A new study by the Institute of Policy Studies of Sri Lanka (IPS) has revealed that cigarette smuggling is widespread in the country, undermining both public health policies and government revenue collection. The report stresses the urgent need for stronger enforcement, digital tracking systems, and public participation to curb the illegal trade.
The study, titled “Tobacco Smuggling in Sri Lanka – A Scoping Study”, notes that despite high excise taxes imposed to discourage tobacco use, smuggling allows cigarettes to enter the market at significantly lower prices. This makes them more accessible to young people and low-income groups, eroding the effectiveness of anti-tobacco measures.
“Smuggled cigarettes bypass health warnings and taxes, making them cheaper and more dangerous,” said the study’s lead author, IPS Research Fellow Dr. Erandathie Pathiraja.
Co-authors Nishamini Ihalagedara and Ruwan Samaraweera added that the illegal trade not only heightens healthcare costs but also robs the state of badly needed revenue. “This is a double blow—the health sector bears the rising burden while the Treasury loses billions in potential income,” they noted.
The IPS report challenges the common view that higher cigarette taxes directly fuel smuggling. Analysis of customs seizure data shows no consistent correlation between excise tax hikes and volumes of seized contraband. Instead, factors such as corruption, gaps in enforcement, and porous borders play a more decisive role.
Sri Lanka’s tobacco industry is heavily taxed, with excise duties accounting for the bulk of cigarette prices. While taxation is seen as a key tool to reduce consumption, the IPS study cautions that weak enforcement leaves loopholes that smugglers exploit. The result is a parallel market that both undermines official policy and exposes vulnerable groups to unregulated products.
To address the problem, IPS draws on international best practices. Recommendations include introducing digital excise tax stamps to track products, offering incentives for public reporting of smuggling activities, and tightening border control measures. Greater transparency and stronger institutional coordination are also highlighted as priorities.
The report warns that unless decisive action is taken, Sri Lanka risks losing both the health and revenue battle against illegal tobacco. “Technology, enforcement, and public engagement must go hand in hand to tackle smuggling effectively,” the authors stressed.
IPS argues that the country cannot afford to overlook the issue, as unchecked cigarette smuggling threatens to undo years of progress in reducing tobacco use while simultaneously weakening fiscal stability.
