Sri Lanka tobacco firm profits, taxes up amid consumption boom
ECONOMYNEXT – Sri Lanka’s Ceylon Tobacco Company Plc, a unit of British American Tobacco said profits rose 57 percent to 3.2 billion rupees in the September 2015 quarter from a year earlier amid stronger consumption demand.
The firm reported earnings of 17.58 rupees per share for the quarter in a quarterly accounts.
For the 9-month to September it reported earnings of 46.99 rupees per share on total profits of 8.8 billion rupees.
"This performance is primarily driven by the increased levels of disposable income and consumer confidence experienced this year," the firm said in a note to shareholders.
In the first nine months out of total revenues of 82.7 billion rupees, 68.6 billion rupees went to the government as several taxes, the firm said.
Sri Lanka consolidated value added tax on tobacco with excise tax in 2014 as part of a strategies followed by during the Rajapaksa administration to progressively undermine the VAT regime.
The policy is expected to be continued by the new administration, with further undermining of the VAT regime in store, some analysts say.
Tobacco taxes were raised recently to boost state revenues.
Sri Lanka’s government is deficit spending heavily by printing money, generating a Keynesian style ‘stimulus’ generating balance of payments troubles as the newly minted money ends up as imports.
CTC said authorities seized 10.4 million cigarettes from raids on illegal cigarettes. Due to high levels of tax, smuggling is encouraged.
The firm said the raided cigarettes had a street value of 304 million rupees.
CTC said ‘Beedi’ a legal product made by small businessmen, which is taxed a lower rate was also hurting taxes and its revenues.
Beedi is smoked mostly by lower income groups and blue collar workers but does not have the upmarket image built by international firms.