Sri Lanka has forgone more than Rs. 25 billion in potential cigarette tax revenue since 2025, with over Rs. 8 billion lost in the first half of 2026 alone, according to Colombo-based think tank Verité Research.
Crucially, the shortfall is not attributed to smuggling or evasion, but to a policy choice: cigarette taxes have been allowed to fall below internationally recommended levels. The World Health Organization advises that tax make up at least 75% of a cigarette’s retail price. Sri Lanka last came close in 2018, when the share reached 74%, but Verité says it has since slipped to 67% from 2025 onwards, the Daily Mirror and Daily FT reported.
The findings were released alongside the launch of a “Cigarette Tax Leakage Tracker,” a real-time dashboard hosted on the PublicFinance.LK platform that estimates the revenue being lost minute by minute. According to the tracker, the state is forgoing an estimated Rs. 547 every second, Rs. 47.3 million a day and roughly Rs. 17.3 billion a year at current rates.
Verité says the gap could be closed by gazetting excise increases across cigarette categories, including raising the duty on cigarettes up to 60mm from Rs. 19.35 to Rs. 22.90, and on 60–67mm sticks from Rs. 50.15 to Rs. 60.11.
The analysis sharpens a debate already live in Parliament, where Opposition Leader Sajith Premadasa earlier alleged that cigarette tax concessions had cost the Treasury Rs. 17.3 billion while household taxes were raised. Health campaigners have long argued that higher tobacco taxes deliver a rare policy win-win, boosting revenue while curbing consumption.
