Govt urged to implement systemic excise policy to protect people

The Alcohol & Drug Information Center (ADIC) claims that due to the 20% increase in alcohol taxes in 2023, alcohol consumption has decreased by 8.3 million liters, and the government’s alcohol excise revenue has increased by Rs. 11.6 billion.

The ADIC also alleged that the government’s excise revenue from cigarettes has increased by Rs. 7.7 billion in 2023, while cigarette sales have decreased by Rs. 521.5 million.

The ADIC made this claim issuing a statement regarding the use of alcohol and cigarettes and the increase in taxes.

Excerpts of the statement are below:

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Alcohol and cigarettes are not ordinary consumer goods, and their prices should always be maintained at a level that discourages their purchase. Alcohol use causes nearly 15,000 premature deaths in Sri Lanka each year, while smoking kills nearly 20,000 people annually.

In addition to making many more people sick, alcohol and tobacco have become major factors limiting people’s happiness and freedom. Every year, tobacco and alcohol companies use various strategies to lure our country’s children to alcohol and cigarettes to replace their losing customers.

The number of deaths from non-communicable diseases in our country has now increased to 80%. Two of the four main factors affecting non-communicable diseases are smoking and alcohol use. The Surgeon General of the United States federal government issued a special report earlier this year stating that alcohol is a carcinogen and that even small amounts of alcohol consumption increase a person’s risk of cancer.

Accordingly, it has been confirmed that alcohol is a carcinogen. Therefore, he has recommended to the US government that alcohol bottles should state that alcohol is a carcinogen.

“Increasing excise taxes” is among the effective policies proposed by the World Health Organization to reduce the harm caused by alcohol and tobacco use. Accordingly, the increase in excise taxes that occurred in January 2025 is also beneficial for the country.

The idea that excise taxes can be used for the development of a country is outdated. Statistics show that the health and economic costs of alcohol and the amount of tax collected from alcohol have not been able to cover the economic and health costs of alcohol.

According to a study conducted by the UNDP in 2022, the economic and health costs of alcohol are 237 billion rupees, while the alcohol tax revenue that year was 165.2 billion rupees.

Furthermore, the World Health Organization’s recommendations for alcohol control state that a quantitative increase in alcohol taxes is a very effective alcohol control measure that the government can implement at a low cost.

This has also been demonstrated by the recent increase in excise duties in our country. The 20% increase in alcohol taxes in 2023 has reduced alcohol consumption (pure alcohol) by 8.3 million liters and increased the government’s alcohol excise revenue by 11.6 billion rupees. Additionally, the government’s excise revenue from cigarettes has increased by 7.7 billion rupees, while cigarette sales have decreased by 521.5 million.

This increases state excise revenue and reduces consumption. This has a positive impact on several health, economic, and social problems. Therefore, increasing excise taxes is a win-win situation for the country.

Furthermore, whenever the price of alcohol increases, alcohol companies try to create a perception that illegal alcohol will increase. This effort is a tactic used to prevent future tax increases and reduce existing excise taxes, as increasing taxes on legal alcohol will reduce sales of their products.

The harm caused by legal or illegal alcohol is not different, and all types of alcohol have a serious impact on health.

Therefore, the government should formulate a formal program to control illegal alcohol, effectively enforce the law to control illegal alcohol, and reduce the use of legal alcohol by increasing excise taxes, reducing the ease of obtaining alcohol, and preventing methods that lead children and youth to use alcohol.

Furthermore, when increasing excise taxes, it should be done through a scientific tax system. Until 2009, the government had the full or most of the advantage in levying excise duty on cigarettes. Before 2009, the maximum tax increase was made by considering the market, demand, inflation, and price elasticity when determining excise duty.

Therefore, the opportunity for tobacco companies to set a price on the tax has been minimized. This has enabled the government to obtain the maximum amount of tax that can be collected and has not enriched multinational companies.

Thus, the increase in the profits of tobacco companies, as they receive a large additional profit for their advertising and various interventions, increases the opportunities for children and youth to become victims of tobacco companies.

Although there have been calls for reducing this situation for many years, the tobacco companies have benefited the most from the tax increase this time.

The excise duty on the cigarette category with the highest sales in the market has increased by Rs. 4.51. However, its price has increased by Rs. 10.

The cigarette industry will benefit from the increase in cigarette taxes this time as a proper tax collection system has not yet been established. The additional profit that the cigarette industry will receive from this tax increase is approximately Rs. 7,000 million.

However, based on the current situation, it can be said that whoever comes to power, the tobacco and alcohol companies always win.

Therefore, what people-friendly governments should do is not to increase the income of tobacco and alcohol companies, but to make healthy, economic decisions that keep the public happy and healthy.

For that, it is the responsibility of a people-friendly government to protect the people by implementing a systematic excise policy.

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