This paper describes trends in tobacco use in Sri Lanka, assesses the economic
contribution of the industry (jobs, earnings, tax revenues and trade balance), and analyses the
relationship between demand for cigarettes and prices and incomes, looking at different socioeconomic
groups. It uses the estimated elasticities to simulate the likely impact of a tax
increase on prices, government revenues and on demand, expenditures and tax burdens of
different socio-economic groups.