British American Tobacco Influencing Cigarette Tax in Sri Lanka

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Background

The highest one time increase of the cigarette price was recorded in the 4th Quarter of 2016 in Sri Lanka. It was due to an increase of Excise Tax in October and introduction of 15% Value Added Tax (VAT) in November.[1] (Also see Industry Responses to Tobacco Tax Increase in 2016). Ceylon Tobacco Company PLC (CTC), the company which has a monopoly of cigarette manufacturing and sales in Sri Lanka, is a subsidiary of British American Tobacco (BAT). As of 2017, BAT owned 84% of shares of CTC, rest of which is owned by private and corporate investors.[2]

Health Minister’s Allegation against BAT

In the state media briefing held on 01st November 2017, Minister of Health and the Media Spokesperson for the Cabinet of Ministers, Rajitha Senaratne accused BAT of interfering in the cigarette tax increase. The Minister’s full statement on the issue (translated) follows:[3]

As you know, we imposed 90% tax on cigarettes. That is on top of 80% pictorial health warnings. We imposed the highest tax percentage in the world. I was highly pressurised during the process. The chairperson of the British tobacco company flew to Sri Lanka in a separate air plane. He met people, even Prime Minster, and pressurised me a lot. He said if the tax is 90%, the profit is only 1% and the tobacco company will have to be closed down. That means you are closing down a 134 year investment. In all those meetings, a group of agents came. I discussed with them and asked them few questions. “How do you say the profit is 1%? How do you run your company from that profit margin?” Then they took a telephone call to a person in the tobacco company named Michael and asked “the Minister is enquiring like this, what’s happening?” Then he said “Yes that is true… The data is true. But, I will come back to you” he didn’t come back until this day (01st November 2017). But, the company that said they can’t run by a 1% profit margin is still running.
Image 1: Minister Rajitha Senaratne in a press conference announcing Cabinet Decisions[4]

Industry Response

As of 10th November 2017, neither BAT nor CTC responded publicly to Minister’s allegations on attempted interference.

Tobacco Unmasked Resources

Other relevant TobaccoUnmasked entries:

Notes

  1. Daily Mirror. Cigarette price to increase up to Rs. 55, 23 October 2016, accessed March 2017
  2. British American Tobacco. Annual Report 2016, 2017, accessed November 2017)
  3. Sri Lanka Mirror. Joke from Rajitha for SLM Anniversary (Video), 01st November 2017, accessed November 2017
  4. IS Kodikara. AFP/GettyImages, 17 September 2015, accessed November 2017