Easter Sunday Attack a major factor
Cigarette and alcohol sales within Sri Lanka have come down during 2019 reports the latest Annual Report of the Central Bank of Sri Lanka (CBSL).
“In response to lower demand for tobacco products caused by price hikes, legal restrictions, increased taxes on tobacco products as well as growing health awareness among the public, the manufacture of tobacco products contracted in 2019 for the second consecutive year, reporting an annual decline of 12.6 per cent. The decreased production of cigarettes largely contributed to the slowdown in the manufacturing of tobacco products subsector in 2019.”
“Moreover, revenue from excise duty on cigarettes and tobacco declined by 5.3 per cent to Rs. 87.4 billion mainly due to the decline in cigarette sales. However, revenue from excise duty on liquor increased marginally by1.3 per cent to Rs. 115.4 billion in 2019 due to the increase in excise duty on both locally manufactured and imported liquor. Meanwhile, the share of excise tax revenue in total tax revenue declined to 23.0 per cent in 2019 from 28.3 per cent recorded in the previous year.”
In 2018 too, the production of tobacco products recorded a decline of 12.9 per cent, compared to the growth of 1.2 per cent witnessed in 2017, largely due to increased cigarette prices. Nevertheless revenue from excise duty on cigarettes and tobacco increased by 7.3 per cent to Rs. 92.2 billion mainly due to the increase in excise duty rates on cigarettes in mid 2018.
“Accordingly, the beverages sub sector recorded a growth of 3.6 per cent in 2019, in comparison to a growth of 9.1 per cent recorded in 2018. The increased production of beer was largely driven by external demand, resulting in an export growth of 57.2 per cent for beer in 2019. However, lower domestic demand from local households and the tourism sector owing to the Easter Sunday attacks significantly affected domestic sales and the demand for liquor in 2019. The excise tax applicable on locally-manufactured liquor as well as imported liquor based on their alcohol content was increased in March and December 2019, which partly resulted in a decline in domestic demand, and thereby overall liquor production, particularly in terms of distilling, rectifying and blending of spirits.”
In comparison in 2018, revenue from excise duty on liquor recorded a marginal increase of 0.2 per cent to Rs. 113.9 billion due to the increase in soft liquor production.
“Meanwhile, demand for soft drink items increased owing to drought and warm weather conditions that prevailed in most parts of the country during the period under review.”