According to the CBSL annual report, as a share of GDP, the tax collected from tobacco and alcohol decreased from 1.8% in 2017 to 1.5% in 2021. As a share of total private consumption expenditure on alcoholic beverages, tobacco and narcotics, the tax collected decreased from 78.0% in 2017 to 62.8% in 2021.

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