March 10, Colombo (LNW): The Parliamentary Committee on Public Finance (COPF) has rejected a proposal from the Ministry of Finance to raise the Excise Duty on cigarettes, citing a lack of sufficient evidence to justify the increase.
The Committee discussed the matter during a recent meeting, reviewing the Order under Section 3 of the Excise (Special Provisions) Act, No. 13 of 1989, and the Excise Notification No. 01/2025, which proposed a 5.9 per cent hike in excise duties on several goods, including cigarettes, tobacco products, motor vehicles, and aerated beverages.
Finance Ministry officials presented their case, explaining that the proposed increase was part of a broader adjustment to the excise duties on various products. They also highlighted a similar 5.9 per cent rise in the excise duty on alcoholic beverages, in line with the government’s efforts to increase fiscal revenue.
However, COPF Chairman MP Harsha de Silva expressed concerns about approving the hike on cigarettes without clear, robust data to support its potential impact.
De Silva pointed out that previous studies on cigarette excise revenue suggested that such increases had inadvertently led to a reduction in government income, while simultaneously boosting profits for certain tobacco manufacturers.
He stressed the importance of ensuring that any changes in taxation would actually contribute positively to government revenue rather than simply benefiting private companies.
Given the concerns raised, the Committee decided to defer the decision on the cigarette excise duty increase. It was agreed that further clarification would be sought from the Ministry of Finance before the proposal could be reconsidered at the next meeting.
The Committee also called for more detailed data to justify the proposed tax increase on cigarettes.
On the other hand, the proposal to raise excise duties on alcoholic beverages was approved without issue. During the discussions, some MPs voiced concerns that the increase in liquor taxes could push consumers towards the illicit liquor market.
In response, Finance Ministry officials assured that the authorities are actively cracking down on illegal liquor production and distribution, with raids being carried out regularly.
Officials also reported a 22 per cent increase in liquor production over the past two months, with corresponding revenue growth of 23 per cent. To address the potential for increased consumption of illicit alcohol, plans are reportedly underway to introduce a new category of legal liquor aimed at curbing illegal trade.
