The Hon. Harsha de Silva

¶ 01 PUBLIC FINANCE COMMITTEE REPORT

¶ 02 I lay on the Table the Reports of the Committee on Public Finance on the following, referred by the Government:

¶ 03 (i) Excise Notification under Section 22 of the Excise Ordinance relating to excise duty on liquor (Excise Ordinance, Chapter 52);

¶ 04 (ii) Order under Section 3 of the Excise (Special Provisions) Act, No. 13 of 1989;

¶ 05 (iii) Order under Section 5 of the Special Commodity Levy Act, No. 48 of 2007;

¶ 06 (iv) Order under Sections 2 and 5 of the Special Commodity Levy Act, No. 48 of 2007;

¶ 07 (v) Protocol amending the Agreement between the Government of the Democratic Socialist Republic of Sri Lanka and the Government of the Republic of India for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to taxes on income, under Section 75(1) of the Inland Revenue Act, No. 24 of 2017; and

¶ 08 (vi) Inland Revenue (Amendment) Bill.

¶ 09 Ordered to lie upon the Table.

¶ 10 Mr. Speaker, I do not intend to debate these now, but I must clarify one point. When Government sought approval at the Committee on Public Finance to make a certain change on cigarettes, we did not grant approval initially. We asked them to return with a logical analysis. They did so. Since the Appropriation Bill needed to be passed, we could not delay further and therefore approved. However, the method of taxing cigarettes is wrong. Global best practice, per the WHO, UNDP and others, is tax-in-price, i.e., around 75 per cent of the retail price as tax. Here, over recent years, the State’s revenue growth has lagged industry profits. I am not making an accusation, but due to inadequate analysis, the industry’s profits have become disproportionately large relative to Government revenue.

¶ 11 Further, adding a fixed inflation factor to set excise was justified with figures of 4 per cent while actual inflation was nearer 1.2 per cent last year. Applying the same rate across brands like Gold Leaf, Capstan and John Player Gold Leaf creates discrepancies, encouraging new product introductions that capture consumers, with the argument that otherwise they would switch to beedi.

¶ 12 Therefore, I propose Parliament take a fresh decision on cigarette taxation, rather than leaving it solely to administrative adjustments. We in the Committee on Public Finance will participate constructively.