The gap that became a giveaway
In 2018 the tax-in-price sat right at the WHO mark. But since 2025 it had slipped well below it.
How to fix the tax leak
On current prices, increase the excise tax on cigarettes as follows:
| Length | Tax increase per cigarette | Excise per cigarette (now → proposed) |
|---|---|---|
| Up to 60 mm | + LKR 3.5 | LKR 19.4 → 22.9 |
| 60 - 67 mm | + LKR 10.0 | LKR 50.2 → 60.1 |
| 67 - 72 mm | + LKR 5.8 | LKR 71.5 → 77.3 |
| 72 - 84 mm | + LKR 10.6 | LKR 81.0 → 91.6 |
Recovers Rs. ~17.3 billion a year in excise tax revenue, currently left with the cigarette company CTC, whose profit before income tax was Rs. 53.9 billion in 2025.
What that money could have financed
The revenue forgone so far in 2026, now Rs. and counting, could have financed:
Allocations from the Citizen's Budget 2026.
What happened
The World Health Organisation recommends that taxes make up at least 75% of the retail price of cigarettes, a level widely treated as international best practice. In 2018, Sri Lanka's weighted-average tax-in-price stood at 74%, right at that benchmark.
Here is the catch. Most of the tax on cigarettes is an excise set as a fixed rupee amount per pack, which the government adjusts only now and then. So when the company raises its prices, the rupees collected in tax do not rise automatically. The government has to step in and raise the excise. It did raise it, but by far less than the company raised prices to load up its profits. The tax went up in nominal terms, and the headlines duly reported “tax hikes,” yet the tax's share of the price kept slipping.
Since 2025 that weighted-average share had fallen to 67%. As taxes rose across most other goods under Sri Lanka's IMF programme, cigarettes quietly got a tax cut.
The counter at the top shows the difference between what the government actually collects today and what it would collect if the tax-in-price ratio had been held at the WHO's 75% benchmark: an estimated Rs. 17.3 billion in 2026, accumulating second by second.
Don't let it slide quietly
Tapping share copies this image. The live figure, the date, the link and a scan code are all baked in, so you just paste it into WhatsApp, X, or anywhere. Here's exactly what goes out: