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White collar terrorists on the loose

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15,000 killed every year
Hundreds of thousands ‘wounded’
Annual cost to economy
‘Closed-door’ policy making thwarts combat efforts

The Treasury has lost approximately Rs 76 billion in the eight (8) years between 2007 and 2014 in potential income due to weak and inconsistent taxation on tobacco products, Dr Nishan de Mel of Verité Research said on Thursday.

 Dr. de Mel, speaking on ‘Tobacco Economics and Taxation in Sri Lanka’ at the national summit titled ‘Towards Tobacco Free Sri Lanka,’ pointed out that the excise tax rate had been lowered from 71% for the most sold brand in 2006 to levels lower than 60% in next 8 years. His data showed that one brand had been taxed only 41% in 2008. The rates were once again increased to above 70% in October 2014. 

The loss calculated by de Mel is the excise revenue lost to government by not keeping excise taxes at this 70% rate in the 8 years between 2007 and 2014.

 Working on the basic premises that price is the main driver of consumer choice and that taxation is a key driver of price, de Mel argued that economic and tax policy regimes in this period hadsignificantly increased  the affordability of cigarettes in addition to causing a massive decline in tax revenue. 

The number of cigarettes affordable (per annum per person) has increased from around 10 thousand to close to 16 thousand between 2000 and 2015, affordability being calculated based on average per capita GDP income.

 Dr de Mel’s calculations showed that If pricing had followed social policy goals  and therefore factored in affordability the most sold brand would now have cost around Rs. 49 as opposed to Rs 30 per stick.

Observing that historically the decision-making process has been closed, Dr de Mel strongly advocated an open process which allows for wider contributions which will in turn result in more predictable and reasonable policies.

Meanwhile World Health Organization Economist Mark Goodchild, in his presentation to the Summit also argued that there is a strong economic justification for implementing tobacco control methods, focusing mainly on the demonstrated causal relationship between health and labor productivity.

The ratio between economic cost and cigarette tax revenue is an alarming 4:1 he said, providing figures pertaining to Smoking Attributable Deaths (SADs) and relevant costs and losses.

 Goodchild claimed that smoking causes around 15,000 deaths per year in Sri Lanka and added that the economic cost is equivalent to 2.3% of the country’s GDP.

 Meanwhile, following a Parliamentary ruling early this year, the tobacco industry will be required to carry pictorial warnings of the dangers of tobacco use on 80% of the surface area of all packaging.  This augments the 50-60% court order obtained by the anti-tobacco lobby in 2014.  The tobacco industry has been faulted for attempting to circumvent the court order by compromising the clarity of the pictorial warning, choosing incongruous and confusing visual material.  
       

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