Sri Lanka has world’s most expensive cigarettes based on purchasing power, report says

Sri Lanka has the highest cigarette prices in the world when measured against purchasing power parity (PPP), according to World Health Organisation (WHO) data cited in a recent assessment by Oxford Economics.

The assessment challenges the effectiveness of the WHO's global tobacco tax incidence benchmark, arguing that taxation policies should take individual countries' economic conditions into account rather than follow a single international target.

The WHO recommends that taxes account for at least 75% of the retail price of tobacco products. However, the Oxford Economics assessment questions whether achieving this threshold necessarily leads to a reduction in smoking rates.

According to the report, there is no significant relationship between the proportion of cigarette prices made up of taxes and overall smoking prevalence. It notes that countries with higher tobacco tax shares do not necessarily have lower smoking rates.

The assessment also draws attention to concerns raised in previous international publications about using tax incidence as the main measure of progress in tobacco control.

A WHO publication cited in the assessment has previously noted that the tax share of cigarette retail prices is not, by itself, a reliable indicator of success in reducing tobacco consumption.

Instead, the publication highlights the actual retail price of cigarettes as a more important factor influencing purchasing decisions and smoking behaviour.

The WHO's Technical Manual on Tobacco Taxation also acknowledges that a high tax share alone does not guarantee the effectiveness of policies intended to reduce tobacco demand.

Against this backdrop, Sri Lanka's position in global cigarette pricing highlights the importance of considering consumer purchasing power when developing and evaluating tobacco taxation policies.

The Oxford Economics assessment argues that countries should evaluate the effectiveness of their tobacco taxes by examining actual cigarette prices, affordability and smoking prevalence rather than relying exclusively on a predetermined tax percentage.

While recognising taxation as an important tool in controlling tobacco consumption, the report emphasises that national economic conditions should play a central role in determining appropriate taxation strategies.