Taxing Tobacco: Benefits and Burdens of Beedi Taxes to Sri Lanka’s Economy

Beedi smoking is widespread in Sri Lanka, accounting for nearly 23% of the country’s smokers. The absence of a filter makes it an unsafe product exposing its users to nicotine, tar, and carbon monoxide. As such, this tobacco product is possibly more harmful to human health than other forms of smoking. However, beedi remains an underregulated product notwithstanding the provisions of the Tobacco Tax Act No. 8 of 1999. This blog argues that beedi taxation is a low-hanging fruit to boost government revenue and reduce the foreign exchange outflow with the added benefit of improving the health of Sri Lankans. An excise tax on beedi can benefit the economy in several ways: it would directly increase government revenue, lower beedi consumption, and decrease raw material import costs thus reducing dollar outflows. Lower beedi use would also lower smoking-related health issues, thereby reducing the government’s expenditure on health.