Beedi Tax : COPF informed of drop in licence renewals

The Parliamentary Committee on Public Finance (COPF) has approved the Extraordinary Gazette Notification No. 2430/16 dated April 01, 2025, which increases the Tobacco Tax (TT) charged on beedi manufactured in Sri Lanka.

Per the Extraordinary Gazette Notification, the Tobacco Tax on beedi has been increased from Rs. 2 to Rs. 3 per stick, effective from April 02, 2025.

This adjustment was announced in the Budget 2025 and is implemented under the Tobacco Tax Act, No. 8 of 1999, by an Order made by the Minister of Finance in accordance with Section 2 of the Act.

During a meeting of the COPF, Chaired by MP Harsha de Silva in Parliament recently (22), it was disclosed that while 1,140 licences were issued to beedi manufacturers last year, only 840 renewed their licences this year following the tax increase. 

The Commissioner General of the Excise Department further said that revenue collection has also fallen short of expectations, with only Rs. 1,055 million collected last year against a target of Rs. 2 billion, and just Rs. 469 million collected so far this year. 

The Commissioner General attributed these shortfalls to large-scale beedi smuggling and insufficient enforcement actions.

Committee members questioned whether the declining licence renewals and shift toward illicit markets resulted from the increased tax burden, citing economic principles that suggest higher taxes may drive legitimate businesses underground. 

They proposed that reducing beedi taxes could potentially increase legal manufacturer participation and boost overall revenue collection. 

The committee requested that any future tax adjustments be supported by scientific evidence to demonstrate their effectiveness in meeting revenue targets. (Islandnews)