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Sri Lankans are spending an eye-popping 121 billion rupees every day on alcohol and cigarettes, according to a new report by the Alcohol and Drug Information Centre (ADIC). The ADIC is urging the government to implement scientific tax reforms to both increase government revenue and reduce the harmful effects of alcohol and cigarettes on society.
The report highlights that while overall tax revenue grew by 55% in 2023 compared to 2022, the contribution from alcohol and cigarette taxes has decreased. The Central Bank’s analysis shows that excise taxes on alcohol increased by 20%, but the share of alcohol tax revenue to total government income dropped from 15% in 2022 to 10% by the end of 2023.
The ADIC argues that the government missed an opportunity to raise excise taxes on alcohol further, which could have reduced the financial burden on the public while increasing government revenue. It claims that the current level of tax revenue from alcohol and cigarettes is not enough to cover the economic and health costs associated with their consumption.
Research from the United Nations Development Programme (UNDP) shows that the economic and health costs of alcohol and cigarette use are significantly higher than the tax revenue generated. In 2022, alcohol consumption cost the economy 237 billion rupees, while cigarette consumption cost 214 billion rupees. However, the tax revenue from alcohol and cigarettes in 2022 was only 165.2 billion rupees and 92.9 billion rupees, respectively.
The report highlights that while overall tax revenue grew by 55% in 2023 compared to 2022, the contribution from alcohol and cigarette taxes has decreased. The Central Bank’s analysis shows that excise taxes on alcohol increased by 20%, but the share of alcohol tax revenue to total government income dropped from 15% in 2022 to 10% by the end of 2023.
The ADIC argues that the government missed an opportunity to raise excise taxes on alcohol further, which could have reduced the financial burden on the public while increasing government revenue. It claims that the current level of tax revenue from alcohol and cigarettes is not enough to cover the economic and health costs associated with their consumption.
Research from the United Nations Development Programme (UNDP) shows that the economic and health costs of alcohol and cigarette use are significantly higher than the tax revenue generated. In 2022, alcohol consumption cost the economy 237 billion rupees, while cigarette consumption cost 214 billion rupees. However, the tax revenue from alcohol and cigarettes in 2022 was only 165.2 billion rupees and 92.9 billion rupees, respectively.
Tax Hike
International organizations such as the World Health Organization (WHO) have recommended raising taxes based on scientific evidence to reduce the harm caused by alcohol and cigarettes. The ADIC believes that raising taxes would not only reduce consumption but also increase government revenue, providing more resources to address other pressing national issues.
International organizations such as the World Health Organization (WHO) have recommended raising taxes based on scientific evidence to reduce the harm caused by alcohol and cigarettes. The ADIC believes that raising taxes would not only reduce consumption but also increase government revenue, providing more resources to address other pressing national issues.
Low Income Families
Despite previous tax hikes on alcohol and cigarettes, the ADIC notes that the tobacco and alcohol industries have found ways to offset the impact of these increases, leading to increased profits. A recent excise tax increase in January 2025 led to an additional 7 billion rupees in profits for the cigarette industry, mainly due to the lack of further increases in alcohol excise taxes.
The ADIC report also points out that low-income families are the largest contributors to spending on alcohol and cigarettes, with these groups bearing the brunt of the financial and health-related costs. It recommends further tax increases to help reduce consumption among current users and discourage new users from starting.
Despite previous tax hikes on alcohol and cigarettes, the ADIC notes that the tobacco and alcohol industries have found ways to offset the impact of these increases, leading to increased profits. A recent excise tax increase in January 2025 led to an additional 7 billion rupees in profits for the cigarette industry, mainly due to the lack of further increases in alcohol excise taxes.
The ADIC report also points out that low-income families are the largest contributors to spending on alcohol and cigarettes, with these groups bearing the brunt of the financial and health-related costs. It recommends further tax increases to help reduce consumption among current users and discourage new users from starting.
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