📉 High Cigarette Tax Strategy Facing Limits Amid Illicit Market Growth

• Global & Regional Benchmarks: The World Health Organization (WHO) target of a 75% tax share on retail price is met by only 39 out of 190+ countries globally—22 of which are high-income economies, with zero representation in South Asia. • Sri Lanka Market Context: Despite excise taxes on legal cigarettes rising by over +100% in the last 5 years, revenue has not grown proportionally. High taxes risk shifting demand to illicit untaxed products or lightly taxed domestic alternatives like beedi, impacting state receipts and public health goals. • European Comparison: Excessive tax burdens are creating market distortions across the EU, where over 10% (~42 billion sticks) of consumed cigarettes are illicit, causing €16.7+ Bn in annual tax revenue losses. In high-tax countries like Ireland and France, non-domestic legal purchases account for over one-third of total consumption.